The one-time buyer is a real challenge for retail organizations, and it doesn’t live with any one team — it’s everyone’s problem.
Working with hundreds of retailers of all different sizes in all different sectors and verticals, we’ve too often seen the marketing team saddled with the sole responsibility for solving customer loyalty problems like one-time buyers. But that approach doesn't work.
Some retailers have been able to make meaningful progress on this challenge while others struggle, and for the ones making real headway, it’s all about the steps that they follow as an organization.
Customer loyalty is a complex and multifaceted issue, and the stakes are way too high to lay it at any one team’s doorstep. Some numbers to paint a picture:
The average business loses about 25% of its revenue every year to customer attrition, as frequent shoppers purchase less, drop out of the category, or defect for competitors.
Roughly 50% of direct-to-consumer eCommerce sales are made on promotion or markdown, speaking to how hard it is to get customers to buy repeatedly without constantly having to give discounts.
And about 75% of customers who interact with a brand make one purchase and only one purchase. That means the average retailer is actually losing tens of millions of dollars every year because they’re not converting more one-time buyers into loyal repeat customers.
Customer loyalty and repeat-buyer conversion are too critical for the whole business to rely on a triggered email or two as a solution. Of course, those nurture campaigns are important, but from the customer’s perspective, there are many other aspects of the experience that determine whether they will buy again: the purchase process, the fulfillment process, customer service, pricing, the products themselves. All of these play a role in driving customer loyalty.
With that in mind, if we were able to design our dream retail organization, what would it look like? Think about this as the most fighting-shape-fit organization to solve the one-time buyer problem.
There would probably be some kind of shared visibility into what the one-time buyer rate is. The CEO actually knows that the one-time buyer rate is going up month over month and is looking to the teams for answers.
Marketing comes to the table with new and improved forms of personalization, talking about putting the right message in front of one of their personas and expanding to different channels.
Merchandising is getting in on the game too, looking at which customers are repeating and using that to optimize their merchandise assortment while incorporating product feedback into their collection.
Finance has a seat at the table, looking into which promotions are effectively getting buyers to purchase a second time.
Store Ops folks are thinking about where they should strategically locate the retail footprint in order to maximize the likelihood of new customers coming back to make a second purchase.
This may sound like a utopian dream of a magical land where the fountains flow with customer loyalty because so many organizations are so far from this kind of integration and collaboration. So what’s holding these companies back from trying to achieve this vision? Why are different teams not collaborating to solve absolutely mission-critical business challenges like the one-time buyer problem?
We’ve narrowed it down to three hypotheses.
Number one, it’s very rarely the case that we see a retailer where there is a single source of insights across every team and every channel. People may roll their eyes at terms like “single source of truth” or “single source of data” because these ideas get used and abused by lots of analytics vendors claiming to offer software that solves your problems.
The truth is that there’s no single silver bullet, no one piece of technology, data management software, or personalization software that will solve the challenge alone. It’s all about what you do with the data and insights. But having that data stitched together is a critical first step that many retail organizations haven’t taken.
Number two, a big hurdle that we've seen is that there are often gaps in alignment across teams around what initiative to pursue. Even if there are fantastic enriched customer profiles that every team is accessing, with stats around customer loyalty that are common across the company, there are often real disagreements around what problems the business should be trying to solve.
Is its acquiring and retaining millennials? Is it a focus on driving adoption of new subscription products or private label credit card? Is it the one-time buyer problem? And if so, which segment or segments of customers are they looking at? This is a question of prioritization and getting every team operating off of the same page.
Number three, as hinted at before, is that it can be hard to know what to do with the insights. When you see that certain segments of customers are falling off in terms of their one to two-time buyer conversion rate, what are the best practices in the industry? How do you get merchandising and financing and all these teams that feel a world away from marketing involved in banding together to solve the one-time buyer problem?
Here’s the good news: there is a repeatable process to close these gaps that we've discovered from working with so many great retailers and their customer data. It’s about spreading the same insights across all teams, driving alignment and then leveraging the expertise that lives across the company and through external partners.
Generally speaking, the organizations that are able to really accelerate quickly into solving problems like one-time buyer follow a four-step do-si-do.
First, they mobilize their organization around a common understanding of the business problem. This means quantifying the size of the prize and setting goals around where they want to steer the ship.
Second, they go from insight to strategy. Many teams realize, "Hey, we have a five-million-dollar problem," and the initial instinct is usually to jump in and start executing. But the successful organizations take a step back to focus on root causes and creating a coherent action plan.
Third, they execute vigorously
and with an experimentation mindset, knowing that they will have to re-assess and make tweaks.
Fourth, they maintain an obsessive culture around measurement and optimization, iterating and adjusting as they go to get better and better results.
In the next entries in this series, we’ll walk through this process step-by-step and in much greater detail to see how this works and what this looks like in practice.