It doesn’t matter if you are a brick and mortar retailer, an eCommerce business or both, everyone has a need to market their services to new and existing customers. Even if you have a limited marketing budget you need to diversify your message and spend, because some customers are worth more to your business than others and some customers are more willing and able to spend money today, the key is understanding your customer. Catalyst Analytics is here to help.
1. Not All Customers are Created Equally
Say you have 500 customer’s buy the same pair of shoes from your online store and you wanted to re-market to those customers to try and get them to buy your newest pair of shoes, which of those 500 or more likely to buy from you again?
There are a number of questions to be asked in order to help answer that question, here are just a few:
- Was there a sale during their last buy?
- Were they part of a group discount?
- Was it a limited edition buy?
- What is the customer’s past spending habits if they have purchased previously?
Going through these questions and many more will help you in your analysis of your customer and their spending behavior and we’d like to add two more questions to your list.
- What is my customer’s current economic situation? (i.e. do they have a job/economic stability)
- Which of my customer’s are willing to spend money today and which ones are still dealing with adverse affects of the housing and job crisis?
As we have learned since 2008, the housing market in addition to the job market has a huge impact on consumers spending behavior. Looking at housing and employment at an MSA or County level is not good enough, you need to drill down to the neighborhood level to get the real story, it’s a lot of work but in the end it will make a difference to your bottom line. Catalyst Analytics is here to help you answer these questions and more, learn about our services here.
2. Looks Can Be Deceiving
In the case of brick and mortar locations, just because you have 20 or 100 locations that demographically look alike does not mean that they will perform the same. Brokers, retailers and analysts spend hours looking at shopping center demographics in addition to to other analytics to give them insight as to the future performance of a retail location.
Over the past few decades, with rare pockets of exception, neighborhoods changed slowly. The average price of a dwelling unit within a neighborhood would rise and fall with periodic cycles and occasionally there would be an unfortunate foreclosure. If someone moved out, you had a pretty good idea about the household that would move in…particularly their income level. That paradigm is in the midst of significant change in many major and minor markets throughout the U.S.
Just because a demographic report tells you that the population and income levels fall within your acceptable parameters does not mean that the sales per square foot will be equal amongst locations, especially those existing locations where you last ran a report using pre-2008 data. Once you understand the new make-up and economic standing of the neighborhoods supporting your locations you can adjust your marketing spend accordingly. Identify those neighborhoods who have survived the “great recession” and housing crisis, they are more willing and able to spend money today! We can help you during this process, learn more here.
3. Economic and Social Changes are Affecting Your Customer’s Spending Habits
For the most part, businesses within the last fifty years have heard about and focused on the “baby boomers” and their impact on our economy and our culture. Not undeservedly so, as the baby boomers have had more impact in the United States than any generation in the history of our country. However, the echo boomers (18-32 year olds) who numerically are just as large as the baby boomers, and their impact on the economy, are being largely ignored.
The baby boomers reached their peak spending and earning power within the past decade. Their late forties is when they achieved their highest salaries, and they spent the most money as their children matured and as their families grew to their max…McMansions were affordable because of low interest rates and the ability to buy them.
Things are changing radically for the baby boomers. They don’t need the McMansions anymore. Forget the ability to buy them. Today baby boomers are looking toward retirement…looking to downsize, looking to save… and in many cases they are looking to economically help their echo boomer children, survive these difficult economic times. When have you seen so many “children” living at home?
We have a perfect storm. The echo boomers are in the stage of life where their earning and spending power is not at the height it will be in twenty years. At the same time, we have the baby boomers coming out of their highest earning and spending power years and refocusing their consumer attitude on their retirement and savings.
Understand the Make-Up of Your Customers
- Economically challenged households are being replaced by larger, financially stable households in many neighborhoods
- Baby Boomers have moved out of their peak earning/spending years and are focused on retirement
- Generation X will boost their earning and spending capacity over the next 10 years
- Mobile households (renters, Echo Boomers, Singles, etc…) are moving to smaller communities with diversified, stable, employment opportunities
Once you recognize the significant economic and social changes affecting your customer base your immediate next step should be to understand the make-up by age of your customers and adjust your marketing efforts accordingly. Understand that the services and prices that you market to Baby Boomers should be different than Echo Boomers and Gen Xers as they are all at different stages of life! If you need assistance measuring the make-up of your customers contact us and we’ll help.