Having run a survey at a recent ecommerce conference, I now have some evidence to support that somewhat anecdotal statement.
We asked a room of premium and luxury retailers to review twenty statements related to customer data and insight. We had 45 responses so I don’t claim this to be the most exhaustive study, but I think there are some interesting findings.
Furthermore, the list below does not cover everything a retailer should know about their customers.
Clearly, as you get more granular with your search, email and social strategies, for example, there will be specific metrics used to measure behaviour.
However, in defining your customer strategy, setting business goals, optimising your marketing activity and refining it on a continuous basis, each of the areas below are pretty vital.
The percentage of retailers that were able to answer ‘yes’ to each statement is in brackets. If you are a retailer, feel free to mark yourself:
- We know where our customers live (81%).
- We understand what life stage our customers are at (39%).
- We broadly understand their interests and habits (61%).
- We understand the personal values of our customers and how they influence their purchasing decisions (32%).
- We know the channels our customers prefer to be contacted via and how often they want to hear from us (23%).
- We know the type of content our customers respond best to and tailor our strategy accordingly (43%).
- We know what our customers like about us…and the things they don’t (56%).
- We understand why our customers sometimes prefer to buy from our competitors (50%).
- We understand how price-conscious our customers are (59%).
- We know who are most valuable customers are and, as such, treat them differently (41%).
- We know the incentives that appeal most to different customer segments and shape loyalty programs accordingly (16%).
- We know the products that first time customers tend to buy (39%).
- We know what the time lag is between first interaction and sale (23%).
- We know how much we can afford to spend in acquiring a new customer (29%).
- We know how much our customers spend per transaction (89%).
- We know why our customers return our products (73%)
- We know what our customer retention rate is and the revenue we are losing by not retaining customers (29%).
- We know the lifetime value of our customers (39%).
- We know if our customers have recommended us online (25%).
- We measure customer satisfaction using Net Promoter Score or a similar metric (14%).
How did you score?
Areas of greatest concern
Broadly speaking, the results are rather disappointing. Simply put, respondents do not know nearly enough about their customers, which will inevitably result in missed opportunities, wasteful spending and dissatisfied customers.
A few really stand out however.
Just 23% know which channels their customers prefer to be contacted on. As I highlighted with an example in my last article, marketing budgets are not infinite. Therefore, focusing attention on the channels and touch-points most aligned to the behaviours of your customers is essential to ensuring that budget delivers the greatest return.
Again, in my previous article, I highlighted how one of our retail clients refined their loyalty program based on customer feedback.
Yet, just 16% of our respondents know what incentives most appeal to their customers. This survey would suggest retailers are second guessing the incentives they offer rather than aligning them to customer needs, values and behaviours.
Only 40% of respondents know the products that tend to attract first time customers. Yet this information can be hugely powerful in shaping an acquisition strategy.
For example, a paid search campaign can be honed around the products that new customers typically buy as an entry point to the brand, along with accompanying messaging to drive conversion.
Perhaps the biggest surprise relates to understanding what can be spent by a retailer to acquire a new customer – just 29% of respondents know this. Furthermore, just 39% know the lifetime value of a customer (a little lower than a study Econsultancy reported on back in April).
Without understanding these metrics, it makes it nigh on impossible to optimise your marketing programs and ensure that activities, such as paid search, are driving a positive return.
Why is understanding your customers so important?
Happy customers spend more and are more loyal if a retailer is able to deliver an experience that meets their expectations. But get it wrong and a customer will be only too happy to take their business elsewhere. In this day and age, they really don’t have to work very hard to do so.
To win and retain customers, the question, ‘will this work for our customers?’ should therefore be the starting point for every decision, no matter how big or small.
This means understanding what your customers want, rather than what you think they want and knowing how they behave rather than how you think they behave. All assumptions should be left at the door.
Focusing on the right data and involving your customers in the planning process are therefore essential. Customer know-how is not a nice to have. It’s a necessity.