May 09, 2022

Whipsawing Customer Development Issues

For many of my clients, 2020 was good for the p&l. Really good. With retail largely shelved for a few months, customers bought from e-commerce brands. A glut of new customers joined the customer file, and those customers (when developed properly, which didn't necessarily happen) rolled through the customer file through the middle of 2021, generating disproportionate profit.

During the second half of 2021, many of my clients faced inflationary pressures ... labor cost increases paired with cost of goods sold increases. Most of the clients impacted had no choice but to raise prices.

During 2022, the price increases are rolling through customer files. It's common to see reductions in rebuy rates offset by increases in spend per repurchaser. It's very common to see decreases in new customer counts as well. This is the troubling aspect of 2022. Artificial customer acquisition buyer increases in 2020 evened up a bit in 2021 and have been in decline during 2022. Now you add price increases and we're seeing a lot of new customer acquisition pressure. Pair that with rebuy rate declines and you've got a recipe for a Customer Development crisis.

A lot of old-school marketers are already committed for Christmas with product and "campaigns". These marketers have problems. I'm not very optimistic about what the second half of 2022 holds for these brands. Going into 2023, these brands won't have file power, and will likely struggle to compete. Weak companies (from a p&l standpoint) are in a lot of trouble.

Companies with strong Customer Development issues will build the customer file through early November, in an effort to capitalize on Christmas. They're going to use nearly-free tools like email and social to Develop existing customers while identifying likely prospects. They will leverage the items that still have "value" in the mind of the customer, presenting products that do not appear disproportionately expensive. They will fuse Customer Development and Merchandising Margins to grow "where possible". They will attract new customers with merchandise the customer can afford.

Blend your Customer Development strategies with Merchandise Margins, and generate as much profit as you can during our inflationary period. This is not the time to do "what we've always done" while you already increased prices and have product availability issues. That's a recipe for an awful 2022.

Do something different.

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