The Origins of Clienteling
The word clienteling came about as a rhetorical use of the noun clientele. It was used to describe activities one might take when working with their clientele, and has evolved to be used primarily as a verb to describe those activities. Today, the word clienteling also describes initiatives or programs (manual or software-based) which revolve around these activities, much like CRM describes solutions for managing customer relationships.
Looking at the broader definition of clienteling, I often define it as a philosophical approach to better serving one’s customers (clientele). This approach is focused on highly personalized service established over time through a learning relationship.
While the verb clienteling is often used to describe activities associated with the sales process, its more common activities can be summarized in three key elements:
1. Access to information to assist the customer while in the store
2. Customer profile enhancement (likes, preferences, wish lists, etc.)
3. Personalized customer communication (outreach)
While personalized communications finds itself last on the list, it is in actuality the primary goal of a long-term clienteling program. It is through the successful completion of the other two items, however, that this communication becomes meaningful and effective.
The Customer Lifecycle
As described above, relationships are established over time. Selling is like any other relationship in that the more you know someone, the more you understand their needs and wishes. You don’t learn everything about a person in a single encounter. But, over time, as the relationship matures, your understanding of them improves, and your ability to relate to them and to guide them improves as well.
It is through the enhancement of the profile over time that the communications can be more targeted and meaningful for each and every customer. The following graphic highlights how a customer/associate lifecycle can change over time. From the first time encounter, whereby the associate needs to identify the immediate need, to a long-term relationship, where they are able to anticipate needs, make personalized suggestions, and follow-up regularly.
The Pareto Principle
Any clienteling initiative should be designed in such a way as to get the most benefit for the least cost. The Pareto Principle states that roughly 80% of the effects of an activity are derived by 20% of the invested effort. This principle holds true for retail as well, where for most retailers roughly 80% of all sales come from 20% of the customers. This 20% are the most loyal customers, and often shop across the most categories of merchandise.
With this general understanding in mind, many clienteling activities focus almost exclusively on the Top 20% of customers. The logic being that an increase in sales of 10% with this segment represents an increase of 8% for the enterprise as a whole. It would take an increase of 40% in sales for the remaining customers to equal this same 8%. Obviously the cost to reach 80% of your customers is also significantly higher than for the 20%, so this approach makes sense on a number of levels.
There are three items to consider, however, with using this approach exclusively:
- 1. Over time, customers attrite albeit at a much slower rate with the 20%, so a focus solely on this group of customers at the exclusion of others will see the size of your overall pool of customers diminish.
- 2. First-time customers may take some time to qualify as a top customer, and without appropriate guidance from the store associate, the relationship may never mature to this point.
- 3. These customers are most often already your loyal customers, and may already be benefiting from some form of clienteling, so the gains might not be as immediate as with customers previously ignored in these efforts.
So, while there is tremendous short-term benefit to focusing on these top customers, it is clear that focusing solely on this segment will have diminishing returns over time. For this reason, it is important to also nurture elements of the 80%, but to do so in a highly targeted and strategic manner. The most effective approach is to focus most energy on the top tier of customers, but to design targeted campaigns aimed at segments of the remaining customers. These campaigns might include one year follow-ups, replenishment item reminders, birthday/anniversary wishes, in-store events tied to past purchases or noted wish lists and preferences, etc.
To a large degree, the success of clienteling and outreach activities is tied to basic math. The more of your clientele you work with, the more successful you will be. While the old manual process only supported a limited book, and therefore the same customers were contacted over and over; this has changed dramatically with clienteling applications.
If we assume the average associate has 125 customers in their client book, and reached out to each customer once every two months, that would consist of 750 interactions. While that number sounds good at first, if you break this down to the workday it is far less impressive. This 750 communications averages only three a day. By augmenting this list of clients with targeted customers, an associate can double their outreach without losing focus on their best customers.
This graphic demonstrates these principles. In this diagram, the word Customer defines a consumer that may not be in an associates “book”, while the word Client defines a consumer that belongs to an associate’s book (or multiple associates’ books).
Putting it all Together
In summary, the typical customer lifecycle goes from a first-time buyer, to a repeat customer, ultimately to a long-term client. It is the goal of every retailer to move customers from point A to Point B, and eventually to Point C. Working exclusively with customers who have reached Point C in the lifecycle has immediate value, but diminishing returns if new customers are not brought through their own journeys.
So the question becomes, how do you focus most efforts where they have immediate benefits, but not at the expense of those efforts that will pay off in the future? This is accomplished by designing a program that enables the associate to keep their primary focus on their top customers (their Client Book), but to augment this activity with pre-defined scheduled and automated campaign types that support the nurturing of a larger segment of customers based on customer needs, life events, interests, and other relevant and personalized outreach.