Fired Any Good Customers Lately?

Fired Any Good Customers Lately?

Posted on 27. Aug, 2013 by Jon Bird in retail strategy

In the midst of a dynamic retail landscape, it’s important to continually evolve your retail brand. “It’s constant reinvention, not just once, it’s constant”, as J. Crew’s Mickey Drexler told last year’s attendees on the Westfield World Retail Study Tour in New York.

Part of the process of brand evolution is looking at your customer base. In my experience it comes down to two critical questions: 1) who is the loyal customer that you must keep, and 2) who is the customer that you are currently missing out on, that you must attract? One customer is the engine of your business. The other is the turbo-charger. Striking the right balance is the secret to maintaining forward momentum.

Critics may say that I am oversimplifying a complex consumer landscape, and that there must be multiple segments to any retailer’s audience. Well, yes. But it’s extremely difficult for a business to broadly get its head around understanding and servicing a dozen different customer types. Of course that kind of thinking comes into play when you are, for example, managing a huge array of tailored messages to a database. In that case, the finer the segments the better.

But out in the stores, or in the corridors of support office, it helps to have in mind the shorthand summary of “who do we need to keep, and who do we need to get?” When I worked with Supercheap Auto some years ago, we managed to reduce 16 customer segments to two imperatives: “keep the Barrys and get more Scotts”. Without going into fine detail, Barry was the epitome of the blue-collar, “10 year old Holden owner” past and present of Supercheap Auto, Scott was the white-collar “late models in the triple car garage” future. Both customers were important, and everyone from the buyers to the bloke on the check-out understood the strategy.

I was reminded of this tenet recently when re-reading the aftermath of ex-Apple retail guru Ron Johnson’s untimely exit from US department store JC Penney. Famously, Johnson set out to reinvent retail in department stores; get rid of “high-low” discounting, introduce exclusive new brands and modernise the stores and the marketing. Attracting a younger, hipper, Gen Y audience was also part of his grand plan.

The biggest change was moving to an everyday low pricing strategy and dispensing with coupons and deep discounts. When this happened, JC Penney’s rusted-on shoppers voted with their feet and went elsewhere. As Laura Heller from Forbes wrote earlier this year, “When Johnson got rid of the pricing schemes, he essentially fired those customers…unfortunately he threw the good customers out with the bad…”

That’s a powerful metaphor and a great lesson to remember. Sure, hire new customers, but be very, very careful about firing the old ones (particularly before you get the new ones on board).

So to take your brand and business forward…who you gonna keep, and who you gonna get?

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