Monday, December 10, 2007

Retain or conquer

If we keep a record of the person who makes a sale, then as a retailer it should not be very difficult to determine a "conquest" rate. Now of course all wise marketers must know exactly how this is calculated, that is how they can confidently make blanket statements such as "Acquiring a customer costs 5 to 10 times more than retaining one".

Obviously client confidentiality rules so I will never publish any practically used rules here, let alone any actual results. However, there are general issues that are known to everybody in the marketing world. So let us assume that we are selling sofas from manufacturer X.

We could define a sofa conquest as a sale to someone who has never bought one from X before. But what if they have earlier bought armchairs from X. Footstools? Table lamps? OK, so we could record as conquest anyone with any relationship with X.

Some buyers collect sofas then sell them on, so at any time they have a few extra in the warehouse, how would we treat them differently to people who always dispose of a sofa before picking up the new one?

Equally, there are people who regularly buy from X, but who also buy from Y and Z, maybe more often. However they are still loyal to X aren't they?

And it gets more interesting if, whenever we record a sofa sale, we keep a separate record of the person choosing the sofa, the name on the credit card, the person who will be signing for delivery … so which of these people do we include when determining conquest rates? Do we have separate rates for all of the different permutations?

Perhaps it would help if the government kept a record of everybody buying a sofa. Then all we would need to do is to get hold of the government data and match up our purchase records with government records. So surely ID cards will solve everything…

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