One of our biggest retail clients has a customer - we’ll call him Jon Grayson - and, let’s be frank, Jon seems more trouble than he’s worth. Over the past 12 months, he’s spent about £80, which might sound like a lot but
this retailer’s average customer spend is in the multiple thousands per year. Consequently, Jon’s been relegated to the lowest priority CRM pot, the marketing equivalent of Douglas Adams’s infamous “bottom of a locked ﬁling cabinet stuck in a disused lavatory with a sign on the door saying ‘Beware of the Leopard’.”
But, when we mapped our client’s customers’ inﬂuence over other shoppers, we discovered something amazing about Jon Grayson. While he wasn’t spending much himself, he lay slap bang in the middle of a huge network of social sharing - making him the virtual gatekeeper to over £2m worth of revenue. A kind word from Jon would
signiﬁcantly push the needle. Any negative sentiment would do a lot of harm.
You won’t be surprised to learn that Jon is no longer our client’s lowest priority. And there’s a lesson here to be learned across retail: in today’s inﬁnitely connected world, a customer is no longer just a customer and social is no longer simply a vehicle for chitchat.
The customer has become a market and social has become a critical sales channel. To an extent, this is nothing new. If anything, identifying and rewarding your business’s key inﬂuencers is the logical replacement for afﬁliate marketing: a vehicle which, one upon a time, delivered advocacy and acquisitions, but now does little more than hang about your checkout, mugging you for 10% of your takings. Built for a presocial era, tools such as afﬁliate marketing are starting to show their age and, like an acrobat swinging from an old, weather-beaten trapeze, the tighter we cling on, the more splinters we’re going to get.
And then there’s discounting. Given themountains of big data we now have at ourﬁngertips, we’re supposed to be tailoring our deals to match every nuance of the customer journey. But, when there’s so much information that no one can begin to process it, most retailers just run for the hills and knock 30% off Andrex instead.
Here at Buyapowa, we call that ‘dumb discounting’: generic price reductions which get your products in front of customers and get your customers in front of checkouts.
But the problem with dumb discounting is that, unless you’re prepared to be accused of misleading promotions, you have to make the savings available to huge numbers of people for long periods of time. That affects both margin and price-perception, alienating your CFO, your suppliers and, eventually, even your customers themselves.
The alternative to dumb discounting deﬁnitely isn’t no discounting. Remember the sad ballad of Ron Johnson, the former Apple Store maestro who took over at JCPenney in 2011, scrapped sales and coupons and “lost the customer dressing room” almost overnight. Johnson, famously, lasted less than 18 months before being unceremoniously jilted for JCP’s ex, Myron Ullman - who wooed back customers and analysts alike with an aggressive campaign of price-busting deals. The takeaway? Cut cutting cuts.
The real alternative to dumb discounting is ‘smart rewards’: dynamic deals or promotional codes which improve – and keep improving – only if the customer earns them, either by demonstrating their loyalty, bringing in new customers or promoting your brand to their social networks.
We’re all familiar with Forrester’s data on trust (70% of people trust brand recommendations from friends, only 10% trust advertising) – well, this is how you set those viral dominos in motion: by making the price, bundle or promotional code value more attractive as more people participate and share.
We see this in action every day as our clients achieve 60% referral rates on retail campaigns powered by Buyapowa. That’s an unprecedented six out of every ten shoppers transacting not because of massive marketing spend but because of incentivised word of mouth.
Consider it the evolution of loyalty: a movement from one-to-one to one-to-one-tomany.
And customers instinctively get it. They understand that something for something is
much more meaningful that something for nothing.
Better still, if you make this process fun by introducing gaming mechanics,
targets, deadlines and jeopardy, the customer actually enjoys earning their rewards and
works much harder for you in the process.
(This isn’t rocket science. In fact, it’s really just an extension of coffee shop loyalty cards. Weplay’ them because targets are fun, not because we desperately need a free latte.)
SKIN IN THE GAME
So, we’ve seen how we can use tactical and dynamic rewards to get customers shopping.
But how can we extract value from customers who aren’t ready to purchase? The received wisdom is: study them, stalk them and ambush them – hence the recent explosion in retargeting advertising. But retargeting’s an inexact science (I’ve lost track of the number of times I’ve been served irritating ads for products I already own), and there are much more effective ways to engage customers in the run-up to transactions.
One of the most compelling is getting them to put some ‘skin in the game’ via selection and curation. Instead of pushing out deals from on high – the ultimate ‘dumb discounting’ – let your customers (and their networks) pull the deals they want to see. If a thousand customers want a deal on baby monitors, or even just one inﬂuencer with some serious sway over a relevant audience, then make that deal happen – safe in the knowledge that economies-of-scale are underwriting your margin.
Because these customers have essentially signed up to buy before the deal even goes live, because you’ve engaged with them in a meaningful way, you know that the vast majority of them will purchase when the opportunity arises and remain committed members of your buying community afterwards. At the very least, you’ll have acquired a CRM database of red-hot leads, which you can convert at a later date via new or augmented offers. It’s the same principle as pre-sales in the ticketing and entertainment industries - and it’s a no-brainer to apply these techniques throughout retail.
Best of all, when a customer has skin in the game because they’ve been involved in selection or curation or simply asking to be told when an upcoming deal goes live, the discount doesn’t even have to be that big: “I asked for a deal on winter tyres.
I got a deal on winter tyres. I’m taking them up on that deal for winter tyres.” Combine this with incentivised sharing and you’ll be able to achieve all the impact of dumb discounting without slashing your prices, making huge numbers of units available or running long,
risky promotions. You can even use these techniques to reinvigorate mid-life-cycle
products, achieving all the buzz usually reserved for new launches but at a time when
your margins are much more favourable.
Remember: none of this is a replacement for the tried and tested techniques which have powered retail for hundreds of years. But if, like Tesco , HRG and PepsiCo, you want to make the most out of all your customers – the ‘good’ and the ‘bad’ – you need to start experimenting and learning to ensure you don’t get left behind. It’s not the new future.
It’s the new now.