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High-value customers: Strategies to maximizebusiness profitability & build brand advocates

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High-value customers: Strategies to maximize business profitability & build brand advocates

High-Value customers and why they matter

The retail industry works on the principle of Pareto’s law in that 80% of an organization’s core business comes from its top 20% customers – as revealed by a Marketing Profs Five Stars analysis on customer loyalty.1 What this means for a retailer is that focusing marketing efforts, time, and monies on high-value customers can help the business maximize revenues and create a loyal base of quality customers willing to spend more, and respond well to marketing promotions and campaigns directed at them.

Identifying a core group of customers willing to endorse the brand is the first step. Once this target audience has been defined, a retailer needs to devise the appropriate strategies to give them an enhanced purchase experience through exemplary customer service; targeted, and personalized offers; and effective cross-selling and up-selling. This will not only ensure a high ROI but also improve the brand’s image in the market, giving it a noticeable edge over competition.

Identify your high-value customers

It is a known fact in retailing that customer acquisition is a lot more expensive and time consuming than customer retention. However, a smart retailer needs to know which group of customers to retain. The logic is simple: typically, the ones who contribute to a maximum share of sales are the customers that deserve extra attention. There are several simple ways in which a retailer can identify who the top customers are, by leveraging the power of analytics to understand customer behavior and measure loyalty.

High-value customers can be differentiated by studying their responses to, and interactions with, the brand. Big data plays a central role in providing useful information about customer demographics, psychographics, purchase history, spending behavior, and other critical parameters. Some of the most important variables that can be used to identify top-notch customers include:

1

80% OF AN

ORGANIZATION’S

CORE BUSINESS

COMES FROM ITS

TOP 20%

CUSTOMERS

Identify high-value customers

Devise strategies to retain them

Enhance brand value proposition

Maximize business

volumes and profitability

1 http://www.marketingprofs.com/chirp/2013/11338/surprising-facts-about-customer-loyalty-marketing-infographic

Customer Lifetime Value (CLTV)

CLTV is indicative of how profitable a particular customer is, based on his or her relationship with the brand. By segmenting customers based on their lifetime value, retailers can create strong marketing strategies to effectively cross-sell and up- sell to their most loyal, upmarket customers.

The lifetime value of a customer can be measured by studying online customer data and information gathered from CRM systems. This data can then be processed using real-time analytics to structure promotional campaigns and loyalty programs. The eventual objective of any customer-facing strategy is to increase the CLTV.

Predictive analytics

The quantity of customer data can be enormous; it is present in diverse formats across multiple channels of interaction and difficult to manage and extract value. Predictive analytics plays an important role in retail CRM strategies enabling brands to gain crucial insights on customer behavioral trends. Advanced predictive modeling techniques can help retailers classify the right (high-value) customers, gain insights and develop strong strategies to surprise and delight them at every purchase point.

Loyalty score

Different customers respond differently to loyalty programs, and studying customer responses is crucial to understanding which segment of customers to target with personalized offers and messaging. By combining effective loyalty measures such as Net Promoter Score (NPS); customer satisfaction surveys; and brand endorsements retailers can determine loyalty and hence segment high-value, brand loyal customers.

RFM [Recency, Frequency, Monetary Value] analysis

Another very useful metric that can help retailers segment High-Value, High-Frequency (HVHF) customers is the RFM model. This technique involves understanding the following: • How recently have customers purchased a brand’s product? (R)• How often do they purchase? (F) • How much more do they spend on each purchase? (M)

Based on these parameters, each customer is given a rating and customers having the highest rating for all three categories (Recency, Frequency, and Monetary Value) are identified as the brand’s high RFM customers. These customers are most likely to repeat their visit and make a high value purchase again. High RFM scores are directly related to the CLTV and are indicative of the brand’s most profitable high-end customers.

Once the brand has identified its HVHF customers, it is imperative to give them preferential treatment over other customer types. Brands need to constantly identify their high-end customers and take the necessary steps to nurture and delight them at every interaction.

High-value customers: Strategies to maximize business profitability & build brand advocates 2

IT IS A KNOWN

FACT IN RETAILING

THAT CUSTOMER

ACQUISITION IS A

LOT MORE

EXPENSIVE AND

TIME CONSUMING

THAN CUSTOMER

RETENTION

PREDICTIVE

ANALYTICS PLAYS

AN IMPORTANT

ROLE IN RETAIL

CRM STRATEGIES

ENABLING BRANDS

TO GAIN CRUCIAL

INSIGHTS ON

CUSTOMER

BEHAVIORAL

TRENDS


Peter England

Peter England has seen significant growth in revenue and customers within the last 4 years with over 600 stores. However, like most retailers in the competitive retail environment the brand was becoming ever more dependent on seasonal sales to meet revenue targets. Past attempts to increase sales had included generic offers that were sent to all customers with no personalization, which lead to further margin erosion. The company wanted an insights-based customer engagement process that could help them build personalized targeted campaigns for different customer types by utilizing insights based on purchase behavior, demographic profile, past transaction history and preferential choice to reduce mass marketing efforts. Capillary assisted Peter England in collecting, integrating and analyzing customer demographics, customer transaction data and also product inventory data to create rich 360 degree customer views. By harnessing the power of deep analytics and big data, Peter England now intelligently engages with its customers through multi-channels acting on their buying preferences with relevant communications and offers, optimizing its marketing expenditure, and reducing their dependency on mass marketing campaigns to drive sales. In fact, the company’s personalization efforts lead to 33% more transactions in its historically low-business month of June compared to the annual average.

Through customer segmentation, Peter England was able to identify high-value loyal customers, to offer in-store rewards and promotions to encourage cross-and up-sale products, increasing lifetime value. New customers on the other hand, were targeted with more aggressive offers to increase impulse buys with the goal of converting them to long-term loyalists.

Five strategies to maximize business profitability of high-value customers

Once retailers have identified their high value customers through any of the above means, they are ready to start obtaining value from these customer relationships. Here are five strategies to consider:

1. Consistent customer engagement across all channels lead to delightful purchase experiences Customers willing to pay a premium are not just paying for the products they purchase but also for the overall brand experience across multiple channels. Retailers need to be aware that their premium customers are most likely interacting with their brand on social media and other digital/mobile channels. These customers expect a consistently rich and delightful purchase experience at all times across all channels. It is this experience that will eventually determine whether they continue to shop with the brand or switch to a competitor.

At the core of efficient customer engagement is 1:1 personalized communication between the brand and its high-end customers. By engaging deeply with these loyal customers through personalized messaging, brands can maintain healthy interpersonal relationships that augment business profitability and drive customer delight through relevant product suggestions and targeted offers.

2. High-value customers need high-value services A loyal customer may not easily defect to a competitor, but will expect a more personalized interaction from his or her favorite brand. This is taking retailing a step beyond cross-selling and up-selling – it is about understanding what a high-ranking customer will want from his future purchases and modifying product design to customize the basic offerings. This is a strategic move but necessary all the same, especially when dealing with High-Value, High-Frequency (HVHF) customers.

Insights from big data can be a great asset here in helping retailers understand specific customer preferences and allowing for appropriate changes in design and development. A fully automated, customizable, and cloud-enabled business intelligence solution can help retailers acquire vital customer information in real-time and access this information anywhere and at any time without an investment in time or expertise to understand how to build and manage the data. Brands have to innovate at every point of interaction and provide more value in every purchase by offering relevant product bundles packaged in line with the customer’s specific purchase style, preference and choice of products.

3. Top customers require an efficient loyalty and rewards management programThe paradigms of typical retail loyalty management have been defined with one main objective in mind: to convert regular shoppers into brand loyalists and ensure that they stick to the brand despite increasing market competition. An efficient loyalty program packages the customary point-based redemptions, discounts and rewards, and referrals along with future engagement initiatives that seek to engage and retain high-value customers. Good loyalty management is essential to drive customer retention, and in the case of high-value customers, retailers have a bigger challenge to constantly come up with attractive rewards and benefits.

Efficient loyalty program management incorporates exclusive rewards such as preferential access to a new or exclusive product line; savings on future purchases; reduced or no shipping costs; and other intangible benefits such as uninterrupted service and healthy brand-customer relationships. These rewards have to fit into the brand’s overall market positioning and value propo-sition, at the same time ensure that they are compelling enough and advanta-geous to long-term high-value customers. The right loyalty program augments the financial health of the brand by increasing brand value through a steady build-up of loyal customers.

4. Focus on Increasing in customer lifetime value not average basket sizeA high-value customer isn’t driven to purchase by discounts and wise retailers know not to rely solely on discounts but relevant, personalized offers for this segment. The CLTV of a customer increases when he/she shops in larger and higher amounts and keeps coming back to purchase more products.

Brands need to efficiently manage their customer engagement process to bring more customers into the store by providing exceptional, personalized shopping experience at each store visit. Positively urging customers to shop more frequently and for a higher value increases their Net Present Value (NPV), leading to a gross increase in the CLTV. By leveraging data analytics to study and understand specific buying behavior and purchase preferences, information can be used to cultivate interpersonal relationships and effectively cross-sell and up-sell to high-value customers.

5. Clienteling: In person, personalized engagementYour loyal customers also deserve personalized communication: Mass emails, auto-generated emails, and general SMS communications are strongly discour-aged. These loyal customers are willing to put a lot of money into a brand and all market messaging and communication has to be highly personalized to each individual or micro segment. A real-time personalized reward based on a customer’s preferences, or simply a personal greeting when the customer enters the store goes a long way in nurturing brand advocacy and customer loyalty.


CUSTOMERS

WILLING TO PAY A

PREMIUM ARE NOT

JUST PAYING FOR

THE PRODUCTS

THEY PURCHASE

BUT ALSO FOR THE

OVERALL BRAND

EXPERIENCE

ACROSS MULTIPLE

CHANNELS

BRANDS HAVE TO

INNOVATE AT

EVERY POINT OF

INTERACTION AND

PROVIDE MORE

VALUE IN EVERY

PURCHASE

4

Five strategies to maximize business profitability of high-value customers

Once retailers have identified their high value customers through any of the above means, they are ready to start obtaining value from these customer relationships. Here are five strategies to consider:

1. Consistent customer engagement across all channels lead to delightful purchase experiences Customers willing to pay a premium are not just paying for the products they purchase but also for the overall brand experience across multiple channels. Retailers need to be aware that their premium customers are most likely interacting with their brand on social media and other digital/mobile channels. These customers expect a consistently rich and delightful purchase experience at all times across all channels. It is this experience that will eventually determine whether they continue to shop with the brand or switch to a competitor.

At the core of efficient customer engagement is 1:1 personalized communication between the brand and its high-end customers. By engaging deeply with these loyal customers through personalized messaging, brands can maintain healthy interpersonal relationships that augment business profitability and drive customer delight through relevant product suggestions and targeted offers.

2. High-value customers need high-value services A loyal customer may not easily defect to a competitor, but will expect a more personalized interaction from his or her favorite brand. This is taking retailing a step beyond cross-selling and up-selling – it is about understanding what a high-ranking customer will want from his future purchases and modifying product design to customize the basic offerings. This is a strategic move but necessary all the same, especially when dealing with High-Value, High-Frequency (HVHF) customers.

Insights from big data can be a great asset here in helping retailers understand specific customer preferences and allowing for appropriate changes in design and development. A fully automated, customizable, and cloud-enabled business intelligence solution can help retailers acquire vital customer information in real-time and access this information anywhere and at any time without an investment in time or expertise to understand how to build and manage the data. Brands have to innovate at every point of interaction and provide more value in every purchase by offering relevant product bundles packaged in line with the customer’s specific purchase style, preference and choice of products.

3. Top customers require an efficient loyalty and rewards management programThe paradigms of typical retail loyalty management have been defined with one main objective in mind: to convert regular shoppers into brand loyalists and ensure that they stick to the brand despite increasing market competition. An efficient loyalty program packages the customary point-based redemptions, discounts and rewards, and referrals along with future engagement initiatives that seek to engage and retain high-value customers. Good loyalty management is essential to drive customer retention, and in the case of high-value customers, retailers have a bigger challenge to constantly come up with attractive rewards and benefits.

Efficient loyalty program management incorporates exclusive rewards such as preferential access to a new or exclusive product line; savings on future purchases; reduced or no shipping costs; and other intangible benefits such as uninterrupted service and healthy brand-customer relationships. These rewards have to fit into the brand’s overall market positioning and value propo-sition, at the same time ensure that they are compelling enough and advanta-geous to long-term high-value customers. The right loyalty program augments the financial health of the brand by increasing brand value through a steady build-up of loyal customers.

4. Focus on Increasing in customer lifetime value not average basket sizeA high-value customer isn’t driven to purchase by discounts and wise retailers know not to rely solely on discounts but relevant, personalized offers for this segment. The CLTV of a customer increases when he/she shops in larger and higher amounts and keeps coming back to purchase more products.

Brands need to efficiently manage their customer engagement process to bring more customers into the store by providing exceptional, personalized shopping experience at each store visit. Positively urging customers to shop more frequently and for a higher value increases their Net Present Value (NPV), leading to a gross increase in the CLTV. By leveraging data analytics to study and understand specific buying behavior and purchase preferences, information can be used to cultivate interpersonal relationships and effectively cross-sell and up-sell to high-value customers.

5. Clienteling: In person, personalized engagementYour loyal customers also deserve personalized communication: Mass emails, auto-generated emails, and general SMS communications are strongly discour-aged. These loyal customers are willing to put a lot of money into a brand and all market messaging and communication has to be highly personalized to each individual or micro segment. A real-time personalized reward based on a customer’s preferences, or simply a personal greeting when the customer enters the store goes a long way in nurturing brand advocacy and customer loyalty.


A HIGH-VALUE

CUSTOMER ISN’T

DRIVEN TO

PURCHASE BY

DISCOUNTS AND

WISE RETAILERS

KNOW NOT TO

RELY SOLELY ON

DISCOUNTS BUT

RELEVANT,

PERSONALIZED

OFFERS FOR THIS

SEGMENT

BRANDS NEED TO

EFFICIENTLY

MANAGE THEIR

CUSTOMER

ENGAGEMENT

PROCESS TO BRING

MORE CUSTOMERS

INTO THE STORE

5


Conclusion

This is the age of the informed and ever-demanding shopper. Retail marketing strategies need to move beyond just touting the qualities of a product towards delighting the customer, by creating a quality-driven supply channel and more efficient services. Today’s fiercely competitive market environment calls for a high degree of innovation, differentiated product offerings, and more personalized customer service from retailers who wish to gain an edge over their counterparts. By fully utilizing the massive amount of rich customer data to form more personalized interactions, retailers can surpass their efforts to delight their premium customer base. At the end of the day, every brand aims to grab a larger share of the market and its customers’ wallets; and making special efforts to understanding and catering to the purchase fancies of the crème-de-la-crème shoppers is a significant step in this direction.

Retail marketing today has evolved from being product-centric to customer-centric and retailers are pulling all the stops when it comes to catering to the demands and choices of their high profile customers, who are eventually the largest source of revenue for their brand.

What do you have to lose except your most valuable customers?

In-store customer purchase experience management

Customer Name and Mobile No.

Customer Profile and Interaction Summary

Capture feedback and

experience details

Thank You text and

customized offer for next

visit

Marketing Data Warehouse collects data from multiple

channels and Analytics help develop rich

profiles

POS/Tablet displays customer profile, past

transaction history and allows real-time

discounts to be extended at billing

Customized Instant Offers

On the basis of current

purchases, Make real-time

recommendations while interacting

with customer 1:1

In-store clienteling tablet with CRM

Clienteling through a mobile devices such as a tablet enables real-time, personalized interaction while a customer is in the store


Conclusion

This is the age of the informed and ever-demanding shopper. Retail marketing strategies need to move beyond just touting the qualities of a product towards delighting the customer, by creating a quality-driven supply channel and more efficient services. Today’s fiercely competitive market environment calls for a high degree of innovation, differentiated product offerings, and more personalized customer service from retailers who wish to gain an edge over their counterparts. By fully utilizing the massive amount of rich customer data to form more personalized interactions, retailers can surpass their efforts to delight their premium customer base. At the end of the day, every brand aims to grab a larger share of the market and its customers’ wallets; and making special efforts to understanding and catering to the purchase fancies of the crème-de-la-crème shoppers is a significant step in this direction.

Retail marketing today has evolved from being product-centric to customer-centric and retailers are pulling all the stops when it comes to catering to the demands and choices of their high profile customers, who are eventually the largest source of revenue for their brand.

What do you have to lose except your most valuable customers?

Capillary Technologies is a leading provider of cloud-based software solutions that help retailers of all sizes to engage intelligently with customers through in-store, mobile, social and email channels. Our platform powers end-to-end customer engagement, “clienteling,” loyalty and social CRM for more than 150 major brands in 10,000 retail locations. We help bring instant shopper gratification to 75+ million consumers in the US, UK, Middle East, South Africa and the Asia-Pacific region. Our customers include industry leaders Nike, Puma, Pizza Hut, Benetton and T.M.Lewin. We were named Marketing Magazine’s CRM & Loyalty Agency of the Year 2013, a Gartner 2013 Cool Vendor, and one of Mint/WSJ Bloomberg Businessweek’s Hottest Technology Businesses 2013. We’re backed by American Express Ventures. Sequoia Capital, Norwest Venture Partners and Qualcomm Ventures.

Learn more about Capillary Technologies.Visit www.CapillaryTech.comOr mail us at [email protected]

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