Talking About Repeat Business is Worth Repeating
It’s rare that retailers ever talk about or report statistics on repeat customers. Stats are publicized on store over store results, year-by-year. But, that’s it. If you google repeat business, a Bain & Co. study from 2000 pops-up. Yes, the most recent study appears to be 18 years old. That study found that increasing customer retention rates by 5% raises profits by 25 to 95%. Just with that one piece of information, retailers are missing an opportunity. I tell retailers to focus on how to get even one customer to purchase again. Then expand that and if a retailer can get 10% of their clientele to purchase two or three times during a year, think of the significant impact on revenues and profitability.
Retailers confuse customer loyalty with repeat business. Yes, loyalty and repeat business both go to same “church,” but are not in the same “pew.” A customer can be loyal to multiple brands at once. The key is to increase market share from your existing customers and turn one-time shoppers into repeat customers. I have heard from many retailers individually that when a customer purchases a second time, it can be as much as 40% more than the first transaction. Again, don’t make the mistake of confusing loyalty with repeat customers. Loyalty is just one step in the process to guarantee a long-term customer.
Recently, Macy’s reported a statistic that had not been issued before. The number was that 46% of Macy’s revenues ($24.86 Billion) come from 9% of their customers. That’s an interesting stat. While the number doesn’t exactly fit into the typical 80/20 rule where many b-to-b companies report that 80% of their revenues come from 20% of their largest customers, it’s close. In the retail market, certainly worth noting. I can guarantee that the 9% are not customers making a single purchase but are repeat shoppers. I’m also extremely confident that these customers are not being served by random Macy’s associates, but by their favorite salesperson.
My wife and I live in Manhattan, not far from Macy’s on 34th Street, the world’s largest department store. We rarely shop there, but when a friend gave us a Macy’s gift card at Christmas and we needed some new pillows, we decided to visit Macy’s bedding and bath department. So, on a freezing cold morning in December, we met a sales associate on the sixth floor named Rochelle, who greeted us not only with a big smile but also like we were old friends. “I’m glad you’re inside where it’s warm. You must have something special in mind. How can I help?”
We came for pillows and left with more. It was all because of Rochelle. She was eager to help and knew her stuff so well that she was extremely helpful. She gave us her e-mail address and said we could reach her anytime with questions. When we said our good-byes, we did leave as friends. We hadn’t been to Macy’s in years but knew we would shop there again. And, we did. Over the next two years, we purchased numerous items from Macy’s because of Rochelle. Rochelle turned us from a rarely-Macy’s shopper to a repeat customer.
The strongest bond is between two people – one consumer and one store associate. Focusing on how to generate a larger percentage of repeat customers, one-by-one, will provide higher revenues, profits, referrals and most likely happier store associates.
The term, Customer Loyalty,is passé. Developing a strategy to generate repeat customers is, once again, worth repeating.