A convenience retailer's budget has two jobs. First, buy the right new customers for less money. Second, make existing guests worth more.
This insight comes from Peter Rasmussen, CEO of Convenience & Energy Advisors, St. Petersburg, Florida, and Jeff Hoover, director of strategic services of Newton, Massachusetts-based Paytronix, during their presentation Aug. 5 at CSP and Informa Connect’s Outlook Leadership event, held in Rancho Palos Verdes, California.
Citing research from Boston-based Bain & Co. and Adobe Digital Index, San Jose, California, Rasmussen and Hoover said retailers almost never break even on the one-time shopper because acquiring them costs more than their first visit returns.
Rasmussen said that 8% of convenience-retail visitors drive 40% of a company’s revenue and said there are two types of visitors.
“There are customers you have never met and guests you already have,” Rasmussen said, adding that it’s important not to confuse them.
It is also important to capture their visits across every screen they touch and to avoid wasting marketing budget on the wrong audience, he said.
“Suppress your own members so every dollar buys a stranger,” Rasmussen said.
When it comes to the guests retailers already have, Rasmussen said to re-engage lapsed members at the lowest offer that still moves them.
“Step every segment down weekly to its floor,” Rasmussen said when it comes to a disciplined approach to bid optimization.
Regarding artificial intelligence (AI), smarter targeting can end wasted loyalty spend, Hoover said. Hoover and Rasmussen both agreed that the first AI decision is not who to reach, but who to stop paying for.
Have a segmentation model when it comes to loyalty to optimize the rewards, Hoover said.
“It’s important to look at your competition,” he said, adding the importance to match a competitor’s offers closely enough that customers won’t be tempted to somewhere else.
Rasmussen said two factors are critical to improving guest conversion rates: offering compelling incentives and monitoring SMS filtering.
“It’ll be wildly more successful if there’s something motivating to complete it and that no matter what provider you work with, it’s really important to look at the SMS filtering that’s happening,” he said.