January 11, 2011

Multichannel Wednesday: The Missing Part Of The Customer File

The multichannel movement (catalogs, retail, television, radio, online, search, e-mail, social, mobile, tablets, whatever else you want to toss into the mix) promised us riches.  We were told that if we entered multiple channels, our customers would become more valuable, of course, because the most valuable customers are multichannel customers.

Oh boy.  That sure didn't work (ask Circuit City, Borders, Blockbuster, Sharper Image).  Think of all the investments you made to satisfy the pundits.  Now, take a look at your customer file.
  • Was your annual retention rate higher in 2010 than it was in 2000?
  • After adjusting for inflation, discounts, and promotions, did your customers spend more in 2010 than they spent in 2000?
When I analyze client customer files, I continually observe one fascinating trend:
  • The bottom of the twelve-month buyer file is missing.
Obviously, this is an exaggeration.  That being said, one of the biggest findings of the past half-decade is the erosion of the bottom half of your twelve-month buyer file.  In other words, the top of the twelve-month buyer file, your most loyal customer audience, has generally stayed with you.  But the bottom half of the twelve-month buyer file, the infrequent shoppers, well, there are simply fewer of them.  The explosion of choice seems to be having a significant impact on infrequent buyers across existing niche brands.

I don't think this is something that one can fix.  Over and over again, I observe a shrinking bottom-half of the twelve month file.  More choices and lowest prices and free shipping and discounts and promotions and Google and Social drive customers to getting their needs met at the lowest possible cost.

This won't be fixed by publishing an app.

This won't be fixed by "being social".

This won't be fixed by "bricks 'n clicks".

This won't be fixed by offering discounts and promotions, because somebody will always offer a better discount/promo.

I don't think there is a fix for this, I think we simply have to adapt to a new reality.  The explosion of information available to a customer guts our customer files from the masses of infrequent shoppers that used to shop with us in a pre-information era.

Is this happening to your business?  Run a query, decile your customers based on spend in the past year, then use the same dollar breaks for past years ... see for yourself if this is happening.

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