Returning to Your Core Income
Customer Relationship Management Systems
You may have heard of the 80/20 rule or Pareto’s Principle, which suggests that 80% of your income will come from 20% of your customers. It is often true that when a ‘regular’ customer comes into the store, you are more likely to offer them a greater level of customer service than those who appear to be ‘tyre kicking’. The reason for this is obvious; you understand that there is a greater on-going return on investment of your time. Understanding these relationships through an integrated strategic approach is a theory often titled as Customer Relationship Management (CRM).
Customer Relationship Management is the establishment, development, maintenance and optimisation of long-term mutually valuable relationships between consumers and your business. This means that one must take a dynamic and integrated approach to relationship building, and may encompass both relationships with consumers and other stakeholders. In doing so, engagement with the community is the most common for retail garden centers in attracting and expanding their current consumer base. Liaising with local horticultural groups, schools, churches, not-for-profit organisations and other local establishments may be beneficial to the growth of your business. For rural retailers particularly, where there is increasing pressure from the big box encroaching in on potentially already saturated markets, the need to engage with community becomes a necessary and mutually beneficial relationship building exercise.
3 Aspects of a Customer Relationship Management Strategy
1 – Marketing
We have discussed marketing concepts in length over the past two Groundswell articles, and a major part of a CRM strategy is focused around marketing specifically targeted at your customer and their level of engagement with your business. This ultimately means adoption of a multi-tiered approach of marketing to both the Gen Y growing their own fruit and veg to the Gen Y’s grandma who prefers to grow roses for their beauty.
2 – Value Creation
Value creation ties in very closely with the marketing of the business, and refers to the perception of your customers on the goods or services that you are offering to them. It specifically relates to the value on offer to your loyal customers compared to those that walk through the front door at any given time. Creating value in a purchase depending upon the individual comes down to pricing perceptions, of which will be featured in next months Groundswell Retail News.
3 – Innovative IT
While this is least practical for independent garden centres, many of the larger retail stores these days have complex systems where they collect customer information, allowing them to learn about what individuals buy, and the response to target marketing. A prime example of this is fashion brand ‘Country Road’ who took out Australian Retailer of the Year 2009 at the ARA Australian Retail Awards. The company’s reinvention over the past 5 years has been phenomenal.
‘Country Road’s loyalty program consistently delivers response rates above industry standards. While average rates to direct mail campaigns are between 2% and 5%, the response rate from Country Road’s loyalty members to brand communications is up to 30% and makes up almost 80% of the company’s sales.
It’s loyalty program is tiered according to customer spend with high spend customers receiving benefits including spend and save offers, free basic tailoring, free gift wrap, early previews to sales events, invitations to special events such as store openings, occasional gifts with purchases and vouchers on membership anniversaries’ (The ARA Retailer)
Albeit a high capital outlay, this demonstrates the return on investing in an integrated and sophisticated computerised POS and customer management system can be significant. While marketing on this level is structured and targeted upon the information collected about your customers, you can do this on a simpler level by creating a planned e-newsletter that attracts repeat custom. Refer to Groundswell May 2009 article ‘E-marketing for Retailers’.
3 Phases of Customer Growth
1. Customer Acquisition
New businesses and existing ones need to continually market their businesses and its products and services to a wide market in the hope of attracting new footfall through the shop door. It is the first impressions, and the overall experience of their first visit which will determine if they will be retained as a customer of yours.
2. Customer Retention
Once acquired, customers need continual engagement to ensure that you provide them with extended reason for returning. This is the period of building a relationship with this individual which can be influenced through not only by their direct experience with the company and its staff, but also the markets perception and word-of-mouth from customer extension.
3. Customer Extension
The extension of customers involves selling associated products and services to those customers who have shopped with you before. This involves targeting your marketing to this group of customers by offering new products and complimentary services to loyal customers to encourage constant repeat footfall. One of the greatest marketing assets which our industry has with this regard is that of seasonality and the associated lines that come with this – i.e. bulbs in winter, Christmas, summer living, bare root, grow-your-own.
Conclusions
The ultimate goal of implementing a CRM Strategy is to reduce your direct operational costs to the company incurred through uneducated marketing techniques. The benefit of reduced costs is an increase in your overall profitability through the procurement and solidification of a loyal customer base, with whom you are able to develop lasting relationships with.
One final thing to remember is that ‘innovation distinguishes between a leader and a follower’ (Steve Jobs, Apple Co-Founder). Innovation is key to designing a successful CRM strategy.
Case Study: Bay Road
David Howard and Justin Tavernetti of Bay Road understand the importance of communicating effectively with their loyal customers in an increasingly competitive market. As a result of this, they have adopted the Lucky Buys program, which is a ‘points based customer loyalty program.’
Justin clearly noted the key benefits of the system:
1. It enables the business to have a flexible database, and takes the risk of in-house management out of the picture.
2. Information on your customers can be captured easily – this is done through swiping a special card through a normal EFTPOS machine.
3. Luck Buys contacts customers directly via mail, email or SMS based upon any selectively target group, dependent upon information captured about your customer.
4. Quarterly reports are produced allowing you to analyse and see which areas of the business your loyal customers are spending money – i.e. Nursery/Giftware/Café. This is presented in graphical form with valuable numerical sales breakdown analysis’.
5. There are many options to the system all geared to encourage footfall in your business.
Justin previously used this system during his time at the former Essendon Garden Centre, where one day he read an article that suggested house prices in Essendon alone had risen by 29%. He responded to this by offering only people located within Essendon a 29% discount off their next purchase over $100. This was in the customers hands within 3 days of the article being printed.
References
Elliot, Rundle-Theile, Waller & Paladino (2008) Marketing: Concepts & Applications, 2nd Edition. John Wiley & Sons Australia.
http://www.marketingteacher.com/Lessons/lesson_crm.htm
The ARA Retailer – Issue 17, Sept:Oct 2009
