From fear to friendship—the need to embrace change and make it work for you

After visiting more than 275 Christian retail channel stores the last two years, I couldn’t agree more. Countless stores I have visited exhibit all the telltale signs of doing the same things and expecting different results. It doesn’t happen. To get different results, you have to deploy a different strategy.

The retail landscape is littered with closed stores that failed to change. The recent liquidations of Linens ‘n Things, Goody’s and Circuit City are just a taste of what 2009 will likely hold.

Many respected retail consultants are saying that up to 14,000 stores will close during the year. The reasons are many: Failure to differentiate from a competitor, poor cash flow, poor merchandise selection or presentation and changing consumer habits top the list. During an economic downturn, execution is even more important because consumers are spending less.

I care deeply about Christian retailing. In 1975, when I created the concept of music demos and listening stations, it began a 34-year history of passionately seeking to help retailers succeed. Now, at the risk of perhaps alienating some of my very own retailer customers, I feel compelled to speak straightforward about Christian stores.

Change is usually not easy. Doing the same things, following the same routines, is what most people prefer. And, let’s be honest, most small businesspeople would prefer not to have to face competition. But doing the same thing over and over again rarely challenges us. Lack of competition leads to complacency and rarely leads to advances.

Meanwhile, innovation and technology have led to a plethora of choices in just about every facet of life, including multiple choices of how and where to purchase many of the products available in Christian retail stores.

Let’s be clear: There’s no point spending one additional minute bemoaning that publishers sell direct, that Wal-Mart carries many of your best-selling books, that Internet retailers undercut your prices and that some people illegally swap music files. None of this is going to change. Debating whether it is right or wrong will not reverse it. The only thing it results in is a negative attitude.

Where is it written that retailers are entitled to have customers shop in their stores? Or that retailers are entitled to sales increases year after year? We are not entitled to anything. We must earn our customers and then continue earning them to keep them coming back. There is no “top of the hill” resting point. We must always be climbing.

Success in anything starts with a positive mental attitude. Years ago I had the privilege of coaching several high school cross country teams to state championships and nation rankings. The key point that I emphasized every day to my athletes was that the real competition wasn’t in the foot race but in the mind. If they didn’t believe they could win, they were already defeated.

So, let me encourage you to begin each day by thinking about how to differentiate yourself to effectively compete in the marketplace. If you’re focusing on your competitor, you’re not focusing on where you should be going. You’ll never be charting your course. You’ll always be reacting to your competitor’s agenda.

How does this play out in the real world of your store? Let’s use the examples of music and technology.

Music sales peaked in 2000 and have declined every year thereafter. The blame has been put upon everything from illegal downloading to a lack of new mega-artists. Certainly piracy has affected sales, but a strong case can be made for the impact of the rise of other entertainment choices, too.

Consider that just nine years ago, video game sales were almost insignificant and movie DVDs were nonexistent. The iPod had not yet been introduced. Broadband Internet service was not widely available and too costly for many consumers.

Fast-forward to today: The video game industry is bigger than the music industry. DVD sales, while having peaked in 2007, are still significant. The iTunes store has sold more than 5 billion songs. Cheap broadband service has allowed e-commerce sites to offer an ever-increasing selection of goods and services.

Technology has certainly made it more challenging for brick-and-mortar retailers of media products to compete. Online retailers of books, music and movies, according to Internet Retailer, now account for more than 15% of all sales of media titles.

Brick-and-mortar retailers can compete, but not if they continue to sell music the same way they’ve always done. This will only result in a continuing sales decline. Forrester Research is forecasting a 9% annual decline in physical music sales and a 14% annual increase of digital music sales through 2013. As a brick-and-mortar retailer, you simply must change your strategy or you will be irrelevant.

One of the benefits of e-commerce is that it can offer a virtual inventory of practically every music CD and movie DVD currently available. No physical store can stock even a fraction of what is available through what is often referred to as “the long tail.” So, how do you, as a brick-and-mortar retailer, compete? By also using technology.

Media-on-demand systems such as Just in Time Digital’s isMOD and my company’s myMEDIA BurnBar kiosk are enabling retailers to “virtually” stock thousands of titles with no associated inventory cost.

Customers using the myMEDIA BurnBar kiosk can choose from more than 18,000 accompaniment track, artist CD, audiobook, video game and software titles. Additionally, they can select more than 60,000 song titles and mix their own custom CDs.

All this can be burned to CD or DVD in just a few minutes. Very soon customers will also be able to purchase songs as MP3s and load them to their portable players.

With these types of kiosks, technology has put physical location retailers back in the game and

given them a competitive advantage. When we analyzed the 2008 sales data of myMEDIA BurnBar, we found that more than 86% of all accompaniment track titles—nearly 9,000—had sold at least once. In January this year, 68% of all the artist CD titles sold only one copy, while an additional 17% sold only two copies.

This tells us that customers want a very wide selection. Retailers using media-on-demand technology are giving customers what they want—and winning their loyalty in return.

Of course, there is much more to fully executing this or any other viable strategy. But it all begins by embracing change and making it an ally. If you don’t, outside forces will change you by hastening the closing of your doors.

As the 17th annual Expolit convenes in Miami, May 12-19, attendees, including booksellers, publishers, suppliers, distributors and consumers, will discover a return to a one-floor exhibit hall along with a new broadcast component.

Two years ago, the exhibit space was divided into two floors. With vendors and suppliers tightening up on their booth space, Marie Tamayo, executive director of Expolit 2009, said this year the floor will return to one “packed” floor, “making the job easier for everybody.” The floor will feature a larger group of ministry booths in addition to those reserved by suppliers.

Also, this year will mark the first official broadcast of the event through DirecTV, after an experimental run during last year’s show. Thursday evening’s concert—featuring Danny Berrios, René and Dámaris González Blest, Lizzie Lizzie and Marco Barrientos—will be broadcast live through the Enlace network telecast.

“We are broadcasting live to Latin America with all the key artists,” Tamayo said. Artists on the program also include 3:16 Media, Planetshakers, Lucía Parker, Danilo Montero, Ana Laura and Marco Barrientos. Speakers include pastor and author Henry Blackaby, Operation Mobilisation founder and former International Director George Verwer and well-known youth pastor and author Dante Gebel.

DOING BUSINESS

Tamayo believes the event is “the place to be to be a part of the Christian picture” in the Spanish retail industry.

“Expolit is a bridge, a showcase opportunity,” she said. “It’s the only event in the industry where you can find media, authors, booksellers, distributors and the general public.”

Facing the economic downturn, Tamayo said early registrations were down in January, but reports revealed a different trend in March, with registrations being up by 10 to 15. To help keep late registrations coming and “support the industry,” the show was keeping the price at $99, Tamayo said.

The usual breakdown for the event is 60% attendance from the U.S., with a large crowd of consumers coming from host city Miami. Functioning also as a buyer’s show, Tamayo said the majority of buyers, around 65%, are from Latin America.

“Some companies really just don’t care about the retail business there,” she said. “They just want to meet with buyers. So it fits everyone’s plans.”

TACKLING THE ISSUES

Tamayo said the Spanish-language music industry has faced a struggle this year, dealing not only with the economy but also with ongoing piracy challenges and digital music sales. The bigger record companies are still coming to Expolit, but the show has seen fewer booth reservations from smaller companies and independent music artists.

“Generally we have a lot of independents come to Expolit, but we’re seeing a real decline there,” said David Ecklebarger, president of Expolit. “We’re having shrinkage in our exhibit space, and the majority is in the music.”

Tamayo agreed, but added that the independents are coming to connect, though they are not reserving booths.

“The music industry has been very affected by what’s going on in the economy,” she said. “That’s why we’re having a workshop about it. This is a time to be creative and a time for alliances. Smaller artists need to team up and maybe get organized together. The song of God is not going to stop.”

In addition to that two-part workshop—“Goals and Realities of the Christian Music Industry,” taught by Mauricio Scott—there are 20 other workshops on subjects such as youth ministry, health, women’s ministry and creativity, in addition to a school for booksellers held early during the show.

The workshops are conceived by partnering publishers, although the Expolit staff reviews proposals to select ones that are “relevant and needed.” Depending on the subject, the workshops can attract crowds from 100 to 500.

Publishers and suppliers from Tyndale Español to Integrity Music and Casa Creación also hold their sales presentations during Expolit, which gives Latin American buyers all the more reason to attend, Tamayo said.

Although some, concerned with the economy or for other reasons, may decide not to attend or exhibit, Tamayo believes Expolit is the “motor” that keeps the Spanish-language industry running.

She cited a recent article highlighting the growth of religious products during the economic downturn and said: “This is the time for Christians to step up to the plate.

“We need to be diligent and frugal, but we need to be here,” she said.

Visit www.christianretailing.com for our printable Expolit 2009.

What it takes to build a successful music department

While some predict that the CD is only five years from extinction, strangely, music is more popular than ever. As such, the category can still be a vital part of a Christian store.

After all, despite the fact that sales are tending downward, about 80% of Christian music is still sold in the physical format. Retailer Randy Ross, among others, also points out that while digital music sales and music theft have cut into the all-time high retail profits seen during the early half of this decade, abandoning music makes no more sense than abandoning children’s books or any other category that makes up a similar percentage of store sales.

“At our (stores), we’re still averaging more (revenue) in music than children’s books; in most of our stores, music and Bibles are neck and neck,” said Ross, a music inventory specialist for Parable, a chain of nearly 200 Christian stores. “With that same logic, we need to stop selling cards, children’s books and take a hard look at our Bibles.”

Though overall music sales have never been higher, thanks to digital, traditional Christian retail music sales declined about 1 million units, from approximately 12.4 million units in 2007 to 11.4 million units in 2008.

Christian album sales overall—physical and digital combined—were also down 9.7%, from 35.9 million in 2007 to 32.4 million in 2008.

While cautioning retailers, music leaders like Word Distribution President Mark Funderburg remain optimistic.

“We finally found the enemy, and it’s us. If we’re not careful we’re going to kill an industry that consumers still want,” he said. “I can’t tell you the number of times I talk to customers and they say, ‘We want to buy this, but we can’t find it.’ ”

Ross of Parable added: “The amount of space you dedicate needs to be in accordance with your sales, but people have had a knee-jerk reaction to music. It becomes a self-fulfilling prophecy. You’re not paying attention to music and your sales are declining? Surprise.”

So if music is an important part of a store’s product mix, how should stores go about merchandising, promoting and selling it in a rapidly shifting music landscape?

Inventory

First of all, experts say, look at the albums ordered and their quantities, as best-practice inventory strategies have shifted. Funderburg, along with other experts, advocates stocking a broad selection of albums, but with fewer quantities, especially of backlist.

“You can re-order every other day if you need to,” Funderburg said. “But as for breadth, there are few stores left anymore that carry a good selection of anything, and I think that’s really hurt retailers who have slimmed their inventories to get it down to the top 20. A lot of customers want selection like on Amazon. Offer the breadth and then make sure to let customers know that that’s a strength of yours.”

Jim Ellis, who has overseen the music section at Lighthouse Christian Books in Green Bay, Wis., for nearly two decades, agrees. Lighthouse is renowned for its music selection, which includes rare and used albums. “We buy appropriately,” Ellis said. “Whereas I used to buy a case of 30 CDs of a particular album, it’s now usually down to two, three or six.”

Of course, there are exceptions to that rule—a Casting Crowns or Michael W. Smith album, for instance—and this is where industry and product knowledge are important. Funderburg suggests stores stay in close contact with music sales reps and listen to their advice, while others note the importance of keeping up with print or online publications that cover Christian music.

Mike Hockett, CBA training and consulting manager, recommends turning to CROSS:SCAN, a CBA reporting system that tracks sales of more than 800 Christian stores and works in concert with Above the Treeline, a digital inventory management system for retailers.

“CROSS:SCAN probably has the top 1,000-plus music titles on there, and you can see how they rank when you use it with Above the Treeline,” he said. “You can see how it compares with your store’s inventory. You also get to see what’s selling across the country. There might be stuff selling elsewhere that you don’t know about.”

Chains such as Family Christian Stores and LifeWay and some independent stores—including Pee Dee Christian Book & Supply in Florence, S.C.—are maximizing inventory with digital availability. For example, the Pee Dee store, which makes use of CD-burning capabilities, has more than 11,000 CD titles available, including older selections and some out-of-print albums.

Some stores sell music online as well.LifeWay’s PassAlong is a system that allows customers to save up to 10% each time music is purchased with points. Points are earned when the customer passes on a recommendation and a friend or family member buys the item.

Cross-promotion

Some retailers are combining CDs with closely related products, such as DVDs, into a “family entertainment” section. Taking a cue from stores like Best Buy, the DVDs are helping offset the smaller margins and decreasing sales of music CDs.

“Many parents and families are looking for wholesome entertainment, both audio and video, and many times need help,” noted Curtis Riskey, CBA’s strategic solutions executive. “It would make sense to cross-merchandise music in areas that customers would be prompted to purchase as a gift or to complement a larger gift.”

Citing a 2007 industry-wide report on music buying patterns, Sound Decisions, Riskey noted that more than half of Christian customers—58%—bought music as a gift.

Ellis noted that successful independent music stores sell ancillary products like artist apparel, and his store has started to sell music posters and found some success doing so. Yet some caution that stores can go overboard with DVDs and ancillary music products despite their promise.

“Stores are scaling back on the amount of music in the retail space, but it can’t get to the point where you’re burying it,” Ross of Parable said. “If you’re expanding your video department, look at your sales … the amount of space you dedicate needs to be in accordance with your sales.”

In-store marketing

Once a store has the right music product mix, how does that store promote music both inside—and outside—of the store? Many stores not only give music its own section, but also cross-promote it on endcaps, in the book section where appropriate and at the cash wrap. Ellis, for one, has found success selling some lower-priced CDs at the cash wrap as an add-on or impulse buy, though he noted that grouping lower-priced albums together in a kiosk in the music section rarely seems to work well.

Some experts say that another effective in-store promotion, and a way to emphasize a store’s commitment to music, is to have a digital kiosk that burns CDs—with two major companies providing systems to the Christian retail market: Integra Interactive and Just In Time Digital. Though most people aren’t using the systems to burn new albums, some retailers are doing a brisk business on the kiosks by selling accompaniment tracks to churches and soloists.

Paul LaRue, president of Just In Time Digital, said his company’s Quest isMOD kiosk is seeing “a significant increase in accompaniment track sales. The key is availability. … 50% of what we sell through the Quest isMOD would otherwise be completely ‘out of print.’

“One of the big reasons for the increase is when an individual purchases an accompaniment track, they continue to browse through and inevitably find other titles that they’d like to add to their order.”

Overall, Integra Interactive, which places the myMEDIA BurnBar in stores, has found that the long-held idea that 20% of the titles create 80% of music sales needs to be reconsidered.

“Integra’s sales analysis of the nearly 13,000 full albums and nearly 36,000 a la carte songs sold through myMEDIA BurnBar turns the 80/20 rule on its head,” said David Amster, Integra president. “The top 10% of all the titles sold represents only 37% of the total dollar volume. The bottom 90% represents 67% of the total sales. The vast majority of the album titles in this ‘long tail’ are not stocked by the stores and are sales they would not have made.”

In the case of Lighthouse Christian Books, which has a digital kiosk, Ellis said: “We’re not burning a whole lot of music on it other than accompaniment CDs, though the other thing it’s being used for is for people who are putting together their own greatest hits CDs.”

External marketing

Hockett, who consults with more than a dozen stores per year, said not enough retailers are forming partnerships with Christian radio stations—something he believes can drive traffic and move CDs.

“Over half of our Christian music buyers, 57%, listen to Christian radio every day, and 83% listen every week, so if you can match that audience up with your core customer, it’s going to help you,” Hockett said.

He also added that too infrequently stores fail to alert customers of channel-specific product—something with which Christian radio can help.

“We have channel-specific products that are different than what would be released to the general market,” Hockett said. “A good example of that is the Fireproof DVD. The one that’s for the Christian market has ministry tools with it, a song from Casting Crowns and a free Fireproof (greeting) card offer with it. … I think that we need to do a better job of getting that information to stores and to our customers.”

One way to get information to customers is not only through radio, but also by creating “an e-mail list of people who enjoy Christian music and then regularly sending those people updates on new music,” said Riskey of CBA.

Other marketing ideas he suggests include starting a section in the store for “grass roots”—or local—artists and then hosting occasional concerts for them in the store’s parking lot or in the store itself if there is space. “This would begin to build traffic from groups that may never have considered their local Christian bookstore,” he said.

Another idea is to take all the local worship pastors to lunch. “Find out what they’re doing and what God is doing in their church,” Riskey said. “These relationships would be helpful to foster to help make a stronger connection to the churches in your community. Find out what music those pastors are using for worship and maybe those CDs could be made available at a book table after the services.”

Training

A well-trained staff sells more products, and CBA has a Web-based initiative supported by major music labels and distributors to help retailers do just that. Hockett said the program is still in the testing phases but will eventually make training employees easier for stores. Retailers can currently sign up for the program at www.cbaonline.org.

The new effort, CBA Connect, is “a social learning system,” Hockett said. “We’re loading it with different training information, and for the first time, the training is tracked. We know who took it, we know what they did, so this is something that was produced so it could be used by the industry.

“Even Family Christian Stores or Parable Group can have their own place on there that’s separate from what CBA has, and they can still do proprietary-type training. The whole idea is that you don’t do training unless you can measure it.”

Retail insiders are quick to note that product information, while important, isn’t everything. Half the battle is engaging and listening to the customer, something that too many stores aren’t doing, Ross believes.

“The reason that some retailers are selling lots of music is that they are engaging the customer,” Ross said. “(Too often it seems) you hire someone who’s a good Christian and can’t sell the product, or you hire someone who’s a fan of the product and can’t sell the product. We’ve gotten into this mentality that we’re not going to (bother) our customer. You have to be proactive about that. … We can’t automatically jump to a conclusion about what a person will or won’t buy.”

Music still viable

While stand-alone music stores are increasingly rare, it’s clear that for now Christian music is still a viable category within a diversified Christian bookstore. However, the glory days of five years ago are gone.

Today, a successful music department requires plenty of promotion, know-how, a well-trained staff and constant attention to maintaining appropriate inventory levels. CBA has created a list of best practices—available at cbablog.typepad.com—which retailers might consider to boost the performance of their music department.

“I don’t think this is a dead category by any shape,” CBA’s Hockett said. “Part of it is the way people are looking at it. How robust it was doesn’t diminish its importance now. The real Christian retail core customer, they buy music a lot, and they shop the store not just for themselves, but also for their friends. … In retail, it’s like anything else: When you focus on something and you really have a strategy with it, it works.”

Other experts talk not only about strategy, but also about attitude. In a down economy and in an already struggling industry, it’s easy to get discouraged, but retailers must remember why they got into Christian retail in the first place.

“My own personal belief is that it’s really important for music executives and retailers to remember why we got into this business; we wanted to honor Christ with a different message,” Funderburg said. “And with the economy and being around negative thinkers, well, it’s a lot easier to become like who you hang out with.”

Ross of Parable said people are still buying CDs, and it’s not just older people.

“Lil Wayne isn’t appealing to my mom, and he’s selling millions of (physical) records,” Ross said. “(Christian rock band) RED’s Innocence & Instinct was our number two-selling album last week, and that’s not going to appeal to my grandma either. … People are still buying CDs. It’s a different world, but it’s full of sound.”

Recently the Internet has been abuzz reacting to a column by influential blogger, Michael Spencer, known as the "Internet Monk," who says that we are within ten years of a major collapse of evangelical Christianity. Spencer speaks to the foibles, flaws and failures of evangelicalism as a sympathetic insider but with uncomfortable frankness.

And while I would challenge some of his conclusions, I also realize that we in the Christian retail industry have to be willing to hold a mirror up to ourselves to evaluate how we are doing in building God’s kingdom in the culture in which we live.

GMA Music Week & Dove Awards

Saturday, April 18

7:30 a.m.–6 p.m., Early registration

Sunday, April 19

• 8 a.m.–6 p.m., Registration
• 10 a.m.–11:30 a.m., CMB Sunday worship service, featuring Louie Giglio and Matt Redman
• 11:30 a.m.–6 p.m., Exhibits open
• 11:30 a.m., Lunch break
• 1 p.m.–3 p.m., International meeting and reception (for international attendees)
• 2:30 p.m.–4:30 p.m., Music City Walk of Fame induction ceremony
• 3 p.m.–4:30 p.m., Dave Ramsey’s Wealth Coach Program
• 7 p.m.–9:30 p.m., BMI Presents The Songwriter Showcase (artists to be announced)

Monday, April 20

• 8 a.m.–9:20 a.m., Inspirational keynote with Gabe Lyons, co–author of UnChristian
• 9 a.m.–6 p.m., Exhibits open
• 9:45 a.m.–11:15 a.m., Home entertainment presentation, Bob Elder, vice president of marketing, Propeller Consulting
• 11:30 a.m.–1:15 p.m., Big Hits Lunch (artists to be announced)
• 1:30 p.m.–3:30 p.m., Artist/DJ reception (for radio and retail), open only to CMB and CMRC participants
• 1:40 p.m.–3:15 p.m., Singing the Right Song: In–Store Strategies for a Digital Download World by Mike Hockett, training and consulting manager, CBA
• 3 p.m –5 p.m., The Financial Hurricane Creates Opportunity by Michael Q. Pink, author, speaker and business consultant
• 3:30 p.m.–5 p.m., Music Moment: Artist Devotional
• 7 p.m.–midnight, Evening Music Showcases (artists to be announced)

Tuesday, April 21

• 7:30 a.m.–9:20 a.m., 8th annual Tuesday morning worship breakfast, featuring David Nasser, speaker and author of Glory Revealed
• 9:45 a.m.–11:15 a.m., “The End of the CD?: The Facts About Tomorrow’s Hybrid Music Consumer” by Russ Crupnick, vice president and senior music and movies analyst, NPD Group
• 11:30 a.m.–1:15 p.m., Big Hits Lunch (artists to be announced)
• 2:30 p.m.–3:30 p.m., “The Heart of the Artist” with Demetrus Stewart
• 3:30 p.m.–4:30 p.m., Music Moment: Artist Devotional
• 3:30 p.m.–5 p.m., “First Comes Love, Then Comes Money: A Guide to Healthy Financial Communication” with Scott and Bethany Palmer, authors of Cents & Sensibility (David C. Cook) and First Comes Love, Then Comes Money (HarperOne)
• 7 p.m.–midnight, Evening Showcases (artists to be announced )

Wednesday, April 22

• 8:30 a.m.–9 a.m., GMA Community Gathering with GMA’s Special Awards and comments by GMA President John Styll
• 9 a.m.–10:30 a.m., Artist Symposium: “Christian Music Making a Lasting Impact Around the Globe.” Panel of artists to be announced; an address from Luis Palau will follow.
• 10:40 a.m.–11:30 a.m., Closing keynote address (speaker to be announced)

Thursday, April 23

• 4:30 p.m., Dove Awards pre–show
• 7 p.m., 40th Annual GMA Dove Awards from the Grand Ole Opry House (televised). An additional ticket is required.

Without minimizing the enormous challenges resulting from the nation’s plunging economy, let me suggest that the stark financial crisis also presents Christian retailers with a golden opportunity.

How so? Well, our industry has long maintained that Christian retail is different to the regular kind. It’s about more than just the dollars ... and now we have a great chance to demonstrate that.

Falling customer traffic is widely recognized as a problem for Christian retailers, but it’s an area rather like the Bermuda Triangle, the region of the Atlantic Ocean long associated with mysterious disappearances of ships and aircraft.

In our stores, everyone acknowledges that many shoppers do not come back, but no one really seems to know why—or what draws those who do return. However, after more than a decade involved in both Christian retailing and P.O.S. (point-of-sale) software development, I am convinced that we can, and need to, find out.

Do you know how many of your customers stay with you and for how long? Do they have buying habits that can help you serve them better and improve your store operations? Are book customers more loyal than music customers?

Answers to such questions are to be discovered, I believe, in the Customer Retention Triangles that can be explored from good customer data. That means placing a greater emphasis on creating and maintaining a solid database.

Unfortunately, my experience is that while many retailers agree that customer loyalty is a major issue, they often feel they are too busy to commit the small amount of time needed to ensure they have information to work with in helping them do all they can to connect with those shoppers.

It’s all too easy, especially in busy selling times and seasons, to miss capturing customer information at checkout. But it does not need to take a long time to confirm the correct identity of a returning shopper or collect information from a new visitor.

Customer loyalty programs and key tags can encourage shoppers to provide their information, and we have found at our store that a simple, standard script ensures frontliners request and handle customer data requests smoothly and efficiently. Accurate customer information capture rates of at least 85% should not be difficult.

Some retailers seem to think that collecting customer information is simply to be able to add them to a mailing list, but there is so much more that can be done. Having solid data to work with is vital, though.

With business so tight for many, it’s scary to consider throwing advertising dollars at a campaign without really knowing the target. As has been said, “If you can’t measure it, you can’t manage it.”

Pulling a list of the most recent top-spending customers is only one way of looking at customer data. With this in mind, I have spent part of the last several years of my time involved in running Revelation Retail, working on developing other customer analysis techniques with Kevin Meade, an information technology professional of 25 years.

Using the store my wife, Louise, and I run—Majesty Bibles and Books in Manchester, Conn.—as a guinea pig, we recently modified a technique used by insurance companies to analyze claims data and determine premium rates.

By posting customer activity on two axes—calendar year down the left side and purchase year (dating from their first transaction) across the top—we created our first customer triangle.

Our base column included the total number of unique customers for the year (1999), while subsequent columns identified the percentage of that figure that bought something in the store in each of the following eight full years.

Among our findings:

58.8% of those who shopped in 1999 also shopped in 2000

55.2% of those who shopped in 2000 also shopped in 2001

55.4% of those who shopped in 2001 also shopped in 2002

55.1% of those who shopped in 2002 also shopped in 2003

54.9% of those who shopped in 2003 also shopped in 2004

51.1% of those who shopped in 2004 also shopped in 2005

50.7% of those who shopped in 2005 also shopped in 2006

50.4% of those who shopped in 2006 also shopped in 2007.

That was helpful, as far as it went. For example, it seemed to confirm our concerns about the closure of a major retail neighbor, in 2004, that led to a noticeable drop in casual traffic. But that high-level information was not enough, it was only a starting point.

Next we divided our customers into “new customers” and “existing customers,” then added triangles for “original purchase department” and “re-visit purchase department.” Now we could determine shopper loyalty by the types of products they purchased.

Among the lessons we learned:

Our “existing customer” base is strong. Those customers return at a high rate from year to year, and our existing customer counts have been steady.

Our Bible buyers are very loyal customers. When someone purchases a Bible in their first year as a customer, they are highly likely to return to our store to make other purchases.

Additionally, they are more likely to be return buyers after five years than any other first-time product category purchaser.

As a result, we recognize that an inquiry about a Bible purchase by a new visitor is not only a one-ticket sale, but also a potential long-term relationship.

More than 65% of customers who made an initial purchase of a greeting card returned the next year to buy something from our store, making that category an important “introduction” area for our store.

Music continues to be significant, despite ongoing concerns about the impact of digital sales. Our first-year return purchase rate for music buyers is 65%, and while that drops off in subsequent years, they are still visiting the store and buying other products.

Perhaps the biggest surprise came in apparel, where we found a 75% first-year return rate for new shoppers. As a result, we have significantly increased the display space given to the category, which adjoins our music department.

We have also developed triangles that help us understand more about the impact of discounts, sales prices and margin.

This kind of information is helping us to be more focused in our marketing and merchandising. It is enabling us to think strategically, rather than just operationally.

Oftentimes when money is tight, it is tempting to cut back on marketing expenditure, but this only makes things worse.

The answer is not to market less, but to market more smartly, to maximize our connections with our most loyal customers. Knowing more about them and their habits helps us to do that.