Creating Habits
Today's New York Times has a piece [via Marketing Fix] about online retailers building "auto-replenishment" programs to create longer-term relationships with their customers:
The programs require a fair amount of finesse on the part of retailers, as they determine exactly how many razor blades a typical man uses in a month, say, or whether to give customers the option of skipping a shipment of vitamins. But for merchants that can get consumers to stay with the program, the resulting revenue stream can be a boon to business.
Well, it's about time! As Peppers and Rogers wrote over a decade ago, selling is no longer about market share but rather customer share. It's much easier to find your best customers and figure out how to get more of their dollars than it is to find new customers. Creating recurring revenue streams through auto-replenishment programs is exactly the kind of thing that online retailers (which should be able to build a much closer relationship with customers than their offline bretheren) should have been doing all along.
Keeping a customer is ultimately about creating a habit. Unlike a grocery or drug store that is located between your home and work and can ride on the coat-tails of your commute "habit," online retailers have to create a new habit. The switching costs of typing in "www.amazon.com" versus "www.bn.com" are minimal and so online retailers come up with 1-click shopping, first time discounts, recommendation engines and the like to faciliate the process of habit formation.
The concept of a website's stickiness has disappeared along with eyeball acquisition and other vestiges of 90's start-up business plans. But unlike most of the concepts of that era, stickiness remains critical to creating higher life-time customer value. For those who have not read Peppers and Rogers work, I highly recommend it -- less for the specific tactics suggested (it was written in the pre-web days) as for the way it thinks about customer relationship building. Auto-replenishment programs are just the beginning.
Well said, aa -- the service- and quasi-service industries got this eons ago, and still do (from ACH-tied Gym memberships to Netflix). Auto-replenishment, to this lifetime retailer, is as natural a human, business, and consumer behavior as the 3-year lease or the "non-use" guilt / "buffet table" binge associated with evergreen contracts -- be it time share or the Old Country Buffet, the first-past-the-post to drop my Peet's, puffs and pop -- push-style will win my business. Play to real behaviors, and you've got a real business.