How does Patagonia increase its Customer Lifetime Value through an anti-growth strategy? Wait, how would they be making more profit by reducing their sales?! It does sound contradictory, but never say never!
Customer Lifetime Value (CLV) describes the profit a company makes from any given customer over the lifespan of their relationship with the brand (Guptaet al.2006). This metric takes into account the cost to acquire and the monetary value of the relationship. It is important for marketers to consider since it puts into perspective the costs a company commits to acquire and retain a customer and the return they receive of this relationship by shifting the focus from short-term to long-term (Kaul 2017). Besides, it is a valuable asset of a company’s marketing strategy and something that if nurtured with the customers’ wants and needs in mind, can lead to higher profits in the long run (Jain and Singh 2002).
Preparing for a group assignment on consumer behaviour, my group and I soon learned about the controversial anti-growth campaigns the outdoor clothing brand Patagonia put into action and wondered how after all, they can possibly be that successful…
Don't Buy This Jacket
Patagonia’s anti-growth initiatives are simple and yet a very powerful tool to grab current and future customers’ attention: In 2011, Patagonia’s “Don’t Buy This Jacket” campaign helped them grew their annual revenue to over $500m and they smashed their targets by far (Investopedia 2019). The campaign launched with nothing more than a full-page ad in the New York Times on Black Friday asking customers to reflect more before they purchase any items and to spend less in order to reduce the footprint on the planet. “We’re in business to save our home planet” is their mission and ultimately what their marketing strategies are based on to reflect these values (Patagonia 2019).
Since then, Patagonia established its Worn Wear programme, where customers can trade in their old jacket, it gets repaired and resold under their Worn Wear e-commerce site for a reduced price. For their old jacket, customers receive a store credit so they can purchase a new item, which in return adds to the Customer Lifetime Value and eventually the above cycle will be repeated, which would again contribute positively to this metric.
What all these initiatives have in common is the process to first purchase, then wear, repair or resell and therefore recycle clothes, which not only extends the product’s lifecycle but also keeps existing customers engaged with the brand and invites new customers to join the community of environmentally conscious outdoor enthusiasts. Ultimately, this leads to increased loyalty and consequently increased Customer Lifetime Value, since they consistently encourage customers to either buy a new jacket that is durable and lasts a long time or one that was repaired and has now been given a second life.
Patagonia has adopted the principles of Societal Marketing where the company takes on the responsibilities of solving society’s problems, in this case reducing the footprint on the environment and minimizing landfill. With punchy and provocative advertising and their continuous (social) media presence, they stay very much true to their mission.
Conclusion
Patagonia has found a way to increase Customer Lifetime Value by asking their customers to spend less and think about the environmental impact the purchase of a new product would have, or, in return how the footprint can be reduced by purchasing a repaired piece of clothing.
Most importantly, when Patagonia first started out as a business, they wanted to educate people about how making sustainable purchases can do good for the planet. They addressed an issue and told the world about it. Nowadays, the trend towards sustainability and environmental-conscious buying behaviour has rapidly developed across a range of industries. As a result, Patagonia is now able to nurture this trend and also serves a customer base that has only just come to the surface. With these cause-related trends and a healthy Customer Lifetime Value, I am convinced that now more than ever, Patagonia can “do good for the planet” and “do good” for the business.
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References
Businessinsider (2019). [image] Available at: https://www.businessinsider.com/patagonia-black-friday-cyber-monday-deals?r=US&IR=T [Accessed 6 Jan. 2020].
Gupta et al.(2006). Modeling customer lifetime value.Journal of service research,9(2), 139-155.
Investopedia. (2019).The Success of Patagonia's Marketing Strategy. [online] Available at: https://www.investopedia.com/articles/personal-finance/070715/success-patagonias-marketing-strategy.asp
Jain, D. and Singh, S. S. (2002). Customer lifetime value research in marketing: A review and future directions.Journal of interactive marketing,16(2), 34.
Kaul, D. (2017). Customer Relationship Management (CRM), Customer Satisfaction and Customer Lifetime Value in Retail.Review of Professional Management,15(2), 55-60.
Patagonia, Inc. (2019)Patagonia 1% for the Planet- United States. Available at:https://www.patagonia.com/one-percent-for-the-planet.html[Accessed: December 03, 2019].
Patagonia, Inc. (2019)Annual Benefit Corporation Report Fiscal Year 2018.[pdf]. Available at:https://www.patagonia.com/static/on/demandware.static/-/Library-Sites-PatagoniaShared/default/dw08d0f6ed/PDF-US/2018-B-CorpReport-050919.pdf. [Accessed 03 December 2019]
Patagonia, Inc. (2019)Patagonia Action Works- United States. Available at:https://www.patagonia.com/actionworks/[Accessed: December 03, 2019].
Patagonia Works. (2019)Press — Patagonia Works. [online] Available at: http://www.patagoniaworks.com/press?offset=1473696215323 [Accessed 9 Dec. 2019].
The Cleanest Line - Patagonia (2011)Don't Buy This Jacket, Black Friday and the New York Times - The Cleanest Line. [online] Available at: https://www.patagonia.com/blog/2011/11/dont-buy-this-jacket-black-friday-and-the-new-york-times/ [Accessed 7 Dec. 2019].
