For the Love Of Wallet; How Consumer Activation Drives Real Shareholder KPIsOct 1, 2014 - by Neil Capel
In the past few decades, our society has switched from a “ranking” mentality to a more inclusive “everybody can be a winner” approach to competition. However, businesses would do well to return to the old – if sometimes upsetting – guideline that “placing” first through third matters more than anything else. When it comes to business, the first company that customers think of when they’re ready to buy can have an incredible advantage over second place when it comes to their bottom line. And if you’re fourth or lower, your portion of a customer’s wallet may fall to a single digit percentage.
If you’re an ecommerce company, this fact is plainly evident. Competing with brand peers as well as the likes of Amazon, eBay and Google Shopping can be daunting. When your audience can buy from anywhere in the world without having to put pants on, it’s hard to even think about how to get each hard-earned buyer to become loyal, repeat customers – but it should be your biggest concern. Share of wallet is the most important factor in increasing revenue – by definition it is the amount of a customer’s total spending that goes to a company rather than their competitors.
Brands must not settle and get comfortable once they are in their customers’ “top 10” – today’s reality is that if your company isn’t one of the first three brands your customer thinks of when looking for your product, you’re likely earning less than 5% of their wallet.
Loyalty is Royalty
While fostering share of wallet, it’s important that brands remember that in most cases, 80% of your profits are provided by 20% of your customers. Brands are best served by focusing on over-delivering for and retaining the critical minority with which they own the largest share of wallet instead of giving in to the temptation to constantly try to capture 100% of the market at a smaller share.
What can you do to improve the revenue stream from this elite group of hyper-loyal customers?
Don’t underestimate incremental improvements. Just as with a friends, relationships aren’t built entirely on grand gestures. Sometimes it’s the little things that keep us coming back.
Test, test and test again. With all this data that your brand is capturing, it may seem like the answer is obvious, but don’t forget that you’re dealing with humans. Everyone has their own individual preferences, and they aren’t always logical. When in doubt, A/B test until you’re sure!
See data as an opportunity. Marketers will forever segment on attributes like recency and frequency because that approach is proven and familiar – however, there are so many more data points that are available! As Mary Meeker showed in her 2014 annual report, only 1% of data is being analyzed today. There’s money being left on the table, with the right attitude you can reach out and grab it.
Focus on and invest in user experience. Keep users coming back, and inspire them to tell their friends! From the first digital touchpoint to the greeting in-store (if you have a brick-and-mortar presence) to customer service for purchased products – a holistic user experience is powerful for driving retention.
Personalization is Key
Customer expectations are at an all time high – if one company’s offer is not good enough, they’ll simply go find another one. Because of this, ecommerce has to become less about each transaction, and more about fostering long-term relationships. Much like traditional storefronts battling it out with huge names like Walmart and Target, small ecommerce brands must make the customer’s experience of shopping with them a primary selling point – remember your shoppers’ preferences, predict what they might need, and use the agility of being mid-market to accommodate their desires for specific products whenever possible.
Marketers and brands that have healthy customer relationships deploy what I call “The New 4 Ps Framework”:
Personalize content, and meet each customer’s specific wants and needs.
Preempt disengagement automatically with active practices, frequency adjustment and longitudinal studies.
Predict a customer’s actions by analyzing previous behaviors and establishing triggers.
Prevent customers from opting out by sending messaging at the right cadence, with the right calls to action.
By accommodating these expectations of personalization, brands ensure that their customers feel heard and cared for, which is the best encouragement for them to return again and again.
Once your brand is gathering and analyzing data about customers and personalizing each experience, it’s time to expand the relationship with each individual consumer – why are they loyal to you specifically? What can you do to meet their needs further? For brands with slower buying cycles – from real estate to designer jewelry – following the 4Ps can help keep your company top of mind, and consumers warm for the next conversion opportunity.
Consumers today give you millions of data points along their purchase journey. It’s up to you and your marketing team to process each of them, learn from them, and understand the underlying message. Once you’re adept at decoding customer actions, you’ll be able to see what they want from your company as clearly as if they told you outright. As their relationship with your brand grows and thrives, they’ll think of you first in more situations – increasing their loyalty and, therefore, your company’s share of wallet.
— Neil Capel, CEO & Founder of Sailthru