In today’s competitive market, brand loyalty extends beyond the product itself; it encompasses the entire shopping experience. Loyal customers of a brand are often equally loyal to the retailer where they purchase it. This symbiotic relationship presents a important opportunity for both brands and retailers to collaborate, focusing on their most valuable customers through shared data insights.

The Power of Knowing Your Customer

Many businesses prioritize acquiring new customers over nurturing existing ones, a strategy that may overlook a goldmine of potential. As Sergio Zyman,former marketing director of Coca-Cola,famously stated,Most companies are obsessed with the customers they don’t have,rather of focusing on those they do. The advantage of focusing on existing customers is the wealth of data already available.

Bert Peleman, a marketing expert with experience at Procter & Gamble, Walt Disney, and Estée Lauder, emphasizes the importance of leveraging customer data. Many companies have enormous databases on the customers they already have. Only: what do you do with that data? With the combination of big data and AI, marketers today actually have no more excuses not to improve their marketing effectiveness. Peleman’s book, “The Brand Butterfly,” offers strategic insights for marketers and business leaders to attract and retain valuable customers.

Focusing on the Top 20%

During the 2008-2009 financial crisis, while working for Estée Lauder, Peleman observed a critical pattern. Faced with declining sales, the company questioned whether they were losing customers or if existing customers were buying less. It was the first hypothesis: we were losing customers.This prompted us to focus on our most valuable customers, the ‘High value Customers.’ We certainly didn’t want to lose them.

Identifying these high-value customers is crucial. According to Peleman, they typically represent the top 20% of your customer base. These are the customers who generate more than half of your turnover. you always have to keep them. And whatever sector or region you operate in, it is indeed almost always the top 20% of your customers. We found that this pattern repeated itself constantly, again and again. It is therefore absurd to focus marketing efforts on the larger group of the top 30% or 50% of customers, or on the 100 most vital VIP customers, because these are exceptions that do not provide useful details about customers.

The Crucial Second Purchase

Once high-value customers are identified, analyzing their purchasing behavior becomes paramount.It is indeed interesting to see how these customers discovered your brand: what was their first purchase and what will be their next purchase? in the prestige hair care category, hair coloring is the main driver of loyalty; in the field of perfumes, a new purchase within six months indicates the future loyalty of the customer.

The next step involves fostering loyalty among these valuable customers. Analyses reveal consistent patterns: customers with high value in their first year are more likely to remain high-value customers in the second year. Conversely, low-value customers in the first year have a 90% probability of making few or no purchases the following year.customers loyal to a brand tend to be loyal to the store where they buy that brand.This phenomenon is visible both in own stores and at partner retailers. The two go hand in hand.

Working Together: A Synergistic Approach

Brand loyalty programs directly benefit retailers by increasing purchase frequency and fostering a stronger customer relationship. This is an important argument for convincing retailers to collaborate with customer data: when brands collaborate with retailers,you get cross-fertilization. This collaboration ensures that loyalty programs don’t divert customers to other channels but instead enhance the overall shopping experience.