Series 2, Part 4: Are Your Customers Active or Inactive?

Many companies in the pool and spa industry tend to think of customers in two ways: they either are or they are not. While it is a convenient categorization, this yes-no/black-white perspective misses the reality of customer relationships. It creates a “one size fits all” state of mind resulting in inefficient marketing efforts and underwhelming marketing results. For more on this, our team set out to evaluate industry practices with an eye on identifying opportunities for improvement.

Exposing the customer database

All retailers have some sort of database listing names and other information about so-called “customers.” As mentioned in my previous post, we worked with participating retailers of all sizes across the U.S. and compiled 88,000 names from their individual point-of-sale customer databases. But as every retailer knows, not all the names in the database are equal. So to start, we looked at these two categories:

1. Active Customers: Those who made a purchase in the most recent 12 months2. Inactive Customers: Those who did not make a purchase in the most recent 12 months

Large, one-time purchases such as a swimming pool or hot tub were screened out in order to focus on aftermarket products with repeat purchase characteristics. The total time period for this analysis was five years, ending in 2012. Chart 2-4 provides the eye opening results.

Blog 2 4 Chart V1 

Uncovering a potential problem

If your company is typical compared with our sample, only 42 percent of your “customers” actually made a purchase in the most recent 12 months. This means that 58 percent of the people in your database did not buy products from you in the last year. Reporting on the high/low of the multiple companies in our database, the highest level of active customers was 55 percent while the lowest was 38 percent.

Of course, this leads to important questions: When was the last time they bought from you? How many of these were previously loyal? Why didn’t they buy from you? Are they dissatisfied? If so, why? Will your current business practices lead to more defection in the future? What are you going to do to identify, understand and win back lost customers? Are you communicating to all the names in your database as if they were active customers? 

If you are like our sample, 58 percent of your customers are inactive. Does that mean 58 percent of your communications are irrelevant? I will be exploring some of these questions in upcoming articles and look forward to your feedback.

Your turn

What percentage of customers in your database actually made a purchase from you in the last 12 months? What do you factually know about the ones that did not? What are you doing to improve? Do you simply write-off those lost customers without any win-back effort? What information about these customers would you find helpful?

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