Five Stages of Customer Development

At some point in 2021, enough of your customers will be vaccinated and/or have had COVID to allow some semblance of normalcy to return. Not "normal" ... I'm not confident "normal" is coming back and when it does come back it won't be like 2019 ever again ... but "normal" enough to shift your business out of the current mode it operates in.

For so many e-commerce businesses, the past ten months have been all about Acquisition. Most e-commerce businesses (aside from apparel) didn't even have to try hard, the new customers came flying in and have continued since.

So as things start to become "more normal", my e-commerce clients are moving into the third stage of Customer Development.

Acquisition was maximized without significant marketing activities or spend, for the most part ... though some e-commerce brands dumped marketing fuel on the fire and really maximized their opportunity.

The "Welcome" stage was utterly squandered. There needs to be a strong program in place to quickly convert the first-time buyer to a second order, and almost nobody puts in the effort to do this. That's a shame.

So with the opportunity squandered, the customers who self-selected themselves for a second purchase enter the Emergence stage. That's where a ton of effort will be expended in 2021 and beyond. The goal is to develop the customer so that "some" customers enter the Loyalty stage (typically after a fourth purchase ... when a customer has a 60% or greater chance of purchasing again).

The burgeoning Acquisition phase is going to end ... the Welcome phase will be squandered, and the Emergence stage becomes the biggest story of the second half of 2021. Marketers will have an opportunity to develop customers, moving them through the Emergence stage toward Loyalty.

Anybody not focusing on this framework and not developing marketing plans for the second half of 2021 and the first half of 2022 is squandering the enormous blessing gifted to e-commerce brands on behalf of a horrific pandemic.

Get busy, Dear Readers!

Customer Development

I mentioned last week that new customers are going to be a focus of my work in 2021. But it goes well beyond that. New customers are the first stage in the development process, called "Acquisition", of course.. It's generally the most ignored stage in the development process across my client base. That's a mistake.

The second stage is the "Welcome" period. The first three months after a customer is acquired are critical to customer development. If you do not convert the customer to a second purchase immediately, you waste your new customer opportunity. This process is almost universally ignored across my client base. That's a mistake.

The third stage is "Emergence". If you get a customer over the hurdle to a second purchase (which is very hard to do), your focus shifts to Emergence. Obtaining a third or fourth purchase becomes much easier. This is the stage where you shift your focus from marketing channels to merchandise preference, trying to expose the customer to every opportunity your brand presents to the customer.

The fourth stage is "Loyalty". The customer has a 60% (or better) chance of buying again in the next twelve months. This typically happens after a 4th purchase, though your mileage will vary. You harvest all of the profit necessary to keep your business moving forward. These customers were likely acquired a few years ago, but they are generating the money necessary to pay your salary today. Do not over-market to these customers and waste all of the profit they generate.

The fifth stage is "Retirement". The customer extracted everything the customer needed from your brand, and you extracted all of the profit you needed from the customer. The customer is being retired. Your job is to now communicate with the customer, but there isn't a reason to beg this customer for business. The financial aspect of the relationship is over. Use free tools to communicate, and if the customer wishes to purchase again, so be it. For the most part, the customer relationship has ended.

There are five stages to Customer Development in my framework.

1. Acquisition
2. Welcome
3. Emergence
4. Loyalty
5. Retirement

Tough Decisions

At least two Analytics / Direct Mail individuals were involved in what happened at the Capitol last week.

• Analytics CEO (click here)
• Direct Mail Professional (click here)

Both organizations are obviously overwhelmed, given what you see on their websites. The Analytics brand scrubbed the site of the "About" section - you won't learn about the Leadership attributes of their Executive Team. The Direct Mail brand changed their website home page to a simple statement.

We'll all make choices in 2021 and beyond. It's bad enough we have to figure out how to deal with COVID in the workplace and in sales/profit. Now we've got another thing to think about.

January 6

I had a post written for today, but the events of January 6 are more important than my views about new and existing customers.

You've been through a lot in the past year. Persevere. I'll talk to you next week.

New Customers

All of my recent projects have a common theme.

• "What happens when most people who want to be vaccinated are vaccinated and I'm not getting a COVID-bump anymore?" 

Good question!

That's what I'm working on these days ... forecasts that demonstrate what the future looks like ... analysis of the veritable plethora of customers who have been acquired, measuring who moves to loyal status and who disappears ... and careful analysis of merchandise performance given that so many of these COVID-newbies seem to prefer existing merchandise over new merchandise.

You'll be hearing a lot about new customers in the first quarter ... it's your #1 question over the past three months and is the subject of just about every email I've received in the past few weeks.

Attribution and Fraud

Stop what you are doing and read this tweet storm ... right now (click here).

I won't give away the plot ... you need to click on the link and read it for yourself.

I will say, however, that I continually see awful attribution solutions. I'll look at email mail/holdout tests, catalog mail/holdout tests, or experiments where the search budget is gutted for a month and observe that almost nothing changes when ad dollar investments are reduced. And yet? Vendors (and client Professionals who'd rather side with vendors than with their own p&l and yes that happens all the time) keep telling my clients that all these dollars are not wasted.

I spent one (1) year in the retargeting world (way back in calendar 2000) ... working for a retargeting startup. I witnessed the half of the employee base who acted with integrity, and I witnessed the half of the employee base who'd lie, cheat, steal, threaten employees, have relationships with various employees, and do just about anything awful to keep the dollars flowing. Too often, the awful half trumped the half with integrity.

Years ago, I wrote a booklet about holding your vendors accountable. I sold four (4) copies of the book. 

Four!

And when I'd bring the topic up on my blog, I'd get just as much criticism from client-based marketers as I'd get from vendors. Heck, I spoke at a conference about holding vendors accountable, and the client-side attendees chided me after the talk. That was a surprise.

Something needs to change.

You could be the person who acts with honesty and integrity, electing to protect your CFO. Why can't that person be you?

P.S.: One of my favorite moments of vendor fraud happened in a catalog mail/holdout test. The client didn't mail catalogs for three months. The vendor attributed 80%(ish) of the orders in the holdout panel to mailed catalogs ... even though the client didn't mail those customers a single catalog for three months. Let that one sink in. And when the fraud was discovered, the client chose to not change the attribution algorithm. Also let that one sink in. Rampant vendor fraud requires a willing client base to make the process work.

P.P.S.:  Follow this woman, please (click here). And subscribe to her newsletter here.

SIGN UP ON MONDAY MORNING!!

On January 6 at 1:00pm EST / 10:00am PST Bill and I will hold Office Hours for a small group of 25 students. The audience is limited to current catalog practitioners (there may be Office Hours in the future for different disciplines, but this is where we are starting). So if you want to participate, hold the date of January 6 at 1:00pm EST open on your calendar.

Frequently Asked Question?

• How do I sign up?

Here's how I am doing this.

• You can sign up at exactly 1:00pm EST / 10:00am PST on Monday, January 4. Not a minute sooner.
• The first 25 time-stamped emails I receive from current catalog marketing practitioners (send your email to kevinh@minethatdata.com) are in. If your email arrives one minute prior to the deadline, it is thrown out. The next 10 time-stamped emails go on a waiting list.
• You will receive e-mail confirmation that your Office Hours application has been accepted, wait-listed, or denied.

One catch:

• Your email application MUST include a link to one industry article that you think is interesting, an article that you'd like us to consider for discussion during Office Hours. Here's an example of what I'm talking about (click here). Go ahead and tell me what you find interesting about the article and what you'd like Bill & I to consider discussing in relation to the article.
• No link to an article, no acceptance of your application.
• I will collect all of the articles that are submitted by all applicants ... and I will forward the list of all articles to all applicants, regardless whether your application is accepted, wait listed, or denied.

That's what I'm experimenting with, peeps. Let's try something different, and let's see how it goes.

It's time to sign up ... get your submission in!!!