A new study highlights the major customer engagement challenges U.S. businesses face amidst an increasingly indiscriminate millennial population.
Today Thanx published “6 Critical Stats for Customer Loyalty," a retail and restaurant data study designed to help multi-location merchants better understand customer behavior and improve marketing ROI.
Essentially, we dug into a random sample of anonymized Thanx data with one mission: to find out what's actually going on with modern customers. And the results? Fascinating.
A small group of customers holds a significant amount of power
If you asked anybody to identify what makes a successful business, they'd probably say, "tons of customers." In reality, they'd be wrong. You really only need half that many.
For every business we looked at (the entire dataset spans 10.3M customers, 18.3M transactions, 54 businesses, 16 industries and 877 locations), revenue was highly concentrated among only a small number of customers. The top 25% contribute nearly two-thirds of all revenue and the top 50% more than 80% (this “top-heaviness” is even more pronounced in retail). Weirdly, if a business could lose just the bottom half of its customers, it would still be in decent shape. But the other half? Certain doom.
Crazy, right? For restaurants and retailers, this means that identifying the top 25% of customers is a must. These high-end loyalists' power comes from the significant role they play in a business's long-term success.
Modern customers are a promiscuous bunch
To get a detailed picture of ongoing customer behavior, we looked at data in 6-month chunks. This let us identify unique individuals who were active at one time, but later dropped off. We found that more than 70% of previously active customers hadn't returned in fourth months. Given that customers don't shop and eat in four-month intervals, one thing is clear: they're going somewhere else.
Of course, nobody makes an instantaneous decision to be or not be loyal. Restaurants and retailers can proactively reach out to un-engaged customers and improve the relationship with their business.
Weekending is prevalent
Of the businesses analyzed, roughly 50% of customers visited only on weekends. That's only ~29% of the possible days that they could actually visit.
This is a nice opportunity for multi-location merchants. By incentivizing weekend customers to come one more day during the week, restaurants and retailers can open up a new revenue channel.
Loyal customers - maybe not that loyal
More than 70% of customers visit only a single retail or restaurant location, despite the businesses we looked at having on average ~20 unique locations. Remember, there's a difference between loyalty and convenience.
Again, another opportunity for retailers and restaurants to foster more personal relationships with their customers. By driving customers to new or less-trafficked locations, brands can discover the nature of their customers' loyalty (and take action if needed).
Few customers make repeat visits
More than 70% of retail and restaurant customers visit only once. Think of the revenue gains that would result from reducing this number just a few percentage points.
Put it this way: say a 10-location, $20 average check business converted a single one-time customer into a monthly customer every day: that's more than $750K in instant annual revenue.
Location matters more than it should
The average check at a business's highest performing location is more than 150% higher than its lowest performing location – within the same multi-location brand! Seems to me that there's no reason for such a high discrepancy. Managment can share best practices from one location to another and begin to even out the average check value across locations.
View "6 Critical Stats for Customer Loyalty" For Yourself
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My take – if this data screams out one thing, it's "huge revenue potential for smart retailers and restaurants." Stats like "70% of retail and restaurant customers visit only once" are ideal performance benchmarks. Track them, improve upon them, and continue fostering better and more personal relationships with customers. That's the key to restaurant and retail succes.