Morphing Rule # 5 Value
Note: Why is this rule important to all production managers. In the future the value of the customer will be part of marketing. Location based marketing will allow a smartphone to give the most valuable customers (that are standing in the store) a personalized offer. The value of the offer will change based on the value of the customer.
Value is really about a value exchange between customers and corporations. It is really a value exchange - the customer gives this and they get that from the company. Before I go into this let me interject that in the future we will tell the new social story of value - the individual is worth a lot to a company, the household is worth more and the community is exponentialyl more valuable.
But back to this article. The most obvious examples of this give and get is with loyalty programs. If you are loyal and give us your business or use our card we will give you loyalty points.
Lets look at a complete value equation. In my last article focused on rule # 4. I used a baby example. Here is the value of the baby market and thus an example of a value equation.
Yearly Births: Canada 350,000 USA 4,000,000, The average family spends $6,000 on new baby items a year for the first two years. Two year value of new household spend Canada $4 billion and USA $25 billion.
When Mom enters a store with a full line of baby and toddler products and she has a baby and a toddler, she has the potential value (average) of $16,000 to that retailer. In the previous blog "Customer Experience" example we targeted, five moms at four store locations per week with a potential value of $12,500,000 in sales.
Rather than look at the margin per customer think about the marketing spend. How much will a company spend to get a new customer that has just had a baby. What is the value exchange?
The value goes up if the company has a credit card (eg: Sears MasterCard), because there is more margin on transactions at their own stores plus at other locations even their competitors.
When you develop a program, develop a value matrix, then spend more to get more value.
Customer Acquisition: New Moms $150 per new customer, plus $300 for a credit card activation and usage at another outside location (interesting people believe that their retail visa is just for that retailer)
Customer Stimulation: Shop in another department, visit the store more often $10 to $75 depending on the value of the customer (total sales as recorded on their loyalty data).
Customer Retention: Children are turning 6, can I get the family to stay one more year $5 to $55
Reactivation: The birth of a second child back to customer activation values.
As production people we focus on the budget and often the cost per item. Make sure the true value of the customer is understood and the full cost of the exchange. Build in measurement and assessment such as surveys to valuate customers. How many children do you have 6 and under? How often do you visit the store? Are you a loyalty club member?