According to the Chinese Lunar Calendar, 2019 is the Year of the Pig, a symbol for good fortune and prosperity. We at Daasity believe that great business prosperity comes in part from harnessing data strategically. So, to begin the New Year, we have three suggestions for companies to adopt that will significantly up your data-based decision making capability.
1. Build an integrated view of your sales channels
The brands that have done well recently have all executed a better omnichannel strategy; and, indeed, the “Street” and the investor communities have rewarded them with higher valuations. Successful implementation of an omnichannel experience, therefore, is one of the critical growth strategies for most, if not all, D2C brands today.
To effectively and proficiently manage an omnichannel business to drive growth, it is our opinion that you must have a completely integrated view of all of your sales channels – D2C online, D2C physical stores, wholesale and marketplace (i.e., Amazon). It is our observation that most companies still keep and report sales data from these sales channel separately; and, develop plans and tactics for each channel in a silo.
Consumers, however, shop across channels. To deliver an experience that follows how the consumer shops, companies must build an integrated operating plan; and to do this well, you need a dataset and reports that show a unified view of your entire market.
2. Develop a customer retention strategy
Business growth cannot just depend on new customer acquisitions. With the cost of acquisition rising every year, companies need to start driving more sales from its existing customer base.
A company can begin by reporting out the percent of sales that come from existing customers and new customers. We like to see at a minimum 40 to 50% of sales from existing customers for growth brands, and above 50% for more established brands
Beyond this, companies should have a defined retention strategy that segments your customers into at least 3 groups:
– Customers you want to invest in because they are likely to be extremely valuable and promoters of your brand
– Customers you want to maintain because they are profitable and will purchase on a periodic basis
– Customers that you should minimally invest in because they will lapse and are likely one-time purchasers
3. Start tracking customer profitability
Understanding which of your customers are profitable is an analysis that is not practiced in most companies. This is unfortunate because customer profitability analysis could be one of the most powerful insights you can undertake this year to improve your operational performance dramatically.
Customer profitability analysis includes both understanding the specific marketing cost to acquire the customer but also the product, fulfillment and customer support cost of the customer. You may find that some high-value (revenue) customers have a highly significant cost because of the customer service support they require or because they only purchase low margin products. For most companies, their marketing channel performance and customer data platforms only focus on the revenue component which is essential but insufficient. Ultimately, you should be looking to find the most profitable customers and not just the ones that generate the highest revenue.