Full-Price Customers: How to Get, Keep Them
When we do so, we see that full-price-only buyers are, overwhelmingly, the best predictors of future sales at full price. Identifying the best selling SKUs is the next step, as these buyers are more likely to buy the similar category, trend or style. Most predictive methods focus on these targets.
Those who bought either way are perhaps the most challenging. Maximizing sales to this group requires systematic testing to identify a customer’s price elasticity with different product categories.
Lastly the discount-only buyer is a challenge. Many will readily trade brands — up, down or laterally. These buyers aren’t buying the brand so much as the “experience” of getting a bargain. Not surprisingly, those most experienced and habituated in holding out for big discounts become unlikely buyers at full price. Shifting the focus slightly to limited editions and leveraging scarcity in marketing messages and introducing new products may serve to improve performance; but on balance, these are not the best sources of revenue.
All of which brings us to the second, and potentially most important, part of a strategy to generate full-price sales; that being, acquiring full-price buyers.
Acquiring New Full-Price Buyers
Simply put, some buyers do not have the means, the will or the desire to shop at full price. The rise of taglines like “never pay full price again” by dominant retail chains is testament enough to this reality.
So it is essential that the marketer develop an acquisition program that doesn’t just add trial buyers to their database, but those who are most likely to spend more often, have higher AOVs and, of course, buy at full price.
These higher margin customers will become worth investing in a relationship now, and over time, and the the MVB (Most-Valuable Buyer) Law states that these are the customers who will drive up to 80 percent of the profits of a brand.
Acquiring these coveted full-price and most-valuable buyers is addressed in two columns I have developed called, “The Most Important CRM Metric You Might Be Missing” as well as “Bigger Is Better — How to Scale Up Customer Acquisition Smarter”
A ‘Full-Price’ or ‘Margin Growth’ Strategy Must Be Holistic
Keep it simple. You have three segments of customers you need to find in order to execute a full-price or margin growth strategy — and two of them demand most of your focus. The full-price buyer needs to be excluded from any and all discounting, or price breaks. Instead, replace those touches with “appreciation touches” — thank them, lavish them with attention and show them that you value them. This ranges from super-luxury brands sending a Rolls Royce to pick them up, to a server in a fine dining chain acknowledging guests who are in the top loyalty decile accordingly, and surprising them with a dessert or cordial.
The buyers who buy both ways (full-price and discount) also need special consideration. Testing is a must, as the behavior will vary by brand, product and timing. Discounts can be methodically reduced using predictive algorithms. The concept is to reduce the number of discount purchases that could realistically be made at full price.
Lastly, the group of buyers who simply won’t or can’t pay full price for your product ultimately need to be replaced over time. Discount buyers can be migrated to an off-brand clearance product, elevating the premium brand. Consider Nordstrom Rack and its success in selling to discount seekers, while Nordstrom retains its premium branding and offers personal shoppers to its highest-value customers.
‘Damn the Torpedoes’ vs. ‘Ready, Aim, Fire’
Perhaps the biggest lesson we’ve seen is a data-driven and thoughtful strategy trumps a big decision, with a “damn the torpedoes, full-speed ahead” style … Remember when Admiral David Glasgow Farragut first cried the now famous expression? The “torpedoes” Farragut referenced are today commonly referred to as a minefield.
With planning, testing and measurement, you can minimize the negative effects of losing revenues to changing pricing strategies, and maximize the relationship with the customers you really want.