For many retailers, the short version of their mantra is: “Buy low. Sell higher. Beware demon overhead. Mind the merchandise mix. Manage your inventory. Maximize the contributions manufacturers make to our promotional efforts.” Sometimes the customer is in the mantra: “Sell as much as you can to the customer when he is in the store.”
But shouldn’t a close relationship with the customer be the heart of your mantra?
Retailers can use proven direct response techniques to have that type of relationship with customers.
Seven general principles will help any retail direct marketing program:
Understand your competition. Every businessperson can identify key competitors. But often the competitive set is broader than you think. Is Barnes & Noble competing with Borders and Amazon.com for share of your bookshelf? Certainly. But it probably also is competing with General Cinema, Virgin Megastores and Tower Records/Video for share of your entertainment dollar.
Your customer has a finite number of dollars to spend. Knowing where else your customers are spending their dollars not only will help you develop an effective direct marketing program, but it also will help you refine your other promotional activities.
Give your customers a reason to identify themselves. In the age of permission-based marketing and clicks-and-mortar competitors, the bar has been raised. It is no longer enough just to ask customers to sign up for your mailing list. They need a reason Actually, they need a bribe.
With a little ingenuity, however, the bribe can be self-liquidating. You could offer a discount on a purchase the next time a customer visits the store or a bonus discount on today’s purchase. Like many programs run by grocery chains, you could offer an ever-changing array of weekly discounts. You might even get manufacturers to support such targeted promotions.
Track customer activity. Information that is not used is a waste. A list of your customers’ names and addresses is a start, but it is still only a list. Sure, you can append demographic data and lifestyle cluster indicators. You can map the trade areas of your stores. You can profile your average customer. But you still have not created a new customer or sold more to an existing one.
The real value is added when you track customer activity. An analysis based on RFM (recency, frequency and monetary value) can transform how you market to your customers because it will reflect their actual behavior. But you need to start tracking activity to make the most of it.
Segment your customer base. Your profit disproportionately comes from one or two segments of your customer base. The problem lies in identifying the members of those segments. The 80/20 rule still applies, and retailers must be able to tell the difference between browsers, buyers and heavy buyers. It is tougher when you have hundreds of store locations, thousands of associates and tens of thousands of customers, some of whom may shop at multiple store locations.
But the technology exists to identify customers by segment at the point of sale. And the answer may not be technological so much as resourceful. Bloomingdale’s gives its charge card customers a different color card (blue, gold or platinum) depending on their spending level and invites them to sales events before the public. Alternatively, you could have trained associates in each department or a concierge for your premier customers. The trick is not in finding a solution, but rather in finding the right solution for your situation.
Design your program to complement your brand. Consumers have rational and emotional expectations about your stores. Anything you do has to be consistent with what your customers believe about your brand.
For a category killer, an additional discount for repeat purchase makes sense – savings and selection are part of the brand offering. But an upmarket fashion retailer could diminish its brand with a discount. In that case, an invitation to view a new line before the public, during an evening of cappuccino and pastries, accomplishes the same thing.
Keep in touch with your customers. Your store is not the only thing on your customers’ minds. It is likely that your store is in their mental storage containers until there is a triggering event. Your job is to find, remember and act on the triggering events.
Here is where you get back on par with the general-store owner. If you know that a customer buys the new, hot items every season, you could let him know ahead of time that the new line is in. If you know your customer’s birthday, you could send a “gift” that brings him into the store. The goal is to touch your customers in a way that is relevant to them and that drives your business.
Watch costs. Every dollar you spend on marketing is a dollar you are investing to create and keep a customer. Treat your direct marketing program as you would a new store or distribution center. Monitor your expenditures and the returns you see on those expenditures.
Direct marketing is built around generating transactions at a given cost. Any program you consider should not only pay for itself but also generate incremental earnings. The best way to do that is to monitor your programs and test new approaches to see whether you can keep improving your results. New formats, communication channels, promotions, models and communications strategies all bear testing to determine the optimal mix and return.
Pressures facing retailers today are enormous. Even with manufacturers sharing costs, promotional activities must pay for themselves. In the long run, it is better if they help maximize repeat business with your customers. Retailers may have their mantras, but a direct marketing program gives them a secret weapon as well.
• Timothy McCreight is vice president and managing director at DMW Worldwide, Wayne, PA. His e-mail address is [email protected].
