Opinion: Know your Customer (KYC)

By Danny Rappaport, PMC Director of Consulting


We all know it’s harder to acquire new customers than keep and sell to existing ones...So, it’s expensive to acquire new customers, but exactly how expensive?

To compute the cost to win or acquire a customer, "CAC", you take your entire cost of sales and marketing over a given period, including salaries and other headcount related expenses, and divide it by the number of customers that you acquired in that period.

Who doesn’t love a good equation that tells us what we already know? 

But what about the cost of keeping a client we already have? What does it take to stop us as consumers shopping around, changing allegiance, going to the competition?

There is probably no equation for that we could have confidence in and actually it probably depends on the customer as some of us are easier to please or at least placate than others. However the stats tell us that CX or Customer experience is key. A recent (Ultimate.ai) survey showed that

86% of us are prepared to pay more for a better service and 59% of us say its even more important now post pandemic.

So perhaps the cost of retaining a customer is the cost of providing really good customer journeys and experience, whereas the cost of losing one is potentially your business.


What is a good Customer?

So, what makes a customer a good customer? One that we want to keep...

We all know that not all customers are good customers (are we allowed to say that?)

Despite the cost of acquisition and the cost of keeping them, some just don’t do what we want them to do. But what exactly is that?

Surely the best definition of a good customer is one that returns, preferably frequently and I suppose it depends on the product as to what that means. Food retailers will have a different definition of frequent customers than Fashion or electronics.

In The Netherlands, its not unusual for people to shop for food once or even twice a day but wouldn’t it be easier and cheaper (cost to serve) if they came less frequently and bought more? So perhaps it’s not just frequency but spend. So, we want a frequent (within reason) big spender and ideally as they are loyal, someone who will tell others about their good experiences. An advocate that will encourage others to buy from us. 

So, if a customer is a good customer this is a long-term relationship, mutually beneficial. Doesn’t it make sense to recognise that in some way? 


Subscription and Engagement

We all talk about how retailers reward a customer’s loyalty but how about the other way round?

How do we as customers reward a retailer? Well like all long term relationships I suppose, we make a commitment (this is starting to sound like a dating column now..) 

It's not new by any means, but the idea of a subscription to a product or service is the best way to keep a loyal customer and for a loyal customer to get the best service. By definition, the more we know about our customers the better we can tailor the service or product to their needs and hence the more loyal they should be…


Brand Loyalty & Rewards

We all have our favourite brands but what makes one brand worth our loyalty and another not?

Well, for one thing, value.

I think we all like to feel that we are getting value. However, the definition and perception of value is perhaps different for all of us. Rewards however is a more traditional approach, but surely when the average retail Loyalty reward is around 1% (of spend) that isn’t going to make a lot of difference.

90%+ of retailers have some sort of Loyalty programme and 84% of us say we are more likely to stick with a brand that offers a loyalty scheme

But if we are talking about a long-term relationship with a brand, we may experience different value and experiences with that brand over time. So its not just the product itself its about the shopping experience, the value, our perception of the relationship over time and of course this works both ways.

Perhaps even more important a reason to stick with a brand is Trust. Trust in the product, in the company to deliver quality and the services we need as well as look after our interests, our data and our money. If we trust that our custom is valued and we consistently get what we expect , are treated as we want to be, across all the interactions(and channels) for our brand, then that trust is deserved and will lead to a long relationship.


Lifetime relationship

Like any relationship, our relationships with what we buy can have it’s up and downs.

Over a lifetime I’m sure we have all made buying choices we may not be so keen to repeat later on. My kids' reaction to photographic evidence of some of my fashion choices in the 80’s are a little cruel perhaps, but you get the idea.

So in the age of multi-channel retail and ever more efficient supply chains, last mile delivery etc. are we more loyal or less?

Well, just like the divorce rate its not an easy explanation. Generationally we differ in our behaviour, and it won’t be a surprise to learn that the Baby Boomers are a more loyal (to brands) bunch that Gen X or Gen Z, who perhaps are a little more comfortable with shopping around in a digital world.

So as our relationship with Brands is changing perhaps as retailers, we need to change our approach. We need to cater for those who really are “married” to their brand and those who have a more than one, and those who change all the time.

Winning and keeping our customers trust is not as easy now that our relationships rely on so many factors and sometimes partners (logistics, 3PLS, etc) but clearly unless Retailers succeed in this, they will lose out and quickly.


Customer Journeys and experience

“We can’t just rely on the product anymore.” I heard a wise retailer (merchandiser) at a trade show say years ago. She was right. The customer journey, pre-purchase, during and afterwards are all factors affecting how we behave and how we will continue (or not) being a customer.

Things like how easy a product is to return, to exchange, to re-order to pay for or have delivered all play a part in our experience. Modelling these customer journeys as well as the different types of customers is something I spend time with our clients doing. It’s always enlightening, always worthwhile. 

It turns out that like all long-term relationships our customer relationships take work, an objective view, and reassessment and change over time to stay healthy.

So if we are going to spend all that time and money acquiring customers, hopefully keeping them and developing long-term relationships with them, it’s definitely worth taking a step back occasionally to examine what’s going right, what’s going wrong, what we need to change, who and what we trust, looking at how other people do things, thinking about what makes us happy...

...we’re still talking about customers, right?

Danny Rappaport is Consulting Director at PMC

Danny joined PMC as Director of Consulting in October 2021. He joins from Capgemini, where he was a Vice President in the UK, operating across verticals including Finance and Retail. Danny brings a wealth of experience in providing technology and business services to the retail, finance and CPG sectors, having worked in senior executive level positions in the UK, the Netherlands and India.

Danny has worked in a variety of roles in Retail, CPG and Financial Services in sales, delivery and consulting. Danny is extremely passionate about our markets and the opportunities that exist for our customers in today’s global digital economy. 


This opinion article was first published by Danny via LinkedIn in February 2022

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