StrateScapes - Back in the Driver’s Seat


		Excerpted from StrateScapes - Volume 6, Number 1

Back in the Driver’s Seat
Strategies for taking your customer retention program off autopilot and plotting a fresh course for profits (without driving costs off the map).

When you first initiated your customer retention program, the results were all you ever wanted. Customers loved it, and their satisfaction showed in your company’s bottom line. But as time passed, results faltered and the big guys came knocking on your door for explanations — and results. You know your program is based on a solid foundation, so what gives … and where do you go from here?

If your company is like many others, after that first big push, your customer retention initiative has been running on autopilot — and it’s taken the straight route down Stagnation Freeway. The novelty has worn off for your customers, and you haven’t found a way to regain their interest.

Now the good news
Once you climb back in the driver’s seat, you can easily plot a new course that will use your existing program as a starting point for your revived drive to success. That’s what companies like The Great Indoors, Pier 1 Imports, Kohl’s and Einstein Bros. Bagels have done to put their programs on a fresh track. Ready to join them? Here are some well-traveled routes to better results.

Know the score
Using a data-mining strategy called Customer Value Scoring, you can literally assign every person in your database a value to help you determine how much to spend on each customer and identify their potential for growth. More dynamic than recency-frequency-monetary (RFM) valuations, Customer Value Scoring looks at the total customer relationship, including factors like departments shopped, annual visits, proximity to store, and lifestyle and demographic information. You can base your scoring on whatever attributes are most important to you, then use the scores to develop a communication strategy that is not only more relevant to the customer, but also helps you focus your resources where they’ll have the greatest impact.

For example, you might send customers on the cusp of best customer status a targeted communication to help nudge them into the top tier. Likewise, you can identify customers whose scores are so low, it’s not worth communicating to them with the same frequency (or at all).

GROW UP!

Here’s what happened when one retailer kept and grew the value of its customers.

Catch them first
When you’ve made the effort to build a customer loyalty program, it only makes sense to install an alarm system that warns you when a faithful client is getting ready to stray. With Migration Analysis, you can set triggers in your database that go off when a customer shows behavior that signals an impending departure — things like lowered spending or less frequent visits.

Then you can work to save that valued relationship with stealth communication before the customer abandons you for your competitor. After all, it’s much easier — and far more cost-effective — to catch them before they leave than to try winning them back later (see chart at right).

Migration Analysis can also pinpoint customers working their way up the loyalty food chain, indicating an opportunity for you to proactively communicate in ways that will further increase spending, purchase frequency and share of wallet. And whether it’s used for loyalty tracking purposes or as a way to thwart attrition, Migration Analysis can also diagnose problems with your program tiers and help you develop a lifecycle management plan to woo and hold valued customers.

Time it right
You know the last time your customer bought something, but do you know when she’s most likely to buy again? Using Gap Analysis, you can uncover customer purchase patterns, so you know who’s coming in once a year (and when that is) and who’s coming in every three weeks. With that information, you can communicate with each customer at the optimal time to drive her toward an additional purchase.

And by synchronizing your communications with your customers’ natural patterns, you’ll lower your marketing costs by sending messages only when they’re most likely to have a positive impact. You’ll also minimize opt-out rates and reduce customer dissatisfaction, since more relevant communications will reduce customers’ likelihood to perceive your communications as junk mail.

Talk electronically
Using one (or a combination) of the above tools, you’ll be able to communicate with customers in more meaningful ways. But that may call for more frequent communication — and more costs. Sending a direct-mail package costs from 75 cents to $2 per piece, while broadcasting an e-mail costs just 20 cents per piece, according to the Direct Marketing Association. Plus, e-mail promotions tend to have higher response rates.

You can gather customer e-mail addresses in-store (like Tommy Hilfiger does) or online (like Nine West and Talbot’s do), when customers make purchases or sign up for promotions. Just make sure you give them a reason to part with this personal information, such as offering a free newsletter, exclusive information or special offers.

Slice your segments
Once you’ve lengthened that e-mail list, slice it into segments so you can personalize the e-communications you send. Research and CCG’s own experience have shown this is the way to increase response rates, click-through rates and purchases. A prime example: Proflowers.com, which used Cohorts segmentation to define customer clusters, profile customer behavior and target e-mails based on what they learned.

For example, when data showed that female customers didn’t buy flowers for Valentine’s Day, the company targeted its Valentine’s e-mail promotions to male customers only. By doing so, they spent less money, yet elicited the same response rate they’d gotten when e-mailing to both men and women.

Soften up
As you already know, a well developed, well thought-out loyalty program can yield 200 percent or better ROI, and companies like Pier 1 Imports and Kohl’s have found that focusing on high-value customers generates a 10 to 15 percent lift in purchases and frequency.

And you can reach these results without deep discounts. Using soft benefits — like a newsletter or membership card — can yield rich profits by giving best customers the recognition and rewards they crave, without slicing into your margins.

Tactics like these are relatively easy to implement, yet the payoff can be substantial. By helping to ensure that you’re sending the right message to the right person at the right time, they can maximize the efficiency of your marketing efforts and drive customer value into high gear — while you sit comfortably in the driver’s seat, taking all the compliments.

STRATESCAPES and STRATESCAPES SUPPLEMENTS are published by Customer Communications Group, Inc., a full-service agency specializing in relationship marketing and customer communications. Our comprehensive, turnkey services include data analysis, customer segmentation, strategic consulting, account management, creative execution, print production and multimedia solutions.