Context - Why it Matters in Customer Lifetime Value

Context - Why it Matters in Customer Lifetime Value

By: Michael Patterson, DynamicAction's Managing Director, EMEA

For retailers, it is clear that a keen grasp of the evolving wants and needs of those using their products is directly connected to their ability to turn a profit. But what if the person completing the purchase is, in fact, not the end consumer? 

Back in the analogue days during my merchandising tenure, I worked along side future CEO Steve Rowe in Marks & Spencer menswear.  We spent eons locked away in a trading room amongst countless samples, top 10s and assorted hard-gleaned store and supplier data to build a clearer picture of the 'M&S man' who wore our collections.  Among other things, however, it became readily apparent that the person who typically bought our clothing was not necessarily the end wearer.  The proportion of menswear that we believed to be bought by someone's partner was consistently north of 60%.  The real learning though was appreciating the massive disconnect this created in our understanding of a customer’s lifetime value.

While something that the CPG world has traditionally been better at understanding, appreciating the true value that a customer brings has always been a challenge for retailers to master, thus impacting their long-term success. For example, a retailer can promote and market to a shopper a pair of men’s trousers, getting them ‘through the till’ with real-time cross-promotional strategies. However, if there is no holistic conception of who the actual consumer is – whether they are the person making the purchase or not – the likelihood of fostering loyalty and encouraging a repeat purchase is low.

According to our most recent Retail Index, European retailers have so far seen customer profitability across every segment fall an average of 6% in 2019. Add to this an average uptick of 5% in returns when compared to last year, and it is clear retailers need to achieve a much more precise picture of their Most Valuable Customers (MVCs) and the products they are seeking. However, to achieve this retailers must embrace an adaptable approach and incorporate predictive technologies as an integral part of their strategy to identify not only their MVCs, but also for whom these customers are buying.

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With peak trading season already underway, it is imperative that retailers and brands fully understand the nuances between the purchaser and the end consumer to build a contextually accurate picture of their performance. This complex reality makes it critical to adopt an analytical approach that aligns with achieving an intricate view of the customers who are right for their brand, making a significant and lasting difference to business success in this ever-evolving industry.