Articles

Who Do You Promote To First?

We all know foot-traffic is the life-blood of retail. We spend enormous amounts of money generating it. This expenditure – the promotional fund – is used to acquire, stimulate and retain customers.

In times past, the overwhelming focus of promotion was on the acquisition of new customers. “New customers”, it was argued, “are the lifeblood of a retail business”. Fail to acquire new customers and the business will eventually grow tired and die. Fear of becoming irrelevant drove the focus on new customers, often to the exclusion of all else.

Increasingly best practice is stepping way from the historical paradigm.

We know today that the greatest form of profit uplift in retail comes from basket size increase from existing customers. We know it can cost up to ten times as much to acquire a new customer as it does to get an existing customer to buy an extra item. We also know that – in retail – the two greatest sources of new customers have turned out to be our existing customers and our staff.

Existing customers and staff – when engaged by the store – actively promote to and recruit their family, friends, peers and colleagues to join them and shop the store. I’ve often heard promotional professionals talk about advertising to existing customers as really being about “reinforcing their choice”. This sells the opportunity and them short.

One of the major reasons that retail advertising expenditure has declined has been the recognition of the power of customers and staff. Indeed best practice again suggests that the only time pure acquisition promotion is justified is when you open a new store. Once the foot-traffic is established in a store the promotional strategies need to change their focus.

Embracing initiatives that generate greater revenue from existing customers and staff and encouraging customers and staff to recruit new customers have not only turned out to be lower cost but higher reward. And there is another learning.

Promote to your staff first.

After all, they are on the inside. They are the ones who have to sell it to their customers in the store. They are the ones who will seed the market.

So the new world order – well, at least as far as retail is concerned – is promote to your staff first, your current customers second and then the new customers after your staff and existing customers have already promoted to them on your behalf.