Our Thinking

Special offers retain customers only if the timing is right

By Ed Higdon. Posted in Insight

June 16, 2014

All retailers feel the pressure to keep revenue flowing, and many are concerned about meeting their projected goals while maintaining the spending patterns of their existing customers, especially their most loyal ones.

They have every right to feel this way. If a retailer looks at the top 20 percent of its customers based on annual spending, typically 60 percent of those customers will not be in the top 20 percent one year later. Additionally, those who drop from the top percentile bracket will decrease their annual spend by more than 50 percent. The risk here is not attrition, but the customer degradation signified by the drop in spending. So what’s the key to slowing this decline in spending? In a single word, timing.

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In many cases, customers who are slowing their spending behavior can be “shocked” back to their original shopping pattern with an attractive offer or message, given at the right time. Imagine the customer’s shopping pattern as a heartbeat. If the heart is beating normally, there is no need to do anything. If the heart starts to beat irregularly, some type of treatment should be applied. But if the customer’s heartbeat falls flat, it is too late – the retailer has likely lost the customer for good. Regular monitoring of the individual shopper’s heartbeat is essential.

Retailers can send out huge offers or discounts to their best customers to keep them shopping, but unless the timing is right the retailer is either discounting sales that would have happened anyway, getting lucky on timing and “saving” a good customer, or getting no impact at all.

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All too often, marketers develop attrition-mitigation strategies that are driven on a 12-month cycle. When a customer has not shopped in 12 months, he or she is sent a follow-up with a big offer or a “We Missed You” note. If she regularly shops once a month and has not purchased a product from the store in a year, she is not “leaving” — she is gone. So how does the retailer know when special offers retain customers and when it’s time to deliver the winning sales pitch?

The best timing is based on individual behaviors. Every shopper has different habits with their favorite stores. One may have a tendency to spend $40 per outing and do it 10 times a year. Another may have a tendency to spend $100 per outing but do it four times a year. In the end, both customers bring the same total value to the retailer. That’s why it’s important for a retailer to work with a trusted business partner to design an individually based marketing program, one that can assess when different customers’ heartbeats are about to go flat.

Timing is the key for your customer, and it probably is for your business, too.