In sports, teams rise (or slump) to the level of their competition. What is your company’s single most essential challenge that your team can rise to?
Pivot Point worked with a B2C manufacturer / distributor (we’ll call B2CM) with progressive products and a respected brand. However, customer acquisition costs were a growing percentage of revenue. Their digital agency analyzed the situation and recommended becoming more efficient with that spend, and B2CM had other initiatives to trim costs.
But B2CM leadership also had a wise hunch, that acquisition cost was “penny wise”, while not understanding the lifetime value of a customer they were acquiring was “pound foolish”
So we undertook a strategic analysis: “What distinguishes the “best” customers from the “rest”? This method has benefitted several of our clients. At each one, we find predictable, substantial differences in lifetime value behavior before the first order and within the first few orders such as:
How they were acquired. Not all marketing sources are equal.
What products they buy in the first order or two
Purchase cycles and habits
Levels of discount
Customer service contacts
At B2CM we uncovered that a high percentage of customers - far higher than they hoped - were single order “one-and-done.” And - a nugget almost literally of gold - after a second order, customer value accelerated: quicker order cycle, rising order value.
The “growth with cost control” strategy might get them 2 or 3% lower cost, and only for new customers. Getting a second order from a customer would increase profit for that customer by 250% or more, and probably at a lower cost than acquiring new customers.
The strategy, then, was to turn from acquisition marketing to relationship marketing. That meant immediately to cultivate new customers so they wouldn’t end up as single-order customers. The rallying cry that everyone from the warehouse to engineering to customer service could get behind: “MISSION #1 IS ORDER #2.”
How? The “best vs rest” analysis gave clear directions.
One, their loyalty platform was working, so they could double down on that messaging.
Two, certain acquisition sources tended to attract more “best” customers, as did certain products, so they could shift marketing spend and content.
Three, we now knew the categories and timing of 2nd order (45 days - far shorter than they had assumed) which were necessary to cultivate a good customer, giving the marketing team a sharp focus.
With that, they could craft KPIs to oblige the team to pursue these customer behaviors, and they had a clear and simply rallying cry.