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4 Tactics to Solving the Mystery of the Unknown Customer

By Ed Higdon. Posted in Uncategorized

February 25, 2015

Unknown customers are an elusive breed: they are not members of the rewards program, they do not have (or do not use) a branded store credit card, and they generally fly under the radar. These mysterious customers leave retailers virtually paralyzed: unable to establish ongoing communications, retailers cannot build the meaningful relationships that support long-term profitability.

While it is impossible to identify every single anonymous customer, retailers can increase their known customer base and lay the foundation for long and healthy relationships with those shoppers – and it doesn’t have to be a giant increase; just a 1% increase in the known rate can have a measurable and significant impact on the bottom line.

The Value of a Known Customer

How can such a small increase make any difference at all? Through analysis of the customer base, retailers can identify the incremental value of each customer – how much customers spend before and after they are known.

Let’s say that a retailer has a known customer base of five million and that each customer spends $100 more, on average, after they become known. Just 1% of this known base is 50,000 people! If the retailer can turn 50,000 unknown customers into known customers (and get those individuals to spend that extra $100 more), the end result is a staggering $5 million increase in sales. Moving customers from the anonymous vortex into the world of known customers isn’t a herculean task: these four tactics can get any retailer on pace to make bigger profit with just that 1% increase.

Tactic #1 – Tie Rewards Cards to Other Customer Cards

Rewards programs are often a gateway into the known customer realm – unless the customer forgets to swipe his or her rewards card on some transactions. This leaves gaps in their customer profile.

Therefore, to truly know a customer, retailers can “tie” a credit card number to the customer through the rewards system in the initial rewards-card transaction. That way, if a customer uses his or her credit card at a later purchase without swiping the rewards card, the retailer can still link the purchase to the customer, for a more robust profile.

Tactic #2 – Work Backwards with Data Appends

No matter how enticing a rewards program may be, there will always be customers who resist signing up. In order to capture information and initiate communication with those customers, retailers can make use of data appends – the process of “appending” data to a customer base after they make a purchase.

This strategy is not new to retail. There was a time when sales associates asked customers for their telephone numbers at checkout. A data append partner would use the numbers to provide the retailer with the names and addresses associated with each landline.

With the increased use of cell phones and privacy concerns, however, data appends have moved beyond the telephone numbers of yesteryear. When customers swipe a credit or debit card at checkout, the retailer captures the name and address associated with the card. Laws vary by state, but in most cases the retailer cannot use the address information for anything other than processing the transaction – it cannot be leveraged for marketing purposes.

However, the retailer can use the name to initiate a data append. First and last names of unknown customers can be sent to the third-party append company, where they are identified through geographic indicators. Once identified, the retailer can send that customer relevant communications.

*Laws vary by state and jurisdiction, please seek legal counsel before proceeding with any appends.

Tactic #3 – Push Better Store-Branded Credit Cards

Store-branded credit cards allow retailers to know their customers on an intimate level, and to nurture relationships with them through highly personalized, relevant communications. Thus, reducing the number of customers who only use the card for the first purchase discount can have a significant impact understanding your customer’s behavior.

Tactic #4 – Just Ask for the Information

Simply asking for customer information at checkout is an obvious (and sometimes overlooked) method of gathering customer information. However, many customers have become wary of this tactic: some may provide bogus email addresses, or email addresses that they use for the sole purpose of funneling marketing communications, or they may refuse to provide any data at all.

But, asking remains a worthwhile effort. There are plenty of customers who will willingly provide their accurate email address to a sales associate, especially if they know relevant offers await them. To that end, bounce-back coupons can be an effective manner to entice customers to provide their email information at checkout. Be sure that their receipt reminds them of the email offer, so they will be more likely to open the email when the offer comes through. Correspondingly, giving the associate a spiff as an incentive for collecting the data is an effective practice.

Establishing a relationship with an unknown customer takes time, effort, and strategy. But trying these four tactics to leverage relevant data – even if it moves just 1% of customers out of the unknown and into the known – can have a long and lasting impact on loyalty, retention, and sales.

WHAT’S NEXT

Once you know the customer how do you develop a new customer base?