Why brands and retailers should work together to find their most valuable customers

Shoppers who are loyal to a brand are usually also loyal to the retailer where they buy that brand. Both parties therefore have every interest in focusing on their most valuable customers based on shared customer data.

Know your customer

“Most companies are obsessed with the customers they do not have, instead of focusing on the customers they do have.” That is a quote from Sergio Zyman, former Coca-Cola marketing director and author of the book ‘The end of advertising as we know it.’ The advantage of customers you already have is that you already know them – at least in part.

“Many companies have huge databases of the customers they already have, but they do not know what to do with that data. With the combination of big data and AI, marketers today have no more excuses not to improve their marketing effectiveness”, marketing expert Bert Peleman says. He started his career at Procter & Gamble and held executive positions at Walt Disney and Estée Lauder, among others. His recently published book ‘The Brand Butterfly’ provides marketers and CEOs with strategic insights to find and keep valuable customers. At LD&Co and RetailDetail’s Category Management Congress, on 19 June, he will explain his most important findings.

Focus on the top 20 %

During the 2008-2009 financial crisis, Peleman worked at cosmetics group Estée Lauder, where sales were falling. The company wondered if fewer customers were still buying or if customers were buying less? “It was the former: we were losing customers. That prompted us to focus on our most valuable customers, the so-called ‘High Value Customers’. We certainly did not want to lose those.”

Who are these valuable customers? How do you define them? “They are the customers who realise more than half of your turnover. You always need to retain those. Whatever industry or region you operate in: they are almost always your top 20 % customers. We saw that pattern recurring consistently over and over again.” Therefore, it makes no sense to focus marketing efforts on broader groups such as the top 30 % or top 50 % customers, nor to focus on your top 100 ‘VIP’ customers – those are exceptions that do not provide useful customer insights.

The crucial second purchase

Once you have identified those valuable customers, you can start working with their data. “It is interesting to look at how those customers came to your brand: what was their first purchase, and what is their next purchase? In the Prestige Haircare category, hair colouring is the main lever for retention; in perfumes, a repeat purchase within six months indicates future customer loyalty.”

The next step: how to retain valuable customers? Again, the analyses proved surprisingly consistent: customers who were ‘high value’ in year one, were more likely to be so in year two. Conversely, ‘low value’ customers from year one were found to have about a 90 % probability of making few or no purchases the following year as well. “Last but not least, customers who are loyal to a brand tend to be loyal to the shop where they buy that brand. This is visible both in own shops and at retail partners. Both go hand in hand.”

Working together

That is the link to trade marketing and category management: your brand’s loyalty programmes also benefit the retailer. They do not draw customers away to other channels such as e-commerce or your own shop network. On the contrary: they increase frequency. “That is an important argument to convince retailers to work together with customer data: when brands work together with retailers, you get cross-fertilisation.”

At the Category Management Congress, Peleman will demonstrate how brands and retailers can put customer data to work together to find and retain their most valuable customers in an optimal ‘high value’ customer journey with clear examples and compelling cases. Moreover, speakers from Albert Heijn, BENU Pharmacies, Nutrition & Santé, Promojagers and LD&Co will also take the stage that day. You can still reserve your ticket at advantageous ‘early bird’ rates until 25 May.