Strategies to identify and retain your most valuable customers

Add To Cart Podcast
Episode 7

In this episode of Add To Cart, we are joined by Customer Experience expert Danny Phillips, Co-founder of the CX platform Omneo and agency Arkade. Danny’s business focuses on retention rather than acquisition and in this episode, we’ll find out why and hear his top strategies for holding onto your most valuable customers. 

🎧 LISTEN TO THE EPISODE HERE:

Questions answered in this episode include

  • How do you identify the most valuable customers that you want (and are profitable) to maintain? 
  • What retailers are you seeing using smart retention tactics for their best customers? 
  • How do you measure if your retention tactics are valuable? 
  • What role does technology play in retention? Does it have to be complicated? 
  • Where would you recommend retailers start when looking to improve the retention of their customers? 

🔥 HOT TIP

Steps to Retention Success:

  1. Identify your top 10% or 20% of customers
  2. Work out what is special about them and how they are unique in their behaviours or desires  
  3. Use that information to model products, promotions and loyalty incentives that resonate with your core base

🔗 Links from the episode 

About your co-host

Danny Phillips from Arkade 

Danny has worked in the Australian retail and CX landscape for over twenty years and is passionate about rebuilding valuable relationships between “brand” and “customer”. 

Danny is the Co-founder of the CX platform Omneo and Customer Experience agency Arkade – a Shopify Plus Partner. During this time he has contributed to informing the next generation of CX practitioners by speaking at RMIT University, New Zealand Trade and Enterprise, The General Assembly, and many industry events. 

These days he’s working on CX strategy with established businesses like APG & Co, PAS Group, Glue Store, MJBale, Decjuba and Treasury Wines (even Danish Department store Magasin du Nord) – plus up-and-coming brands like Academy Brand, MAAP and Francesca. 

You can contact Danny on LinkedIn

This episode was brought to you by…

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Full Episode Transcript

Hello there and welcome to episode seven of the Add to Cart podcast. My name is Nathan Bush, host of Add to Cart and strategist at se-commerce consultancy, 12HIGH. In today’s episode we’re going to cover all things’ customer retention. How to identify your best customers. How to analyze them. And most importantly, how to keep them. Joining me today is the master of retail customer experience, Danny Phillips. Danny has over 20 years in strategy marketing and development. Based out of Melbourne, he’s the co-founder of CX and loyalty consultancy, Arkade and CX and loyalty tool, Omneo. Danny and the team have worked with retailers such as M.J. Bale, SABA and Cotton On.

Nathan Bush:
I’ve actually known Danny for years. And there was one thing that he said to me recently that really stood out. He said, “There’s this fascination at the moment with customer acquisition, but no one seems to be giving, retention, the recognition it deserves.” And to me that was spot on. There’s been this mad scramble for new customers in the race for customer acquisition via chief social channels, but we are rapidly saying that tired turn of social ads become more expensive and the direct to consumer game becomes a little bit harder. Customer retention is, and in my view will always be key for good retail. Let’s get into today’s episode with Danny Phillips on customer retention brought to you, of course by our partners at Shopify Plus. Welcome Danny.

Danny Phillips:
Thanks for having me.

Nathan Bush:
Pleasure. Now you have over 20 years in CX, according to your bio. How have you seen CX change over those years? And tell us a little bit about what you’re doing today.

Danny Phillips:
It’s interesting. It’s really gone full circle in a lot of ways. I think the things we were doing 15, 20 years ago, with respect to good old fashioned customer service, disappeared for a good 10, 15 years where we all got our heads around se-commerce and technology. I think a lot of agencies, us included, are probably guilty of distracting a lot of retailers into being exposed to the shiny lights of the Facebook page or an se-commerce engine or a loyalty program or whatever else. The good news is that, what is old is new again and it now seems to be this new discipline of, it’s being called CX or customer experience, which is the focus of the utility your brand gives to a consumer in the form of helping them buy your stuff as opposed to maybe helping you sell your stuff to them. It’s a really cross discipline exercise of understanding the role of marketing service, se-commerce, in-store experience and stitching it together for a good customer outcome and hopefully using that experience as your differentiator in market.

Nathan Bush:
Is that a really hard thing to sell? Because I know as someone who sells se-commerce strategy, that means so many different things to so many different people. Right? And one person’s version of strategy is very different from another person’s, and I’m assuming it’s very similar to CX.

Danny Phillips:
Yeah, I mean I think we’ve picked one of the hardest categories and the hardest despecializations to sell at the moment. We might… Whether we’re, I guess in retail because retail is being seen as a tough environment right now, even though I think I agree with some of your points on this as well as that there is plenty of money in retail. There’s plenty of good things that can be done. A lot of that value is being sort of wasted and spread very thin across maybe some undeserving brands, but also a lot of platforms that are getting a lot of the value out of the customer relationship as opposed to the brands themselves. It is a complex or sophisticated concept to understand, but I’ve got every faith that the retailers that we’re speaking to and working with are up for the challenge.

Danny Phillips:
I think you can’t just win with a technological arms race anymore or you can’t outspend your competitors in ad tech. That CX really is the last… And you can’t really race the bottom in price either. I think there’s already people waiting at the bottom there to take your customers from you at the bottom of the price pool as well. I feel like you’re having a consistent customer experience across all of your ecosystems, whether you call it that or whether you just call it a concise set of strategies across your silos. Across se-commerce. Across service. Across retail.

Danny Phillips:
I think it’s maybe just the realization that it is one coherent strategy across departments is probably the thing that is the hard sell at the moment. Who do I speak to first? Do I speak to the CMO, the CFO, the CTO, head of digital, head of se-commerce? It depends on what their own KPIs or their own measures of success will determine how open they are to the cross departmental discipline that is CX. It is… Short answer is yes, it’s a hard sell.

Nathan Bush:
One of the things that-

Danny Phillips:

had gotten the management though,

Nathan Bush:
Yeah. Now aren’t we all. We are all in retail. One of the things that really cemented in my head, where your capabilities lie and the value that you offer retailers is when you said, we actually don’t care about acquisition. It’s just not our game. And in a market where I think acquisition is seen as kind of this shiny, beautiful toy, especially in the direct to consumer world. And you actually said we only care about retention. Was that a hard decision to make to just go down that path?

Danny Phillips:
Yeah, I think we only really started using that sort of positioning recently because of the complexity of CX, I think we needed something simple to speak to, to get the right people’s attention and retention. I mean, everyone’s done marketing 101. It costs five times more to acquire a customer than to keep them. We all know this to be true. But I don’t see many actual strategies or departments or budget line items sort of dedicated to it. Whereas acquisition, I think because of the sophistication of the marketing technology that’s out there, that really knows that acquiring a new customer does equal new money. There’s no doubt about it. And because they can quantify, the act of joining is one act. You haven’t joined, then you joined. Scorecard goes up by one, the end.

Danny Phillips:
It’s conversion tracking or ad attribution. Once the sale happens, that’s the end of the game. Whereas retention is, that’s the start of the game, now what? To use the sort of funnel analogy, it’s the idea that if acquisition is the funnel and all the art and science that goes towards creating a great funnel and feeding it with good people, then we have the bucket strategy. Like how do we keep them in the bucket? How do we get more value out of that bucket? And how do we protect it? How do we not give what’s in our buckets to other people, without sort of realizing the impact that might have on our business. I think there’s a lot of funnel talk but not much bucket talk out there at the moment.

Nathan Bush:
Cool. All right, with bucket talk, let’s talk about the bucket then. Let’s get into the bucket. How do you identify the most valuable customers that you should have in your bucket? And do you find most retailers know which customers are in their bucket?

Danny Phillips:
I guess the first way is pretty straightforward. Obviously you’re have solved the first problem, which is tracking transactions or interactions against the known customer profiles. That sounds like a very simple and short sentence, but that’s half the job is getting to a point where customers want to track who they are when they interact with the brand or transact. Assuming you’ve got that in place, then it’s pretty easy to sum up. We ought to use… A good term is just annual average value or the average shopping value of a customer. How many customers are in your $10,000 a year club or your $500 a year club or whatever that might be, and just at least understand that distribution.

Danny Phillips:
We often, with… I know half of stats are all made up, but we find that for most brands, the top 10% of their customers generate 40%-50% of their revenue and the bottom 50% of their customers only generate 10% of their revenue. There’s a very disproportionate sort of spike towards the best customer end. And what we’re talking about with retention strategy is really spending as much time as possible focusing on what they want and need, not on what all customers want and need. Whether we’re choosing to do a native app or whether it’s how you design your loyalty program to service all customers. Often people design strategies or incentives or features that service as many people as possible. When in reality, most people don’t care, which is kind of true. I think as a brand. There’s plenty of people that shop from you and you make a fair bit of money from those people, but you make the most of your money from a very, very small group of people.

Danny Phillips:
But you need to know who they are when they walk through the door of your store, when they go to the website or when you choose to communicate to them. A simple tiering program is a good way to start. It’s a pretty simplistic way to start because you’ve got your gold, silver, bronze customers. They know who they are, you know who they are. It’s pretty straight forward. I think you may be more sophisticated than that though. And, think more about frequency or their impact as an advocate, their ability to shop at being both channels online and in stores. There’s other ways to measure the value of a customer over their sort of raw spending power. But start with raw spending power. That’s a really good measure to start with.

Nathan Bush:
Do you reckon as a starting point, if retailers knew their most valuable 10% of customers based on spending alone. That’s a good starting point?

Danny Phillips:
Yes, spending in a year. And just be careful. I think one of the things… The traps you fall into in doing that measure is you can judge people. If someone joins or becomes known to the brand last week and spends a small amount of money in annual terms, you might not class them as a good customer, whereas they haven’t had a chance to give you their full year’s worth of data. When you start categorizing your top 10%, one thing you need to do is only include people that have actually been a known customer to you for at least a year to make sure that you’ve given them a chance to truly prove themselves. It’s the same thing with frequency calculations. Often people will say their frequency is 1.1 because they can’t do more than people that joined yesterday. They’re just shifting the average down because that’s not really a true representation of what your actual customer does in a year. You need to develop those two measures.

Nathan Bush:
And I suppose you could start seeing patterns that if you take that 10% and you look at how they started their journey, you’ll see some pretty common patterns there, that you can then apply to those that might be just applying those journeys and displaying those kinds of behaviors as well, Which says that, they are pretty-

Danny Phillips:
That sort of cohort analysis. Looking at your best customers. Understanding, you might find that our best customers are people that join during business hours as opposed to weekends. That could make a huge difference. Or people that join in certain stores or shop online for the first time instead of in store. There could be common behaviors that indicate that just by this person joining on a weekday at a suburban mall store might actually prove that they’re going to be more valuable or less valuable to us over the course of the year because it’s a strong indicator of their future.[inaudible 00:12:04] use. By understanding what has happened, you can have a much better plan… You can start predicting what people might be worth to you in the future and start treating them accordingly.

Nathan Bush:
Do you find that most retailers go into this activity of finding their most valuable customers, with assumptions around who they are and what they do? And do you find that the behavior often matches what they thought or are they usually surprised by what they find?

Danny Phillips:
I think a lot of it is self fulfilling prophecy stuff. You do see people just seeing what they’d expect to see. I think most retailers know what their good customers are. I think the trap is more trying to bucket them into marketing type segments and personas that they tr… The whole point here is that it’s a segment of one, there’s one customer they happen to follow, they happen to meet a certain threshold, they invite you to put them in this 10% bucket, but they’re very different people. They’re allowed to be a 22 year old rich kid with lots of money or a 60 year old person that’s got all the kids out of the nest and can actually spend a whole lot of money. They could have exactly the same behaviors but have totally different ways of working and operating.

Danny Phillips:
I think you’ll find that there is no common necessarily, behavior set or demographic type for these customers. But for whatever reason your brand serves a purpose for them. That’s the point. That purpose might be very different. Understanding what they get out of the brands is the next step down and realizing that you might have three, four, five or more different sort of use cases of the brand for those customers that you need to accommodate. And that’s where use of Omneo channel strategy comes into make sure you’re fulfilling that utility.

Nathan Bush:
That makes sense. And you touched on before around tiered structures, the gold, silver, bronze, and that’s obviously a nod to loyalty programs. I’m saying… The next obvious step to that is then going, if you’ve identified your top 10%, how do you start rewarding them? How do you start engaging them? Increasing that level of spend with you. What’s your take on the modern loyalty program that we’re seeing these days? We’ve got a mixture of some really structured ones, onset of more ad hoc surprise and delight loyalty programs. Where do you sit on the line?

Danny Phillips:
Yeah, well I mean, I think for starters, I hate calling multi programs for starters and I think, the idea of a loyalty program means that some sort of tacked on experience to the side of my brand. It’s not, my brand was owned by some marketer that needed to give it a name so they could launch it. But I think the modern loyalty program is that, it’s the way we do business with our customers. Our best customers expect to be known and they expect to be acknowledged. Therefore, they are… If you want to call that a loyalty program, then you are welcome to. Then the personalized incentives. I mean, really a loyalty program is an exchange of information for benefits. Those benefits can be experiential or financial. The advantage of financial based benefits like rewards or discounts or tiers to a degree, is that they’re very easy to do and the easy to scale and they’re easy to communicate because everyone has seen them before.

Danny Phillips:
And you don’t really need to change the way your stores or website works to accommodate them. With experiential base benefits. Yeah, you might need to change your retail operations. You might need to change the way your staff are trained. Might need to change some functionality on the website to support different experiences. You only have to see what Amazon or even like the guys from the Accent Group who do a really good job of this, where they see experiential benefits as the reason customers shop with them. They build a lot of those things in free shipping, clicking for late free returns. They’re the starts of those sorts of thinkings, but I think they still, they’ve been born out of se-commerce based necessities or transactional economics as opposed to true… If you have to spend $1.50 to get free shipping but today I’m buying a $20 item and I’ve spent $5,000 with the brand in the last 12 months.

Danny Phillips:
And tiers give you a good way to mechanize that. You get free shipping because you’re gold tier because you’ve obviously spent a lot of money, we don’t need to go to transactional economics anymore. I think the tiers do help communicate and get that point across the customers into the people that manage the program. But if you build it in so that the right customers get the right benefits and they discover those as they become more engaged with the brands, then that feels a little bit more sophisticated. But it’s about balancing the two, I think. I think simple programs can suit lower engaged customers and help them through the starting part of their journey with the brands, but they want to become really good, that they’ll only be bored with the mechanizations of what tier they are. Once I’m voluntarily in the top tier, then I don’t need to be reminded that, I mean that tier anymore. Just treat me individually and sort of specially in the surprise and delight stuff needs to kick in at that point.

Nathan Bush:
Yeah. I think it’s a really good point that, that point around not treating them as a transaction, but treating them as a customer and being able to have the ability that when a customer is coming through that you’re not just seeing it as a one off purchase. That you’re able to say that, “Hey, this is Danny. Danny’s only purchasing a small amount, but he’s been here so many times before. He’s a great customer. Let’s treat him like he’s ordering $1,000 worth of goods instead of $10.” I think that’s a really nice thought.

Danny Phillips:
I think one of the things that really challenges that, brings to say se-commerce practitioners or even retail operations people is, at the moment we’re terrified of asking who a customer is until they’ve got their wallet out. Whether it be online, at the checkout or in store standing at the polls queue. We need to invent experiences online and in store that make it clear to the customer that it’s in their interest to say, “Hi, I’m Danny. Let’s pick up where I left off. And let’s keep interacting.” And that should happen at the start of the visit, not at the end. Better session management, keeping me logged in, guessing who I am based on the fact that I come from an inbound link from an email, you know who I am, just don’t reveal anything personal but start, this is… Facebook do a great job of keeping you logged in.

Danny Phillips:
You never log out of Facebook. We just need to start behaving like that. Keep me logged in for my convenience and start saving what I do for my benefit, not for yours and we’ll be in a good place. I think that sort of fear of identifying the customer probably comes from marketing guilt, I think. Because we assume that most customers don’t want to tell us anything, when actually they do, as long as they get utility out of it. I think that’s trying to change the way we build our in store and online experiences to better serve customers that want to be known by the brands or to the brands. That’s, the sort of challenge. That’s a hard sell. And when you’re trying to build an se-commerce backlog where you’re trying to get through a whole lot of really important features, try to rethink about the log-in flow or the account creation flow or the guest checkout. I think that’s a big opportunity to get those things right from that sort of CX point of view.

Nathan Bush:
Yeah. Spot on. And I think you also fall in the trap for a lot of retailers that when you start talking about customer data and rewards and inevitably loyalty, it turns into CRM conversations or heaven forbid customer data platform conversations. And it becomes bigger than Ben-Hur really quickly. Right?

Danny Phillips:
Yeah.

Nathan Bush:
I know that Omneo that you founded and is CEO of, is the technology platform. But what are some of the basic technology enablers that you see to enable retailers to have that one on one relationship without having to do a six month project?

Danny Phillips:
Yeah, because I think between your se-commerce site, your email marketing platform, your polls system and your customer service system, even if those things aren’t connected via some magical single customer view system, but you’ve got some clever techniques to at least make sure that while you’re standing in one, you can access the others. And if you have that sort of pickup where you left off mentality, there’s some great ways that you can get those things playing nice together using elegant hacks and tenacity without having to invest in a huge single view of customer CRM type solution. I often find if you focus on that customer utility first and build some functionality across those systems that you’ll start seeing the benefit of those things. Often it’s a CX project by definition sometimes is where at least two of those tools are being brought to barely solve something`.

Danny Phillips:
If you say let’s solve something using say Zendesk customer service and Shopify together by using their embedded chat widget on the website. That gives a better customer experience. But did Shopify do it? No. Did Zendesk it? No. It’s both tools together. Whereas if you approach each vendor independently and dig through their feature set and, “Can I do this?” Sometimes each thing in its own right can’t do it. Having more of a customer job to be done way of thinking as opposed to auditing a set of vendor features can give you a good result.

Danny Phillips:
This is where in the brand side, if each department is locked into, “I only play with Zendesk because I’m in customer service.” and “I only work in Shopify because I’m in se-commerce.” Often if there’s no one tying those things together for the customer’s benefit then that’s, I think where you see the CX sort of laggings, are the ones where there is no interdepartmental sort of corporation there to benefit the customer and you don’t need a deeper integration between those tools for a CDP to get there. It makes it easier, but you can actually achieve a feedback just by rethinking about how you use those tools,

Nathan Bush:
You kind of saying take a step back from the technology and don’t try and get to the Nirvana of a single view of customer straight away at least and think about it in terms of features that you can offer to customers. And think about how you got to hack your way to those features and build up those features over time. With the idea that one day you might get to a single view of a customer but don’t let that[inaudible 00:22:20] be an end all goal.

Danny Phillips:
I think single viewer customer projects ultimately are there to service some proportional marketing need, not a customer utility. And you blow a whole lot of money achieving some new view of your data that won’t really yield new information and meanwhile your customers still have to suffer through whatever purchasing or discovery experience they’ve always had to suffer through. Build systems that help them buy from you as opposed to build systems that help you sell to them. It’s the same job, but just from a different perspective, stand with your shoulder next to the customer and help them buy from you better. They just want your brand to be easier than the next guy. They love your brand already. If they’re in your store, if they’re on your site and they’ve got a registered account, they’re already there. They love you so much.

Danny Phillips:
That’s a really hard wall to climb over. Once they’re there, all they want is it for it to be easy. Stop making me start again every time I visit or talk to you. It’s all they want. I call it a single view of brand as opposed to a single view of a customer. They just want a single view of their experience across your website, your customer service team, your email marketing, your in-store experience. That’s all they want. Often it’s the same or might be the same tools that deliver that result. I guess, we’re positioned on there to be much more better, a shared view of customer and the single view of brand experience as opposed to yet another customer data platform or CRM because there’s plenty of those out there that do a great job.

Nathan Bush:
One of the most common queries that I get from se-commerce retailers is about platforms. Usually they’re ready to change platforms because their old platform is no longer supported, able to scale to what they’re aiming for or meeting their ever-evolving customer needs. Inevitably, a follow-up question is, what do you think of Shopify Plus? There’s no doubt that Shopify Plus is a leading se-commerce platform. It is agile, cloud-based and customer centric, but it has to be right for your business. To help understand if it is right for your business. Shopify plus have created a re-platforming guide to help you choose your next and hopefully last platform. Go to Shopifyplus.promo/commerce-guide to download the guide today. Thanks again to Shopify plus for being great partners of Add to Cart. We really appreciate it. Now, back to the show.

Nathan Bush:
I think you’re probably in a similar boat to ourselves is that we can tell as soon as we walk into an organization, which organizations see themselves as a single brand first, which see themselves as multiple department with multiple channels serving to multiple goals. Just in what the example you said before about who do I speak to? If you get bumped around the organization, you normally know that there’s not a single view of brand here.

Danny Phillips:
And I think the role of a CXO, we see it a lot in utilities and insurance and that sort of stuff because their job is to make customers hate them less. Whereas in retail, most their customers kind of love them most of the time. Having someone employed to make them love us more seems a bit sort of overkill. But I think that, that’s what we need to differentiate ourselves. I mean, I think if you’re a mid tier brand is, 10 to 200 or 500 stores. You are being squashed by marketplaces from above and makers from below. You’re in this beautiful position where you’ve got, a network of physical experiences and a decent se-commerce presence and some good marketing weaponry.

Danny Phillips:
There’s no excuse for you not to have an amazing direct to consumer experience platform and someone in charge of that. But I’d love to see some more CXOs popping up in, amongst the brands that we’re dealing with that can actually bridge those departmental gaps. But in the meantime, I mean, that’s… I think your organization and our agency that’s sort of where CXOs for hire effectively, because we’re trying to say if you can articulate your vision and your service model to, “Hey, you want to serve customers,” We can deploy or activate your existing technology or find new technology. The technology can do it. It can be done. It’s all there waiting for you. You as a brand just need to articulate what you’re trying to achieve. Don’t ask what the platforms can do because they can do it all. You just need to articulate how you plan to use them and why and then deploy.

Nathan Bush:
Yeah, that makes sense. And to bring all this to life, cause we’ve talked a little bit about technology, talked a bit about people, talked about one brand. The example that we were speaking about before this podcast was APG & Co. For Australian retailers, you’d know from Sportscraft, SABA, JAG, house of brands but you’ve worked with the [inaudible 00:27:19] and I’d love your insights to how they’re looking at that customer experience because from what I understand, they’ve brought together a whole bunch of technology and some really big technologies such as Salesforce Commerce Cloud and Apparel 21, which is a popular ERP. And then obviously Omneo to come together to deliver those customer features, which will be difficult because they are obviously different brands as well. It’s not just one single brand. Multiple brands across multiple technologies and I’m assuming multiple departments.

Danny Phillips:
Well I think, I mean APG & Co has always been customer centric. I think they’ve been around long enough to know that the customer is who they stand for and they’ve got a very complex and diverse set up where they do sell through concessions. The department stores, they do have their own brand of websites. They’ve got their own branded stores. They have, like all companies that have multiple brands, the sort of economic rationalist pressure to maybe should we group all these together and have that single customer view sort of creeps in and out every now and again. But I think they realized that the brands are what report… The brand customer relationship is where all the value sits. And they’ve obviously been very intentional about the platforms that they are choosing to set those foundations and like all retailers, this isn’t specifically an APG thing, but if you move too early, the technology’s not quite ready.

Danny Phillips:
Making sure all those platforms are on an even footing and are equally capable without sort of stretching one platform too far ahead is always a bit of a balance, being so true and fair to the concept of a customer having a relationship with one brand and not necessarily another. But when they do have relation with the second brand, how can we speed up that process so that it feels right for the customer without feeling sort of weird. I think it does some really good jobs to solve that. If you want to see that experience going to a Sportscraft or a SABA store and become a member and see what that feels like, I think they’ve really understood the value that the customer brings in. Their customer data goes back over a decade. They’re not just keeping the last 30 months of data for the sake of a marketing cube that they are. When a customer sees that you’ve been a member for 12 years on their profile. That’s important.

Nathan Bush:
Yup. Have you got any specific examples or tactics that they’ve used in terms of making that customer experience better using that data?

Danny Phillips:
Well, I think just making sure that the customer, the people that serve the customers in store have access to the customer’s full purchase history online and in store. I’m using Omneo clientele interface that they’re making sure that when we start that conversation and then I’m not just pulling up your profile at the point of purchase, I’m hopefully pulling up that profile at the point of entry to the store and they can look up that information so that they can really get a sense of the backstory of that customer’s wardrobe with them so that when they talk about what they might want to buy today, they’re sort of just adding to that story as opposed to starting from scratch. And a simple thing of seeing a visual purchase history of what the customer’s bought seems like a no brainer, but most platforms in their own right won’t show you that or won’t go back more than a few months at best.

Nathan Bush:
It sounds so simple, but there’s very few retailers that have that full Omneo channel view of a customer’s purchase history, especially available to their associates. And I know that, that in itself, and when we talk about loyalty, that in itself triggers loyalty because people will re-shop there because they have all that access. So if I walk in there, I know that they can pull up all my past purchases and tell me exactly what sizes I am and what I’ve bought past. Make that shopping experience. So easy, quick-

Danny Phillips:
Yeah. And if I don’t have to, I have the change room because I know what size I am in the pants here. That’s really efficient. If you’ve created utility to help me be a better customer and help me buy better and, I mean, that’s the sort of operational utility that isn’t very sexy, but it actually makes a huge difference to the way the store teams can work. And it’s for them and for other brands that are using similar things, it’s the start of the journey. They’re going… These store teams have got 10 ideas of things I’d love to add to their toolkit. They’ve all had little black books in their top drawer of previous customers. You’d be surprised about how clever the in-store teams are sort of weaponizing their experience with customers. We just need to catch up to them and actually provide them with the tools because they’re ready to use you.

Nathan Bush:
That makes sense. Outside of Australia, are you seeing any retailers who are delivering fantastic CX experiences or gathering loyalty because of those CX experiences?

Danny Phillips:
You can’t really go far without sort of meeting brands like Sephora, some of the international department stores like Nordstrom, all those guys. I mean it’s a bit boring sort of bringing them up because I think they’ve been wheeled ahead as the best experiences of the last sort of five or six years.

Nathan Bush:
I was just gonna say it’s really good because I was about to hang up, if you were going to say Amazon.

Danny Phillips:
Yeah, no, no, no. Amazon’s the opposite of that. And I think, look, Amazon is just trying to prove an amazing point on how good a delivery system they are from a fulfill… they’re a fulfillment business. They just need to get license to sell. These were like margin of fulfillment that’s all they are. And to do that as efficiently as possible. They need your home address, your credit card details and what products you want to buy. The data’s right. Money off fulfillment. What that makes and which makes… And they’re doing the best at it, no doubt but they’re not a brand experience.

Danny Phillips:
I think you only have to start seeing people like Nike pull back out of Amazon saying, “Well, we’re going to…” I think Nike’s got a member-only store in New York where you can’t even walk through the front door unless you’ve got an app installed and you’re logged in. They’re saying, “We can give you this best experience if you’re one of our customers.” You have to be a Nike customer to come in here. And yet you kind of have to prove it. And once you do that, you’ll be amazed at how much value we can give you because all the pixels are on the stalls, you’re not on some other marketplaces. Leveraging all that data. It’s all that they use flowing between the customer and the brand.

Danny Phillips:
I mean I’m a bit of an anti marketplace sort of proponent. I think brands need to stand up and fight for their experiences and fight for their customers and keep it all as in house as possible because there is no doubt a massive amount of value that’s being generated there. You just got to keep it in house.

Nathan Bush:
Absolutely. And I’m surprised actually by how much conversation around brand is coming out of this and I shouldn’t be because it’s all about retention, but it all seems to be tying back to brand. Right. And less so around loyalty to be with making people feel that connection either with you personally through your associates or through that brand and how that comes through, whether it’s through data or otherwise is kind of by the buy.

Danny Phillips:
Well, I think a brand in retail doesn’t exist. The brand ultimately is the collective experience of customers with the brand’s products. I mean, I think the brand is the sum of all those things. The brand lives in the eyes of the customer and it lives in the eyes of the best customers. The way I choose to talk about Sportscraft, develop Sportscraft, that’s, the brand exists in my voice. Unless you’ve got a huge advertising budget, where you get to tell everyone what your brand is. In this day and age, you are the sum of your best customers’ experience whether you like it or not. If you don’t have a huge advertising war chest to convince people otherwise, your brand lives and dies about their collective experience. You should be investing in it.

Danny Phillips:
It’s the new advertising and if I had my way, every cent you’d spend on advertising and acquisition, you’d spend on not only retention but that utility so that all these amazing advocates of your brand will tell the 10 people they influence that this is the only place to buy that particular wallets or toilet paper or muesli or dress or suit from. That’s like you’d be silly not to go anywhere else because these are people that serve me. So I think it’s not a crazy strategy. I just think it’s… A $10 I’ll give to Google on advertising only cost me $5 to give to one of my customers. And appreciate it all. Probably.

Nathan Bush:
That’s a really, that’s a point well made and I think we’re living in a time at the moment where the middle ground is the most dangerous place to be. And you’ve alluded to it, it’s like if you’re stuck in the middle, you’re going to be dead soon. It’s okay to be the cheapest. It’s okay to be expensive if you’re offering extra value. But if you’re in the middle, that’s a really bad place to be. And I don’t think it has to be expensive. Was it Sephora that did the whole basket thing at the front where they had at red baskets and black baskets and you picked up the red basket if you wanted help, black basket if you didn’t.

Danny Phillips:
I’m not sure what was it but it was definitely a cosmetics brand. I’ve seen a couple of examples that are popping up recently. I mean that’s a great example of just a little bit of simple utility to understand it. I mean it’s a bit binary in its approach, but I think there’s something to that. I think, there’s something about that idea of allowing some people to have a high touch experience and people who want a low touch experience to be able to quickly and easily opt in that path. I mean, I think click and collect or BYO polls basically click and collecting stores are a really good example of rather than stand behind three people that want high service. If I can just try this on, scan for it, pay for it. Can I just leave now? Let me do that if I want to. That’s the sort of differential approach to utility that needs to be thought through. Some of them want high touch and you can actually afford to give them that time if other customers who want low touch can just serve themselves. Give them that tool.

Nathan Bush:
Beautiful. If I’m a retailer listening to this and I’m like, I love what Danny’s got to say apart from picking up the phone and calling you. If they’re thinking I’m going to take 20% of my budget from my acquisition budget and throw it into retention, where would you start? What are the tips for them?

Danny Phillips:
First thing I’d do is just understand that retention number. I mean I think for most brands, if you don’t know how many customers who shopped in 2018 didn’t shop in 2019 you need to focus on that number because that cost of loss is real. And I think even choosing that budget, I think you need to understand that cost of loss. I think most brands that have done those numbers are pretty horrified by the fact that even though their active customer counts from one year to the next day, the site that they lost more than half of their customers, and when I say lost like these people signed up and gave their details and did the whole thing and they never came back for the second year. That’s, truly terrifying. That sets the time. But if they have chosen to do it, I think putting strategies into your se-commerce backlog that focuses on the customers that aren’t going to buy online, but they’re informing an in store purchase so that that online behavior can inform the in-store purchasing and carry into the in store experience.

Danny Phillips:
That seems like the number one thing. In store availability is a great example of that. And showing in-store availability of a product won’t help your conversion rates for your se-commerce site. But man, it’ll drive sales because half the time people won’t bother going to a store. Because they’re just not confident that they’ve, that dress that they want will be available in their size and their color. Little things like that are a great example of real customer utility that is built in one channel that serves the other. And multichannel wishlist is the other one. Allow customers in store to save things to some list that’s then available to them online so they can complete the deal later. And they’re the two things that seem like obvious things to monetize the non converting traffic.

Nathan Bush:
Beautiful. I think that’s a really good starting point along with what we talked about, about just identifying your top 10% of customers and what makes them, them and what their behaviors are. And I think if you kind of start there and look at those things that you’re saying there as well. Then you’re on track to a great, great experience across the board.

Danny Phillips:
Definitely.

Nathan Bush:
Thank you very much for your time, Danny. Really appreciate that. Where can people reach out to talk to you or find more of your work?

Danny Phillips:
If you go to omneo.io or arkade.com.au is the website. Or you can email danny@arkade.com.au to talk to me directly, find me on LinkedIn or give me a call on mobile, we’ll put the details in the show notes. I imagine so, just get in touch. I think retail’s a challenging world and we are nothing without the retailers. We want to work with them to help solve this all together. The customers are ready, we just need to work together to solve for them.

Nathan Bush:
Brilliant. Thank you very much Danny.

Danny Phillips:
Cool, great to talk to you.

Nathan Bush:
Thanks Danny. One take out from our conversation that I think is really valuable. And if you do nothing else, isolate your top 10% or 20% of customers and identify what is special about them, how are they unique in their behaviors or desires? Ignore your other customers for the moment. From here you can model products, promotions, and even loyalty incentives that resonate with your core base rather than something that’s a bit more vanilla. That tries to appeal to everyone but never really hits the mark. You can find all the links we referred to as well as Danny’s details in the episode show notes. We’ve got some brilliant guests lined up in the coming months and we’ll be covering topics including the rise of reserve online buy-in store, and the importance of emotional connection with customers. But we’re always on the lookout for interesting guests, both from the retailer and the supplier side.

Nathan Bush:
If you’re interested in joining me, please reach out to me on nathan@12high.com. Also, if you want a little bit more behind the scenes, we have an email list called HIGHmail where we publish a summary of our podcast conversations. As an added bonus at the end of every month, we send this list in se-commerce Month in Review, which has all the news, research and links that Australian retailers need to keep up with the fast moving pace of retail and se-commerce. Visit 12high.com.au to sign up. Until next time, thanks for listening and keep adding to cart.