A retail business can only grow when it’s evolving, keeping pace with trends and adding new customers. However, aggressively pursuing a new customer base can have adverse effects if that strategy disengages existing customers. New customers are important, but long-term growth is only possible when existing customers continue to grow alongside the addition of new customers. The good news? Striking that balance is possible, with the right strategies in place.
Focus on What The Customer Buys vs. Who the Customer Is
When it comes to marketing strategy and tactics, it is very easy to get hung up on demographics – after all, demos have been successful in driving marketing effectiveness since the beginning of advertising. However, too much focus on demographics at the expense of personalization can actually impede success.
Consider what would happen if a retailer’s existing customer base is older and more affluent. If the company wants to evolve, they have to focus more attention on Millennials who are entering prime earning years. But making a dramatic shift to target a new demo – updating logos, changing merchandise, incorporating digital, directing ads to a younger audience – can leave older, existing customers feeling as though the brand no longer relevant to them.
If marketers move past demos and dig into their data, they will find “hidden” patterns and trends. People of all ages, income levels and backgrounds can have similar tastes. Consider women’s clothing, for example. Tastes cross all demographics. The fact is women of any age can have classic taste, contemporary taste, trendy tastes, etc. It’s important not to assume all Baby Boomer grandmothers dress the same and buy the same products just because they’re the same age. Conversely, there are some 35-year-old women that, well, dress like the archetypal “grandma”. By personalizing marketing to customers based on what types of items they buy rather than what demographic they fall into, every message feels personalized and customized and every shopper feels valued, and they see the retailer as a relevant choice for their needs.
Unique Channels, Unique Messages
Marketers can also strike a balance between existing and new customers when it comes to their approach in each channel. Personalization and hyper-targeting are more possible than ever before in digital marketing, social media, email marketing, and even direct mail. Existing customers and new customers can be targeted in separate and unique ways, ensuring neither feels alienated.
Test and Learn
It can be tempting to dive headfirst into a “sexy” new channel or new “look and feel” to attract new customers, but the tortoise always wins the race. A test-and-learn approach is the savviest way to control and optimize spend for best results.
Testing and learning allows marketers to dip their toes into a new channel or try out a new approach, study results in real-time and adjust accordingly for success. Within each channel, “bucket tests,” “split tests” or “A/B tests” are run to try out different strategies, budgets and messaging. These tests provide data on effectiveness, communication strategies, and overall spend. A measured approach leads to better results, controlled budgets, optimized spend and ultimately, ROI.
Establish and Track KPIs
Measuring success is only possible when you know what success looks like. Before embarking on any initiative to aggressively pursue new customers, it is important to establish and track metrics. KPIs (key performance indicators) will vary based on unique goals, but they could include measurements such as:
- Percentage of top customers retained year-over-year
- Percentage of best customers growing year-over-year
- New customer acquisition shifts
- Customer movement into more or less valuable segments
- New customer retention and second transaction rate and timing
Balancing new customer acquisition against best customer retention is certainly not a new conundrum for retailers – it is the solutions that are evolving. Technology can now facilitate data-driven strategies that allow marketers to strike that balance more effectively than ever before.