Customers loyalty is a major factor in success for all firms, many companies spent a lot of time and money studying customers loyalty by measuring and managing satisfactions level and net promoter scores. This old method of study is not accurate 100% where customers might be satisfied with the brand or products the firm offer but will spend money on competitor brand and leave the company brand as a second choice. In studying the theory of the correlation between customers satisfaction and share of wallet, Walmart conducted a two years study of 17,000 costumes in different industries and different nations, The study was conducted to gain insight about consumers purchase pattern, satisfaction, and recommending the brand; the rank consumer give to the brand in relative to competitors such as first Kroger then IGA.
In results, the study concluded the Wallet Allocation rule.
The wallet allocation rule measures the share of wallet consumers are willing to pay for the brand in comparison to other brands.
Steps of Wallet Allocation rule :
Step
- Establish numbers of brands that customers using in the product category.
- survey customers and obtain satisfaction scores for each brand in step 1.
- Plug the brand's rank and a number of brands from 1 and 2 to the following formula:
By applying this approach of an allocating share of wallet, firms can assess brand performance and craft strategies for the future success.
How Target uses their data in predicting consumers trends :
Target is one of the successful retail stores in the united states, Target has been improving their customer's experiences thought using the data they collect from customers purchase and insight.Target has created loyalty programs such as target reward card and other services like Target baby program that offers coupons and discounts for pregnant customers.
On studying customers satisfaction and in taking a step toward engaging with customers; Target conducted a study of consumers purchases pattern for pregnant customers ; they found out that some patterns of product been purchased can predict what stage the pregnant is on or sometimes the delivery data of the baby. Target implemented the finding and start sending coupons on the right timing frame that scores a good relationship with consumers and better promoting process, On the other hand, some faulty mistakes such as sending the wrong coupon people or sending the coupon might violate the privacy of the consumer if somebody else saw the coupon like the example of the high school girl coupon.
Using insight from data can provide such successful strategies in promoting and selling products , On the other hand ,Engaging to much in customers data might raise the fear of violating the privacy rights.
Kroger knows your shopping patterns better than you do :
Kroger is the nation's largest traditional grocery store chain in the united states, with 2,400 stores and 80.8 billion in sales last year, Kroger is working great in the section of customers services and satisfactions where they have multiple Loyalty plans such as the coupons they send ever month, Kroger membership and Kroger gas rewards. In taking a step toward improvements; Kroger hired Dunnhumby which is a data specialist firm, Dunnhumby used the data Kroger collected and experimented different techniques in testing the market. One technique was sending coupons to a different segment of consumers that might not need the product as a necessity but might purchase it or refers it to another future consumer.
The Kroger style and finding are less powerful in comparison to target for example. In studying consumers behaviors toward products and brands , such firms should carefully select their methods or the most appropriate method of testing rather than violating people's privacy or too many annoying promotions.
Developing products for a circular economy :
Many of the manufacturing companies do not give attention to the life cycle of their products when they reach the expiration date. Research suggested that each year some 2.6 trillion dollars worth of materials that can be reused,or recycled are wasted. From one aspect the firms can make a huge amount of profits from refurbished mechanical materials , recycling and after-life activities for their product.
For companies to make a strategy for after-life stage of their product, they need to create a cross-functional collaboration on the product chain value, such a collaboration can be between product development teams , sales , engineers, and market specialists to make the product durable for reuse, repair, and recycling stages and support the circular economy objectives of maintaining green environment.
Lastly, Firms need to create a strategy in how to communicate to their consumers about the recycling or after-life plans and how to implement them, Where firms can create a green campaign or motivate consumers to return the old product for an offer, such as the mobile industries re-purchasing old phones for reuse or disassemble activities.
Calculating Life Time Value(CLTV) :
Starbucks is one of the biggest coffee companies around the world , despite the economic challenges that all firms went through in 2012, Starbucks was not suffering as other competitors does , Actually ,Starbucks was grown and expand around the globe, where they expected to open 600 new-locations worldwide. Starbucks strategy of maintaining high customer satisfaction level and gaining positive customer life time value helped them a lot to be the top in the market.
Customer life time value is the projected revenue that a customer generates over there life time.
The articular uses Starbucks data as an example of calculating CLTV.
Step 1 : Average your variables .
First calculate customers Expenditures per visit (X).
Second calculate number of visits per week (Y).
Average customer value per week = X * Y in US Dollars.
Step 2: Calculate life-time value :
First firm need to defined the following :
(T)The Average customer lifespan, (How long they stay as customers)
(R)Customer retention rate ,(the repurchases habits of customers over period of time )
(P)Profit margin per customer.
(i)The rate of discount
(M)Average gross margin per customer.
Customer Life Time Value Equations
Competing on customer journey:
The revolution in technology, and the data systems that companies analysis and research on using statistics and algorithms gave them capabilities in understanding there consumers, and even more, expectation and suggestion for future purchases. Such as Amazon and its techniques of understanding consumers and keeping them. As a results of studying data insight and analytics, survey, and experiencing consumers journey ; companies starts to builds there loyalty loop and their strategy in how to motivate, educate ,connect and keep consumers.
companies starts going proactive in terms of connecting with consumers, understanding the interactions consumers have before purchase and understanding consumers decisions behavior and satisfaction level. So companies starts to acknowledge the power of online shopping and how its convenient is the key of competitive advantage , such as the online deposit service that many banks offers nowadays through their online app for smart phones that changes the way people depositing money instead of making a trip to the bank.
Another new innovative way of connecting to consumers recently, is the online personalization services that many top brand offers to their consumers , such as apple purchasing journey and the personalization they offer such as memory size, color, other personalization that differentiate apple from its rivals.
The one thing you need to know ?
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