While we’re yet to feel the full impact of the bushfires on our fragile economy, consumer sentiment as gauged by Roy Morgan points to a tough year ahead for retailers that have already had a tough couple.
The research found that 40 percent of Aussies reckon 2020 will be a worse year than 2019, with Roy Morgan researchers noting this figure hasn’t been as high since 1990 – the height of Australia’s last recession.
For retailers, this consumer attitude will likely become a self-fulfilling prophesy causing spending to be even more restrained than 2019. Apart from some purple patches reported on Black Friday and Cyber Monday in November, it’s clear that retail will continue to struggle.
Given all this, how do you still drive some sort of respectable growth when even your normal share of sales is likely to be under pressure in a declining market?
The answer is to steal sales and customers from your competitors so your growth comes from building a larger piece of the whole pie – albeit a pie that might be shrinking in size.
It’s time to put a plan in place for full-on, ‘customer pinching’ warfare that will likely last a while.
But before you get fired up and go off half-cocked, you need to know where you stand.
Step 1: Check your costs
Start by developing a real understanding of your costs. Do you operate more efficiently than your opposition? Do you have a better capability to create a war chest than them? Can you sustain a customer stealing battle longer than them? Common sense dictates that you don’t pick a fight knowing you might not be able to go the distance as well as your opponents can.
Step 2: Keep your existing customers
Next, work out exactly where you stand in the eyes of your customers. Are they loyal? There is no point chasing new customers unless you fix any holes in the bottom of your own ‘customer bucket’. Any additional acquisition of customers must be incremental, not merely replacement for customers you are losing because you’re not adequately looking after the ones you already have. Remember new customers are always more expensive to acquire than existing customers are to satisfy.
Step 3: Fortify your defences
Once you have that sorted, consider how effectively you compete on the key drivers of price, ease of shop/accessibility, quality (value), range and after-sales. Do you have work to do to catch and then leapfrog the competition? Don’t start the fight until your defences are fortified and you are battle-ready.
Step 4: Go hunting
Once you’ve done the objective due diligence and addressed any significant shortfalls to fortify your current business, you are ready to go hunting for your competitor’s customers. Here’s how:
1. Use your war chest to attract attention and create offers that resonate.
2. Advertise to attract like-minded customers and create footfall, and remember that sometimes it is better not to sell what you’ve advertised. Use limited offers such as “for today only” to generate urgency, and smart bundles to lift basket size.
3. Merchandise your heroes to protect margin – make the better margin products the hero of special ‘in your face’ front of store displays. Point out the great value that spending a little more will represent. Upsell and onsell. Merchandise complimentary products together. Bricks and mortar retailers can take a leaf from the online guys – “people who bought that also bought this”.
4. Encourage your loyal customers to leave product and/or service reviews. Potential new customers will want ‘social proof’ that doing business with you will deliver what they are seeking.
5. Look for ‘people like them’. What types of people are your customers? Where can you find people like them that are not currently your customers but could easily be? Use available data on your current customers to assemble look-alike and act-alike audiences. These will deliver the most efficient opportunities for new customers.
6. If it suits your business, reward your current customers for introducing a new customer – it doesn’t have be a big reward, something that is useful and thoughtful will do the job.
All signs point to a difficult year ahead for retailers. But do your due diligence, think strategically, use data and knowledge already within your business to choose your targets wisely, then go after them with military precision.
You’ll grow your share of the shrinking pie and finish a tough year in a more commanding market position, ready for when the mood turns – without having to drain your bank account along the way.