In our previous blog post in this series, we provided evidence that 55 percent of consumers indicate they purchase most of their pool products from a single specialty retail store. We coined the term Loyalists for this group. If Loyalists are real, then retailers ought to be able to identify who they are and what they are worth. But most swimming pool retailers have not analyzed their sales data to sufficiently understand Loyalist value. So we set out to see how real store data correlates with survey findings.
Measuring Loyalist Value
In 2012, we analyzed five years worth of customer data provided from multiple swimming pool retail stores that included well over 150,000 customer records. As a first criterion for loyalty, we screened the data to identify those customers who made purchases for four consecutive years. As a second criterion for loyalty, we screened the same data to identify customers who made at least three purchases during the most recent season. Here is what we found:
• 54.6 percent of pool customers made purchases every year for the prior four years and accounted for 71 percent of total sales.
• 54.6 percent of 2011 pool customers made three or more purchases during the year and accounted for 83 percent of total sales.
Loyalists are real!
Our research confirms that more than 80 percent of retailer revenue can come from 55 percent of their customers. These are Loyalists who purchase three times per year or more. While we are careful to point out this sample cannot be generalized beyond its respondents, these results leave little doubt that Loyalists (in terms of annual customer frequency and multi-year longevity) are real and extremely valuable to the pool retailer. Here are some other facts we uncovered about Loyalists:
• On the average, Loyalists purchase 6.7 times as much per year as Nonloyalists.
• Every Loyalist is worth on the average approximately $515 per year compared to only $80 for the Nonloyalist.
• The top 10 percent of four-year Loyalists averaged $1,770 in 2012. What’s more, they represented 25 percent of total Loyalists’ purchases.
• 72 percent of Loyalists have shopped at the same specialty retailer for at least 6 years with the average being 10 years.
• The average Loyalist has a lifetime value of $4,120; the top 10 percent have much more.
While not the only important customers, Loyalists are the lifeblood of every specialty pool retailer. Loyalists have purchased most of their products from one specialty store in the past and are likely to purchase from that store in the future. That is, unless specialty retailers fail to maintain the advantages these customers respond to. Our research confirms that getting and keeping Loyalists is extremely important to the success of a specialty retailer. Future posts will address how well retailers are actually doing.
Your turn
Whether you are a retailer or not, what percentage of your business comes from loyal customers and how do you maintain their business over time?
Read the previous entry in Larry Bloom's series: How Well Do Pool Retailers Understand Their Customers?
