If you’re in the retail industry, you’ re likely to be constantly faced with the issue of trying to find new customers. Many retailers are obsessed with making sure their advertising, displays, and pricing all “scream out” to attract new business.
This focus on pursuing new customers to increase sales is certainly prudent and necessary, but, at the same time, it can it can end up affecting the business negatively. Therefore, you focus really should be on the loyal customers – the 20 percent of clients who currently are your best customers.
In retail, this idea of focusing on the best current customers should be seen as an on-going opportunity. To better understand the rationale behind this theory and to face the challenge of building customer loyalty, we’ve broken down shoppers into five main types of customers:
1. Loyal Customers
They represent no more than 20 percent of our customer base, but make up more than 50 percent of sales.
Naturally, you need to be communicating with these customers on a regular basis by telephone, mail, email, social media, etc. These people are the ones who can and should influence your buying and merchandising decisions.
Nothing will make a loyal customer feel better than soliciting their input and showing them how much you value it. In my mind, you can never do enough for them. Many times the more you do for them, the more they will recommend you to others. Positive word of mouth is gold for business.
2. Discount Customers
They shop your store frequently, but make their decisions based on the size of your markdowns.
This category helps ensure your inventory is turning over and, as a result, it is a key contributor to cash flow. This same group, however, can often wind up costing you money because they are more inclined to return the product.
3. Impulse Customers
They do not have to buy a particular item at the top of their “To Do” list, but come into the store on a whim. They will purchase what seems good at the time.
Clearly, this is the segment of our clientele that all retailers like to serve. There is nothing more exciting than assisting an impulse shopper and having them respond favourably to your recommendations. You want to target your displays towards this group because they will provideyou with a significant amount of customer insight and knowledge.
4. Need-Based Customers
They have a specific intention to buy a particular type of item.
People in this category are driven by a specific need. When they enter the store, they will look to see if they can have that need filled quickly. If not, they will leave right away. They buy for a variety of reasons such as a specific occasion, a specific need, or an absolute price point. As difficult as it can be to satisfy these people, they can also become loyal customers if they are well taken care of.
It is important to remember that need-based customers can easily be lost to Internet sales or a different retailer. To overcome this threat, positive personal interaction is required, usually from one of your top salespeople. If they are treated to a level of service not available from the web or another retail location, there is a very strong chance of making them loyal customers.
5. Wandering Customers
They have no specific need or desire in mind when they come into the store. Rather, they want a sense of experience and/or community.
For many stores, this is the largest segment in terms of traffic, while at the same time, they make up the smallest percentage of sales. There is not a whole lot you can do about this group because the number of wanderers you have is driven more by your store location than anything else.
Keep in mind, however, that although they may not represent a large percentage of your immediate sales, they are a real voice for you in the community. Many wanderers shop merely for the interaction and experience it provides them. Shopping is no different to them than it is for another person to go to the gym on a regular basis. Since they are merely looking for interaction, they are also very likely to communicate to others the experience they had in the store.
It will require patience and understanding in knowing our customers and the behavior patterns that drive their decision-making process.
Using this understanding to help turn discount, impulse, need-based, and even wandering customers into loyal ones will help grow our business. At the same time, ensuring that our loyal customers have a positive experience each time they enter our store will only serve to increase our bottom-line profits.
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