Retailers: Time to re-think your ‘best customers’
By David King, fulcrm.com
For many retailers, the “best customer” search has been an ineffective venture where the results haven’t warranted the time or expense, despite a host of different efforts. But this tantalizing target keeps pulling dollars out of budgets, dollars that could be spent on creating a more realistic and profitable approach to customers — one that considers customers’ shifting behaviors and value.
Given the great difficulty in defining what a best customer is, why does this notion have such staying power? I believe that the desire is rooted in an unrealistic hope that we all share as marketers: that through our cleverness and industry, we can lift the entire customer base to the level of the theoretical best customer. In other words, if I can find the 10% of my customers that truly are best, I can transform the other 90% into them. Think of it as marketing alchemy disguised as marketing science.
A great example of this thinking took hold in retailing in the early- to mid-2000s. One interesting phenomenon at the time was that multichannel customers, those who purchased in stores and online, were more valuable. The goal of many retail marketers therefore became to get customers to shop through multiple channels. Some retailers — Circuit City is an example — even bucked the trend of retailers shutting down their catalog operation, perhaps in the belief that adding channels inherently increased customer value. And quite a few catalogers began opening retail stores.
It’s easy to look back and shake our heads at the naiveté of this approach. Clearly, multichannel buying did make some relationships more valuable, by giving already good customers a way to shop more often. But getting a store-only customer online also made it easier for him to shop competitive brands, and even if they remained loyal, the online shopping might only be a substitution for physical shopping. Moreover, the diffusion process of online shopping was still very much underway; today, we have reached more equilibrium between in-store and online shopping. We also have the verdict of history: Circuit City went bankrupt, while Amazon continues to grow.
Again, it is easy to look back and believe that this notion of best customer was hopelessly simplistic. Yet, go to any marketing conference today and you will find the same concept in new clothing: today’s holy grail is the “engaged customer.” I think history will likely have a similar verdict about the dream of a fully engaged customer base.
Instead of focusing on these elusive profiles, we need to consider our customer base more like a financial portfolio in which some customers are like bonds, yielding lower, dependable rates over time, while some customers are more like stocks, more valuable at times, but also more volatile. We need to investigate and discover these differences in customer value and profiles and keep them balanced in our customer base, rather than chasing an idealized customer profile that just doesn’t exist.
David King is CEO of Fulcrum,(fulcrm.com) a leader in advanced analytics, technology and multichannel program solutions for marketing.
CVS/pharmacy moves ahead with succession plan, Hank Mullany named president
WOONSOCKET, R.I. CVS Caremark announced on Friday that former Walmart North executive Hank Mullany will succeed Larry Merlo as president of CVS/pharmacy. The move is part of the corporate succession plan announced last May in which Tom Ryan will retire as CEO prior to the next annual meeting and Merlo will step up as CEO.
“Hank brings a wealth of experience to his new role and understands the many demands and challenges of the retail business. His expertise, along with his demonstrated ability to execute strategies and produce outstanding results, make him the right candidate to drive continued growth in our retail business and further our industry leadership for many years to come,” Merlo stated.
Mullany has nearly 30 years of retail experience and a strong background in operations, finance and strategic planning. Previously as EVP and president of Walmart North, Mullany was responsible for the operation of 1,300 stores across 19 states. Earlier in his career, Mullany served in various senior management positions, including as president of Genuardi’s Family Markets in Pennsylvania.
“Hank is the right candidate to fill this role,” Ryan stated. “His broad base of retail experience will further our mission to provide customers with expert care and innovative solutions. Hank’s proven track record as a leader will continue to set us apart in today’s competitive marketplace.”
Barneys New York names EVP, chief merchant
NEW YORK Barneys New York announced that Daniella Vitale has joined the company as chief merchant and EVP responsible for all of women’s and Barneys.com operations. Vitale will be responsible for merchandising, business development and strategy in those areas and will report directly to Mark Lee, CEO of Barneys New York.
Vitale spent more than a decade with Gucci most recently serving as president of the Americas. Previously she was VP Wholesale at Giorgio Armani and a merchandise manager at Salvatore Ferragamo.