Enterprise retail and direct-to-consumer organizations have tried to respond by investing heavily in centralized customer data, in the hopes that having a complete view of the customer will allow them to be more relevant and timely in their communications, driving more engagement and purchasing. But they’ve yet to reap significant return on those investments. The result: pressure to find cheap leads, a push to new activation technologies, the launch of loyalty programs to boost repeat purchases, affiliate and marketplace programs, and a rush to drop absolutely anything onto the site to drive conversion.

Short-term, some of this might work. Long-term, none of it will. Marketers need a sustainable growth framework that will pave the way to long-term success while still producing short-term results. 

It’s not surprising that many marketers have difficulty taking a longer view. Internally, marketing teams are often organized by channel, such as email, SMS, and social. The work they do and the technologies they use are either channel-specific or conducted through a channel-centric lens. Often, these channels are impressively siloed. And marketers aren’t incentivized to look outside these silos and consider the entire customer experience. In some cases, channel-specific teams compete against each other for conversion attribution.

Those who are leading in retail and direct-to-consumer are thinking very differently. They understand that in retail marketing, every customer that is not retained this year hurts performance — and the ability to hit their comps — next year and for many years after. These retail and DTC leaders are obsessed with customer performance and then look to channel performance as an important barometer and enabler. They are committed to proactively growing value through their retained base with a very intimate knowledge of their customer file and trends over time. And they benchmark this information against that of their direct peer group. Understanding that even the best retention strategies eventually expire. Without the constant acquisition of new customers to encourage and retain, the future of the business is at risk.

For a growth marketing strategy to succeed, it must be developed through the lens of the customer. Strategy needs to start with groups of customers — first-time buyers, lapsed buyers, and varieties of repeat buyers — sorted by the time frame in which they were acquired. It needs to distinguish VIPs from a promising tier just below and the vast movable middle underneath. 

A strategy that prioritizes customers over channels enables brands to develop hypotheses, launch experiments, and test and learn their way to success. A customer-driven strategy encourages brands to put less emphasis on metrics that describe the outcomes of a particular channel and to put more focus on metrics that describe the behavior of customers, and, in particular, customer spend over time: retention and reactivation, purchase frequency, average order value, and customer lifetime value. With a customer-driven strategy, marketers no longer obsess over channel tactics in isolation. Instead, they look to encourage specific behaviors by specific segments or cohorts of customers with relevant channel tactics. Channels become secondary to, and enablers of, corporate value creation.

Today’s combination of unusual market conditions and internal dysfunction gives marketing leaders a chance to reset expectations, and use a new approach to promote customer-led growth to drive short-term gains and long-term profit. That approach is customer movement.

Customer movement is a marketing philosophy and framework that is centered on customers rather than channels. It’s the practice of understanding customer value and using signal-based strategies to move shoppers through the lifecycle — from unknown to known shopper, from non-buyers to new buyers, from one-time buyers to repeat, and eventually loyal, customers — and re-engaging those who threaten to slip through the cracks.

Customer movement embraces the fact that the journey from unknown shopper to known customer to loyalist is unique for each individual. It acknowledges that customers are always moving — toward retention or churn — and the fact that brands can choose to be proactive in addressing and shaping this movement. To help do this, a customer movement strategy elevates the metrics that provide insight into customer performance: retention and reactivation, purchase frequency, average order value, and customer lifetime value, in order to achieve quarterly revenue goals, annual growth, and profitability. This long-term view into customer performance is essential to developing strategies to address negative trends and over-invest in positive ones. Our research shows that leaders who focus on customer-led growth are increasing the profit margin from their retained customers by 4x to 12x.

This concentration on customers allows brands to use their resources more wisely. A customer movement strategy positions brands to experiment to discover the best ways to drive profitable growth, and then prioritize the implementation of the most promising tactics. For one brand, customer movement may offer the ability to stop offering across-the-board discounts and instead offer customers a personalized incentive to increase average order value — or, if those customers would purchase with no discount at all. Another retailer may use customer movement to more actively engage with the middle of their customer file. Still, others may find that the insights from customer movement can boost their efforts to acquire new customers. In each case, customer movement provides enormous short-term value while laying the groundwork for long-term, profitable growth.

The key tool in analyzing customer movement and developing tactics to promote it is the Customer Movement Assessment. This analysis strips away channel-centric marketing, ties directly to customer survivorship and value, and focuses insight and development on the important characteristics that determine buying behavior. It also allows peer benchmarking so that a brand can understand how they stack up against the rest of their industry, and, importantly, against the peer companies likely to be their direct competition. Because of this, the Customer Movement Assessment is not just a tool for the marketing team. It helps marketing to work with the C-suite — especially finance — to determine the investment, payback, and ultimate gains in revenue and profitability that are possible throughout the customer file.

The Customer Movement Assessment illustrates both the quality and the quantity of a brand’s customer relationships. Marketers influence both of these:

• Quantity is influenced through acquisition and retention. With each customer retained, there is the potential to create revenue both this year and in the future. With each customer that churns, the brand loses the opportunity to create revenue, both this year and in the future.
  
• Quality is determined and influenced by factors such as average order value, orders per buyer, and tenure. 

Each of these factors contributes to the overall stability of the brand. 

The Customer Movement Assessment can become your compass. By benchmarking your figures against aggregate data from industry peers, you’ll start to discover opportunities for improvement.

Here’s a sample of what benchmarking data can look like:

And, like other leaders who adopt customer movement strategies, you’ll be on the road to reaping a significant improvement in contribution margins from your retained customers compared to your new ones.

These results don’t come from another tool or channel tactic. They’re the outcome of incremental shifts in the way you understand your file health and your customer base, the way you set your goals, and the experiments you prioritize. They’re also the outcomes of the focus you create for your team and the alignment you create with technology, merchandising, and finance.

Leading retailers are building customer-centric strategies aimed at improving specific levers in customer value. When placing customer value at the center of strategic planning, everything from media, to creative, to merchandise supports the overall goal of creating profitable growth through customer value. 

A customer movement analysis illustrates an uncomfortable fact of retail life. New customers are not immediately profitable. They pay back their cost of acquisition over time. Profitability comes after a customer is acquired and purchases a second, third, and fourth time. The quality of the customer determines the rate of return on the investment needed to acquire them. 

That’s why it’s critical to know how long it takes a customer to recoup their acquisition costs. That payback time, in effect, helps the marketing team work with the CFO: illustrating that an investment in new customer acquisition is likely to be repaid at a certain rate within a certain time period. 

This same information also helps set the range for how many net new buyers you need in one year and how many of those you need to retain. It will allow you to determine how many customers are needed in different frequency ranges — how many two-time customers, three-time customers, etc. Once you’ve completed that analysis, you’ll also be able to see the blends of different customer cohorts that will be required to hit your numbers. And your channel experts can start developing ideas to help attain these improvements. With a healthy list of tactics, the next step is to estimate the impact of each one, and then prioritize them by their potential impact and the effort required to execute on each.

Brands that use strategies not informed by a customer movement analysis too often make the mistake of prioritizing tactics with the highest perceived revenue value. But if these tactics are reaching customers who are already on the path to being retained, there’s no incremental value in this pursuit. The tactics aimed at moving a specific cohort of customers that were not already on this path to purchase may have a much smaller reach, but a dramatically higher incremental value. That makes it a tactic that should be prioritized. 

To use customer movement effectively, brands must be able to reach their customers with contextual messaging: relevant to their place in the customer journey, and also reflective of their individual behaviors and preferences. This means being able to recognize a shopper — known or unknown — and capturing every action the shopper takes across multiple devices.

From browsing to searching to clicking and purchasing, this behavior data represents “signals” to retailers. A successful customer movement strategy also means being able to combine those signals with real-time product data such as color, size, category, price, and inventory status. 

Shopper identification is a critical foundation to growing revenue. It brings return on ad spend and retention through the ability to better engage shoppers and encourage them to buy. An organization’s identification rate is its percentage of site visitors who can be messaged directly via email or SMS. On average, brands are unable to identify 74% of the shoppers that arrive at their sites, yielding an identification rate of just 26%.

Identification and identity resolution are easily confused. Identification is the ability to recognize a shopper or customer. Identity resolution merges information that a marketer collects across different environments into a global ID. Resolution has gained significant traction from retailers on the premise that it allows a marketer to create a 360-degree view of the customer to inform multichannel marketing. But merging information takes away context. A global ID doesn’t preserve the data that’s associated with specific mobile behavior or desktop behavior. And the actions someone takes on their mobile phone are different from the actions they take on their desktop. A brand’s ability to move customers is decreased with identity resolution but increased with identity recognition. 

To improve your identification rate, it’s important to be able to measure it accurately and often (weekly is optimal for most retailers). This allows you to track the success of different strategies in boosting the rate. You want to give shoppers every opportunity to self-identify and to share their contact information, but bear in mind that identification is too important to be left up to the shopper alone. You need to consider how you’re capturing their information, how you re-identify shoppers across devices and cookie-clearing, and the creation of complete profiles.

There are four phases of customer engagement, each with its own opportunities for marketers. Let’s start the customer lifecycle at the bottom left of this chart, and move counter-clockwise.

Marketers can use this chart to determine which types of campaigns are most likely to make a significant difference in their results. 

• If your customers are buying often, congratulations! You want to focus on acquisition.
• If there is a high drop-off from the first to the second purchase, it’s time to look at retention.
• If there is a gradual taper in spend, the retention quadrant may be the most relevant. Be on the lookout for customers who sign up for a loyalty program but don’t make a big purchase, as they may be planning to make a large purchase or a series of regular purchases. At the same time, brands must be mindful of how they promote their loyalty programs — a generous one-time offer can encourage customers to sign up for the program, make a single purchase, and become a one-and-done.
• If there’s lots of activity in a customer’s first year but little thereafter, concentrate on lapsed customers. In a reactivation campaign, it’s especially helpful to know exactly when customers tend to lapse.

Most brands have all, or nearly all, the data they need for this type of analysis. But since the data is often too siloed to generate insights in real-time, an investment in infrastructure or other technology may be required.

Brands typically take advantage of only a small fraction of the possible tactics available to them to move shoppers through the lifecycle. They have a short supply of shopper signals and data to which they can respond, and a short list of tactics and campaigns they can activate to capitalize on conversation opportunities. If their data is siloed, they have even fewer use cases they can potentially execute against. 

The Bluecore Globe below contains the four quadrants discussed above and then overlays signal-based tactics that can be used to engage with each shopper at each stage of the lifecycle.

Communications represented in the Bluecore Globe are designed to be heavily personalized. Batch emails are useful for bringing shoppers to your website, and they’re helpful when you don’t know enough about your shopper to personalize. But they’re not revenue drivers, and shouldn’t be viewed that way. When a shopper is on your site, the most important task is to respond to the context with relevancy. Once you’re able to identify shoppers as they enter any of these stages, you can have relevant triggered communications ready to serve them, in whatever channel is the best fit, and tailored to their level of intent. Batch, personalized, and trigger messaging all need to work together to drive customer engagement and conversion. At home furnishings retailer Lulu and Georgia, the thoughtful integration of these tactics yielded 5% list growth and a 133% increase in first-time buyers in just nine months.

The most common strategy is for brands to use the tactics marked by purple dots running up the middle of the globe. The click attribution is generally very high for these communications because the shopper has already done most of the work, and they’re lower in the funnel. The shopper has shown their interest, and in some cases have already added items to a wishlist or to their cart. Without the ability to test for incrementality, a marketer can mistakenly believe that an email reminding the shopper to buy after one of these actions was persuasive. In reality, that shopper may have made the same purchase even without the nudge. Activating the other tactics in the globe allows marketers to expand their activities higher up in the funnel, responding to a much wider variety of signals.

But even within the bottom-of-funnel tactics, most brands will find room to improve their results. Some will send one message for cart abandonment, for example, and another will send a series. Many will never test to determine if the additional messages encourage shoppers to purchase or, possibly, annoy them. Similarly, many elements of these messages can and should be personalized, and delivered through various channels. All should be tested and updated on a regular basis – over time, repetition without adjustment will yield diminishing returns. 

While the most-used tactics are triggered by shopper behaviors, they ignore possibilities based on merchandising. They also are less effective with those at other stages of the customer lifecycle.

Testing across the Bluecore Globe based on a customer movement analysis is what yields incremental revenue. While tactics like “wishlist” may be built for a small audience, this is a group of shoppers who have demonstrated clear intent. Conversion rates for these campaigns are often 30-40x of other messages. Marketing and customer relationship management teams may not prioritize such tactics because of the relatively low total revenue impact, but if this is incremental revenue, the value is likely far higher than it is for tactics with significantly more reach. 

When brands target discrete segments of their customer base, they’re most likely to try to appeal to their most loyal customers. If a brand sends messages only to customers who already love the brand and are frequent buyers, the marketing metrics will look a lot better than if a brand attempts to engage folks who are more resistant. 

The ability to predict shopper behavior is strongest with the very best customers and the very worst. That’s because customer data platforms typically include transactional data, but lack event data, such as real-time shopper behavior and real-time inventory updates. Transactions lend themselves to a structured data format — handled quite well by most customer data platforms — while events are typically unstructured. So most marketers have plenty of data about their very best customers, but relatively little about anyone else. 

This has meaningful implications for in-house data science products. In-house data science teams often build models for personalization that are often highly effective in continuing to move previous highly-engaged buyers. That’s because this is the data that their customer data platform gives them to work with. But they’re not as effective as creating movement in the middle of the file. For that, they need additional signals.

For most retailers, getting even 5% of the vast middle of their customer list — anywhere from 60% to 80% of all of their customers — to buy more frequently would be significant. Once a customer buys twice, the likelihood of buying a third time goes up 95%. Data analysis from Bluecore retail strategists found that during Black Friday, most sales came either from first-time buyers (53%) and true loyalists — people who have bought from a brand at least three times (32%).

Consider Lenovo, a retailer that specializes in consumer electronics. Though customers who do buy repeatedly stay with the brand for many years, laptops and tablets don’t lend themselves to frequent repeat purchases. In the past, Lenovo increased email volume — focused on laptops, which have high revenue per email — in order to improve retention.

Our Customer Movement Assessment helped the brand identify an opportunity to increase purchase frequency from active buyers.

Lenovo put customer movement in motion by shifting from ad-hoc emails to more automated signal-based sends, targeting customers with personalized campaigns that are much more reflective of their intent. As a result, they increased repeat purchases from active buyers by 6.5%. Given the company’s enterprise scale and global presence, this increase represents thousands of customers.

How do you know if a customer is movable? Look at their level of engagement. Any site activity is a good sign, as is a click-through from an email. There’s also the rule of two: Someone who has browsed at least two product categories is more promising than someone who has only browsed one. Someone who has engaged with your brand through at least two channels is a better prospect than someone who only engages through one channel.

For most brands, budgeting and planning begin at the top of the organization and filter down to marketing teams. Most marketers know this all too well: It results in the feeling of having pulled a rabbit out of a hat to somehow make your annual numbers, only to be told that next year, the increase needs to be twice as much. Customer movement is most powerful when it facilitates a bottom-up approach to setting financial goals, and when marketers are able to make the number of customers they’ve retained or acquired their first priority. Customer movement makes even more of an impact when it allows merchandising and marketing to work together to fulfill customer demand.

A bottom-up approach does not, by itself, enable customer movement. It’s possible to take a bottom-up approach and still focus on metrics that are channel-specific, such as traffic, orders, and conversion rates, and then try to optimize those.

A customer-driven approach starts with the number of customers a brand has at the start of the year. Those customers have a rebuy rate, which may vary by the period in which they were acquired. They also have an average order value. With this information, a marketing team can determine a good share of the baseline revenue that can be expected from existing customers in the next year. 

Meanwhile, the finance department has most likely set a growth rate. The gap between their projection and the amount the marketing team expects to bring in from established customers needs to be filled by new customers. By understanding how much new customers buy, and how much they cost to acquire, a marketing team can determine the budget they need to meet the expectations of the finance side. Often, acquisition gets more expensive over time. It may make more sense to try to increase the purchase frequency of existing customers. This is one place you’ll want to look at all your available tactics, and all your available channels, to help boost demand. But you’re building the baseline case by starting with your customers.

By developing a growth strategy that is customer-led, marketing teams can better work with others in the organization to set and meet goals. And they’ll have the data to support additional or new investment when it’s needed.

In the current environment, retailers and direct-to-consumer companies can’t afford a wait-and-see approach. Instead, they need to proactively develop new growth strategies, mindful that their customer files are their most valuable assets. Customer movement enables marketing teams to see beyond channel-centric silos to develop strategies that efficiently move shoppers through the funnel and recapture those who are lapsed. From unknown shopper to known shopper to first-time buyer to repeat, and potentially reactivated, buyer, customer movement gives marketers the tools to address each customer with messages that are relevant to them personally and to their place in the customer lifecycle. This greatly increases the number of shoppers who receive effective marketing messages, ties marketing activities directly to the organization’s profit and loss, and drives short-term profitability while building the foundation for sustainable growth.