How to Lead with Data & Crush Your Customer Cultivation Goals

In today’s article:

  • How to get granular with assessing segment revenue trends so you can set specific growth goals.
  • How to plan for top-down revenue goals and know you’re on track.
  • How to win over other departments and lead the call for increasingly ambitious annual goals. 

In the previous two articles of this series on VIP cultivation, we first covered the critical point that the top-spenders in your customer file likely bring in 50% or more of your annual revenue, then we went into how you can learn more about these top spenders so you can serve them better

Now that you’re armed with a thorough understanding of VIP behaviors and affinities, it’s time to put together a plan. 

Goals for the Gold

Goals are essential to planning and strategy. 

We don't see many retail organizations setting goals in a way that ties to specific tactics that individual teams and people can influence. 

For example, you probably know your top-line revenue target for this financial year — and maybe even for next year — but you don't know how much of that will come from the top decile of your customer base. 

As we’ve said before, the top 10% of retail customers generally bring in at least 50% of the annual recurring revenue. Which means that forming a plan around these high spenders is at least half the battle. 

For that you need to know some key things about your VIP segment. How many VIP customers are there? What is their average order frequency? Their units per transaction? Their average order value? 

These metrics are the root system beneath your bottom-line. Knowing how they're tracking for a particular customer segment (especially the VIP set) is the best way to illuminate a clear path to growth.  

For example, let's say the Corporate Powers That Be have mandated a top-down goal of $100 million in revenue for next year. For simplicity’s sake, let's say $50 million, i.e., 50%, of that will come from your VIPs. 

If we look at the causal tree beneath our VIP YoY revenue trend, we might see that our year-over-year trends show a steady decline in average order value. 

We know our approach to promotions isn't going to change, so we can expect that AOV decline to continue at 10% year over year. 

Digging deeper, we find that a 6% growth in orders per customer (i.e., order frequency) will actually offset that AOV decline and get us to that $50 million.

That's an example of how customer economics trends can tie up to a high-level goal and down to a tactical plan. The example above would involve tactics to boost VIP order frequency to hit that revenue goal. 

Teamwork Makes the Dream Work

This works best when it involves more wings/teams of the retail organization than just marketing. Hitting high-level goals requires high-level buy-in and accountability. 

The Merchandising and Finance teams are the two most likely to engage with this VIP strategy. 

For Merchandising, if they better understand what types of products tend to attract and retain VIPs, then they'll prioritize those kinds of products in the future.

For Finance, these customer-centric metrics give them another angle by which to predict future revenue. For example, a metric called customer equity is becoming more common in corporate valuations. The causal tree provides a lens to the levers for increasing both top-line and bottom-line performance in the business. It will also inform investment decisions within the org. 

VIPs represent a huge percentage of the future value of the whole business and will be of special interest to both Finance and Merch, as well as the others, including the CEO. In next week’s article, we’ll go into detail about how to cooperate with other departments toward big revenue goals.


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