April 22, 2021

A Customer Development Example

This (amazingly) is now more than fifteen years ago. I've spoken about this often, but seldom in the context of Customer Development.

At Nordstrom, we had our annual Anniversary Sale. From late July to early August, we discounted our new fall assortment by about 20%. We did Christmas-like business in mid-summer. When people talk glowingly about Amazon Prime Day, remember that Amazon largely copied the playbook of Nordstrom.

My team was asked to pick an annual spending level that pre-qualified customers for special Anniversary Sale perks. My team did the work, and determined that $750 was the amount of annual spend that was hard to achieve yet worthy of being rewarded during Anniversary Sale. If the customer spent $750 in a twelve-month period of time, the customer would qualify for an invitation to enter the store a week before the event began. In this invitation, the customer could pre-select merchandise. The merchandise would be held for the customer. On the first day of the sale, the customer walked into the store, picked up the merchandise, and paid for it.

Did this tactic "develop" customers??

Oh my goodness did it develop customers!

We knew that, say, 15% of customers would spend $750 a year or more. The program caused a significant increase in the annual percentage of customers spending more than $750.

We knew that customers who bought during the Anniversary Sale would become even better customers in the future, after controlling for other factors. This Customer Development tactic caused the "invited" customers to spend (if I remember correctly) 17% more than comparable customers spent in prior years. You take a half-million customers and get them to spend $40 more than they'd normally spend and just like that you pocket $20,000,000 in additional sales and $5,000,000 more in annual profit.

But you have to have a compelling event. And an achievable spending level to get to. And you have to have "emotional perks". I worked in a store each year on the first day of the Anniversary Sale, and you should have seen how these customers strutted through the store to pick up their plunder while "the masses" fought for what was left.

I know, you're going to say that this was way back in 2005-2006 and therefore is not relevant in a modern "omnichannel" world. Fine. Then use your brilliance to come up with a modern "omnichannel" customer development event. You can do this!!!!

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