A paradigm shift is needed to improve repeat customer rates

Hello everyone. I am Hayashi, the representative of Monosus.
In the last two articles, we have looked at Open Marketing from a quantitative perspective.
We examined why marketers are constantly striving to acquire new customers.

This is the seventh installment, and we would like to move the discussion into the repeat area.

The pitfalls of modern marketing theory

When you hear words like "return rate" or "regular customer,"
What kind of image will it have?

As I mentioned before, in the world of marketing, it is common to think of a business in terms of two areas: Acquisition, for attracting new customers, and Retention, for turning existing customers into regular customers.

However, there is a huge pitfall in this way of thinking.

First, I would like to talk a little about the history of marketing.
The term marketing was coined in a 1902 article in the journal of the University of Michigan.
”Various methods of marketing goods”
It is said that this is the origin of the story.
Marketing is a relatively young concept.

Before that, the concept of selling things was
Commerce, which means trade and commerce,
The word "trade" is mainly used, which means buying, selling, and trading.
In any case, words have been chosen that imply two-way communication.

On the other hand, marketing, of course, also considers the recipient,
The concept is changing to "one against many."

The term CRM (Customer Relationship Management) appeared in the marketing world in the 1990s.

Of course, the concept of regular customers existed before then,
As a differentiating factor in marketing, in practice,
The reality is that it was ranked very low on the priority list.
Around 2000, when I first started working in marketing,
Finally, emphasis was gradually being placed on retaining regular customers, and terms such as CS and CRM were beginning to be used in practice.

That was a bit of a long introduction, but in the 110-year history of marketing,
It was when the emphasis on creating regular customers and proper research began to be put on them.
This has been going on for the last 20 years or so.

As mentioned at the beginning, Acquisition and Retention.
I mentioned that there is a pitfall in having two areas.

In fact, the concept of loyal customers did not exist in the world of marketing at first.
Marketing has developed without distinguishing between new and regular customers.

There are many examples of establishments in Japan and around the world that have placed importance on regular customers, such as Kyoto's "No one-time customers allowed" policy.
The reason why it took so long for loyal customers to be emphasized and properly studied in marketing is that in traditional marketing,
This is largely due to the fact that for a long time new customers and regular customers have been treated as the same.

In the midst of this, with the changing market environment,
"From now on, we need to seriously consider how to attract regular customers."
The concept of CS (Customer Satisfaction) was born,
Furthermore, as we worked to increase customer loyalty, the concept of CRM was born independently.
And the disadvantages are concentrated in the fact that it was born ``independently.''

By considering the idea of creating regular customers "independently,"
Attracting new customers and turning them into regular customers can now be considered separately.

In other words, after attracting new customers and making their first transaction,
For those customers who had left, measures were implemented to turn them into regular customers.

As proof of this, most large companies have separate departments that deal with new customers and regular customers.

So why is it a problem to treat new customers and regular customers differently?

it is,
"The first transaction is your biggest and only chance to turn a customer into a regular customer."
That's why.

They don't buy your products or services because they want to become your company's customers.

In many companies, the strategy of creating a loyal customer is to encourage customers to make a purchase again after the first transaction and to have them repeat the purchase.
This is being implemented as follows.

In other words, "make the customer leave once."
And then I try to call again.

Many corporate marketers
Once the first transaction has been made with a new customer, it's time to take a breather.

As soon as they hear a customer say, "I'll sign the contract" or "I'll buy," they assume that their goal has been achieved.

However, to bring back customers who have left,
It requires a lot of effort.
During the consideration stage, customers are highly motivated when it comes to services or products, but once they make a purchase, their motivation drops.
Therefore, not only does it take a lot of effort to attract customers back,
Many customers will abandon them.

Moreover, many companies make the mistake of
Customers who are buying a product or service for the first time
The problem is that they think that the other person has become a customer of their company.

In other words, just because you purchased a service or product through our company,
Customers do not necessarily think that they have become customers of this company.
This is not only true when selling purchased items,
The same is true even if you are selling a product or service that you created yourself.

The customer wanted the product,
They didn't want to be your customer.

However, regular customers must be your own company's customers.
In other words, you need to convert customers who come to buy your products or services into your own customers .

And the best time to do this is during the very limited time around or at the time of your first transaction.

Instead of encouraging repeat visits, we want to keep them from leaving.

The specific conversion method will be described later.
I would like to talk about the most important premise, which is a paradigm shift.

In the course of working on projects with various clients, I have noticed that
If you are serious about becoming a regular customer,
This means that we need to fundamentally change our way of thinking.

it is,
Instead of encouraging repeat visits, we want to keep them from leaving.
That is what it means.

It's a riddle-like way of saying it, but
When most marketers talk about first-time repeat purchases,
How can we increase repeat visit rates?

He said that...

However, that would only increase the rate from 30% to 35%, or at best 40%.
Of course, that can be considered an achievement,
If the repeat rate is low for the first time, then after 3, 5, or 10 years,
Only a limited number of customers remain.
(This was discussed in detail in Vol. 5 and Vol. 6.)
This may produce some short-term results, but it will not build a customer base that will enable us to maintain and improve our performance in the future.

To be precise,
How can we reduce the number of customers who abandon our services?

In other words, what percentage of customers dropped off compared to the targeted first-time repeat rate of 100%?

In other words, the measures to make customers regular are:
It has to be created with the idea in mind of how to encourage all new customers to return after their first visit .

From this perspective, it becomes clear that the timing of the measures implemented thus far has been crucially off.

Many companies will ask you for more products or to buy from them again after the initial transaction has been completed.
This is the approach we take to our customers.
The medium may be email, direct mail, telephone, or a salesman may visit.
I think it varies by business.

This is shown diagrammatically below.

However, even if you approach them at this time, the first-time repeat rate is usually around 30%, and at most 50%.
So, marketers are thinking, "How can we increase repeat visit rates?"
He makes the statement:
However, if I did something at this point,
You can't change the situation dramatically.

As mentioned earlier, the right timing is
This is before and after the first transaction.

There are many benefits to implementing measures at this time, but the biggest benefit is that
The advantage is that we can implement special measures for all new customers .

The first transaction is the time when you will have the most communication with the customer.
Depending on the type of business, there may be cases where customers are served directly by humans.

However, once you leave (if in-store, go home, if online, leave the site)
It is nearly impossible to reach 100% of your lost customers.
It depends on the channel or medium you use to re-approach.
It is rare for email to have an open rate of more than 30%,
Even if you call everyone, now that mobile phones are widespread,
It is very difficult to achieve a conversation rate of 50% or more.

In other words, at that point the reach of the campaign drops dramatically.

Therefore, when considering the acquisition area and the retention area separately,
You must be prepared for the success rate of measures aimed at generating loyal customers to be reduced by half or less.

We build long-term, stable, trusting relationships with our customers.
In order to make it the foundation of our management,
The concept of acquisition and retention areas,
Ultimately, we must completely change our way of thinking about attracting regular customers.

This time again, it turned out to be quite a large volume.
Thank you for staying with us until the end.

It was a bit conceptual,
I wanted to make this information clear so that you would understand what I will be saying later.

Next time, I would like to talk about specific measures to take when making your first transaction, based on the ideas I shared today.