Finding New Customers Online (Part 1)

New Customers for Retail BrandsExcept for a new brand looking for repeat buyers, most online retailers want new customers.  As a consumer, this can be frustrating since for people wo are loyal to specific brands and/or retailers, they know they are not as valued as a new people are.

New people are offered better deals.  When I used to work in magazine circulation, we printed two versions of insert cards (ie: those slips of paper that fall out of a magazine when you drop or shake it). The newsstand version offered a lower price to subscribe than the subscriber version did since they knew that the people buying on newsstand would likely be new-to-file.  This is one of many examples of better deals given to new vs. prior customers.  Another is the great deals cell phone and cable companies offer to new customers only.

It is worth nothing, though, that there are some fantastic loyalty programs that exist to reward current customers, and as a consumer myself, for that I am thankful. The purpose of these programs is to fulfil target lifetime value goals (LTV).  Companies often lose money on the acquisition and then make their profit from repeat business, but it is not a 1:1 ratio.  Without new buyers coming in, a brand’s customer base will eventually shrink rather than grow since only a percentage of new customers become repeat buyers (thus a reason for why loyalty programs exist). So acquisition plus retention is essential in order to keep a customer file growing and fulfil target LTV goals, which ultimately yield to profit.

While there is universal agreement among retailers about the need to acquire new customers, there is a lack of consistency in defining what a new customer is.  And beware of the definition by the technology providers:  it is not consistent with that of the retailers themselves.

For online retailers, a new customer is sometimes considered a person who has never bought online before regardless of if the person has bought from that company in an offline channel.  Others consider a new buyer someone who has not purchased in the past 36 months.  And others have a more absolute definition of having never bought from a particular brand or retailer ever.  For companies who look at acquisition this way, they typically have deep analytic and CRM capabilities in which they target and model lapsed buyers strategically based on age and prior purchases.  Versus pure plays and store-based retailers, catalogers are usually more adept at this when selling online since CRM is the backbone of direct mail targeting.  If a retailer is considering how to define “new” buyers, they should assess the sophistication of their CRM capabilities before deciding.

In terms of the technology providers who use pixels to facilitate the tracking of their programs, any customer coming in through a channel being tracked by this technology will be called “new” until the person is seen a second time in the tracking.  For web analytics which is an essential technology to gauge the success of online retail, this initiation phase is a momentary blip and will quickly increase in accuracy over time, but for new display partners, for example, most of whom require pixels to implement their campaigns, they will often claim high new buyer percentages out of the gate insinuating that what is being seen initially is representative of the media source going forward.  Their tracking is not pinging a customer database to identify who really is or is not new to the brand.  Rather, they are looking myopically at the performance of their one program which just launched which identifies practically everyone at first as “new.”  Most brands and retailers who test these new programs understand this, but surprisingly, the suppliers themselves do not.  Seems so obvious but worth pointing out because I see it in decks and hear it in conversation all the time about how such and such program is yielding such high new buyer percentages.

“Finding New Customers Online Part 2” (to come) will address the best strategies for acquiring new customers.

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