The best way to solve big problems? Catch them when they’re still small problems. Read on to find out how.
“Our return rate is so high!”
“Our email subscribers stopped clicking our emails!”
When you run into problems like these it’s hard to pinpoint the root cause. Your first instinct will be to zoom in: which products have the highest return rates? Which email campaigns had the lowest clickthrough?
But often you’ll run the numbers into the ground and no clear answer or pattern will present itself. You don’t need bigger data or better analysts. You need to look for the answer closer to the source.
Who is your customer, as defined internally? And who is your customer, as defined by the people who are actually buying from you?
When there is too little overlap between these two definitions, you’ll start to run into persistent problems that drag down the P&L. Here are two examples:
Case 1: “Our return rate is so high!”
A DTC brand positions itself as “cutting out the middleman”. All of the brand’s marketing copy emphasizes amazing value provided for a below-market price. This marketing attracts customers who are looking for high quality products at a reasonable price.
The DTC brand uses art direction to make the product look more expensive and special online than it feels in real life. The brand also pays influencers to post canned reviews about how well the product works and how great it is.
But in reality, the product was slightly modified from a drop-shipper’s catalog and it is not much better than a mass market private label good. You could get something similar at Target for less.
People make an initial purchase, enticed by the marketing and slick presentation. But when they hold the product in their hands and use it for the first time, they are not impressed. Return rates are high and retention rates are low, dragging down profitability.
Case 2: “Our email subscribers stopped clicking our emails!”
An apparel brand sees itself as a high fashion brand with elevated positioning and a sophisticated customer base. The brand invests a significant percent of the marketing budget in two annual fashion shows and in gifting products to all the “right” niche influencers.
The designs themselves are what you might call “specific”. The designs are eye-catching, but a bit too outlandish to wear in most office or casual settings.
The brand’s website and art direction support its vision of the target customer. However, the brand runs bi-annual “online sample sales” that drive a disproportionate amount of annual revenue and customer acquisition.
Because of the sample sales, the brand’s email file is full of customers who could never afford the brand at full price. Remember, they bought it at 80% off. Many of these customers have minimal connection to the brand or its message. They just like getting deals.
When the brand sends out an email promoting the launch of a new (full price) collection, open rates are lower than average and almost no one clicks. The brand finds it harder and harder to sell at full price, resulting in inventory backup that requires bigger online sample sales.
The Customer Congruence Audit
Here is a four step process you can take to prevent issues like this from happening to your brand:
Step 1: Define Your Ideal Customer
It’s ok to sketch out an ideal customer for your brand, even if that definition doesn’t apply to 100% of people who actually buy from you. If you want an ideal customer profile to be meaningful and useful, it has to touch on what the customer values.
You could say “I’m going after the urban HENRY consumer making at least $100k per year.” But that definition could cover both a non-profit director in DC and an oil and gas banker in TX. Two people who, superficially, have almost nothing alike.
Maybe there is a common thread of value that ties them together–maybe they both value high quality products for reasonable prices. But you have to explicitly nail down that value statement if you want your offering to resonate. Otherwise you’ll chase one vision of HENRY at the expense of alienating many others.
Step 2: Audit Your Brand Experience
Now that you have a value statement, you can use it to determine how each component of the customer experience stacks up. Let’s say your value statement is “my customer values high quality products for reasonable prices.”
Product: This one is pretty straightforward: does your product deliver a lot of value for the price? The best way to determine this? Shop the market. For certain product categories you can also see what review sites like Wirecutter are saying.
Marketing Strategy: Your customer wants to pay for quality, not for marketing. So marketing should at least appear to be heavily organic and driven by word of mouth. If marketing is an outsize percent of your expense base, you should think of ways to reduce spend.
Marketing Creative: Again, pretty straightforward: do you speak to high value/reasonable pricing in your marketing creative? Or are you leaning on other levers because they happen to be more effective in certain channels? The wrong message may bring in the wrong type of customer. Cheap in the short term, expensive in the long term.
eCommerce Website: The website should reinforce the value that you’re providing and expand on it. If you have good product reviews, showcase them. If you have interesting UGC, pull it in. Balance the instinct to showcase your product in the best light possible with the duty to represent it realistically.
Distribution: Do your wholesale partners align with your stated values? Target is known for nailing that price:quality equation with superior merchandising. Nordstrom, not so much. They nail quality but charge extra for service and (often) fluffy status branding. This is a great example where demographics and psychographics diverge.
Step 3: Secondary Data Sources
This step is optional, but it will be helpful if you need others to buy into the idea of Customer Congruence. You can use some additional data and research to support all or part of your audit. Some examples:
- Research industry benchmarks for your specific business issue to prove that your problem isn’t “just how our industry works”.
- Purchase third party demographic data and layer it on your customer file to illustrate that your actual customers are different from your ideal customers.
- Run a customer survey to measure alignment with your brand’s values. You can also request IG handles from the survey participants and use them to “stalk” your customers. This is hard to do at scale, but good for creating real customer personas.
- Have a third party expert perform some or all of your audit.
- Purchase third party research about consumer perception of your brand, your competitor brands, and your wholesale partners.
Step 4: Take Action
Let’s say that you run the audit, and it turns out that your brand’s stated positioning has very little overlap with the audience that’s actually buying. I have good news, and bad news…
The good news is that you’ve identified the problem. The bad news is that you now have a tough decision to make: you can rework your offering so it appeals to the customers you already have, or you can go out and get new customers that align with your stated positioning.
Both of these paths are high effort and high risk, and both have some situation-specific nuances. Let’s return to our example cases from the top of the post.
In case 1, the brand made a lot of promises about their product and then failed to deliver on them. They could re-tool the product and attempt to market the “new, improved” version to the existing customer base. But if the product was a high ticket item with a long purchase cycle, this approach might simply irritate those customers–why didn’t you get it right the first time?
In case 2, the brand has built up a large customer base that it doesn’t want, with an inventory base to go along with it. If this brand wanted to dump it’s sample sale audience it would need to forecast sales down dramatically. This might require the brand to eliminate “core” activities like fashion shows and potentially cut staff.
The best way to resolve “big problems” is to catch them when they’re still small problems. You should perform a customer congruence audit 1-2x per year. If you can afford to have a third party perform the audit from an unbiased POV, even better.
To ensure a congruent experience, a brand’s marketing team needs to communicate the target customer’s core values early and often. Internal and external teams need to make decisions using those values as their frame of reference. This will produce congruent experiences.
You may be asking yourself–what are different examples of meaningful brand values? No Best Practices newsletter subscribers received a deep-dive into the four major value systems driving our need to shop. If you want access to that exclusive content, subscribe below and reach out to me at alex [at] nobestpractices [dot] co, and I’ll send it over to you.