We often talk about our customers—bad, good, loyal—through the lens of what we believe we need them to be. Maybe even what our financial model requires them to be.
This topic, of course, comes up in the BFCM run-up every year, as marketers debate the efficacy of steep discounts and whether that’s a wise thing to do for the brand.
The argument against discounting often goes something like this: “Don’t discount. If you do, you’ll attract bad customers. They’re bad, because they only shop sales and they won’t buy from you otherwise.”
OK… And?
Last time we checked, we never asked the brands we liked to stop a promotion so we could pay full price.
While it’s empirically true that steep discounting—and frequent discounting—can influence a customer’s price sensitivity to a brand, it is also empirically true that discounting pulls future sales forward.
Just because someone takes advantage of a sale doesn’t mean that customer is bad.
It means there’s a disconnect between the way a brand is motivating customer behavior and the desired customer behavior. That’s more on the brand than the customer to straighten out.
Brands, it seems, would be forced to learn more about their customers and their motivators, if they bucketed their customers a bit differently.
Perhaps:
⁃ Trial buyers
⁃ Light buyers
⁃ Regular buyers
⁃ Loyal buyers
This type of segmentation could apply to the brand and the category, giving a brand the ability to better understand how their customers interact either the brand and the category at large.
The idea here is that, while each group displays different explicit behaviors, brands can begin to understand how customers move between those groups and why that happens.
As we discussed in “80/20”:
We’re not loyal in absolute terms and we’re not loyal indefinitely. Mostly, we have preferences. And we change our preferences for seemingly random reasons.
All of which is to say that the 20% of your customer base that delivers 60% of your revenue today is likely to be in the 80% of your customer base that delivers 40% of your revenue tomorrow—and that’s if they’re an active customer at all.
In other words, the distribution of revenue may be constant, by the underlying composition of that distribution is not.
This is where an obsession with loyalty and chasing more of the “most valuable” customers falls short. No one customer type is fixed in their behaviors. That means all customers are more alike (we all change our behaviors and move between groups) than they are different.
For brands, then, the mission shouldn’t be so much seeking out more of the 20% insomuch as it should be in understanding why and how customers slide in and out of their respective groups.
While the discussion is timely from a BFC standpoint, we see this line of thinking, too, when talking with CPG brands about subscription. Often, there’s a brand-side desire to have non-subscribers behave more like subscribers in terms of purchase frequency and replenishment intervals. As if the non-subscriber is an inferior customer to the subscriber.
This is, to be clear, a dangerous mindset for any business that aims to reach scale.
After all, if such a thing as a bad customer exists, the logical extension of that is that bad brands exist, too.