Customer Retention: Keep ‘em Coming Back for More

Missing Person Description: high-quality multichannel buyer
Last Seen: purchasing online 18 months ago
The Details: A customer placed an online order for top-quality merchandise 18 months ago. Delivery confirmation was received three days later. Your repeated attempts to contact the customer via direct mail and e-mail have been met with no response. This customer is extremely valuable, with a high lifetime value and history of repeat purchases. Please forward any information as soon as possible.

Do you know which customers are missing in action? Somewhere deep in your housefile are people who no longer shop from you. For some, service and quality issues alienated them. Others have simply gone quietly, leaving without complaint or fanfare. E-mails are unanswered, and catalogs are ignored. Maybe they’ve completed the lifecycle for your merchandise, or they’re just taking a break from shopping in general.

As a smart marketer, your first task is to identify which customers have gone missing. Key metrics such as attrition and acquisition rates are great performance indicators. Unfortunately, they don’t identify specific customers and their value to your business. As you know, not all customers are equal, and your business intelligence is failing if it doesn’t distinguish between buyers. Acquiring low-quality customers to replace valuable ones buys you a one-way ticket to bankruptcy. Understanding your customer profiles and knowing which ones to keep or let go is mandatory.

Costco Gets It

Recently I let my Costco membership expire. Since my relocation three years ago, the closest Costco is almost three hours away. I know I don’t qualify as a platinum customer, but I do have a steady purchase history.

Costco has a great Web site, and I do often travel to areas with Costco stores. In the past, I usually renewed my membership when I was in the store, but three weeks had passed since the expiration of my last membership card. At Costco, alarms went off. Its ‘customer lifeguard’ called, and the message was simple: Costco missed me.

The caller was professional and sounded genuinely concerned that I had severed the relationship. After I explained that I remained a fan, but location was an issue, she said, “Ms. Ellis, we’ll be here when you’re ready to return. Thank you for being a good customer, and we look forward to serving you again.”

This wasn’t a script or a hard sell. She didn’t say: “You can still shop online!” She seemed glad that I still liked Costco and hopeful that I’d return. And I will return every chance I get. I might even make an extra visit this year just because I don’t want them to miss me too much.

Lifespan vs. Lifetime Value

The term lifetime value (LTV) implies that once a customer has purchased, he or she has committed to a long-term relationship with your company. But in reality, a customer’s LTV is dependent on your merchandise selection and his or her lifestyle, rather than the customer’s actual lifetime. Companies with products such as maternity clothes know their customer bases must evolve quickly because the usual customer LTV is short.

Every company should know its customers’ LTV expectancy. A complete business intelligence analysis will define lifespan by customer profile. Some customers will purchase one time only. Some will buy for a time period, stop for a while and then return. Others will make several purchases over weeks or years and then disappear forever.

You incur carrying costs for inactive customers, similar to the ones for inactive inventory. If a customer completes her lifecycle with your organization after six months and you continue to mail a catalog every month for 24 months, 18 catalogs are guaranteed zero return. Presuming a cost of $1 per piece, that’s $18 off your bottom line. Multiply this by 10,000, and $180,000 is lost.

There’s also lost opportunity. Mailing the 18 catalogs to qualified prospects would expedite the lost customer recovery process and increase revenue. It’s hard to let customers go, but sometimes it’s necessary to improve your business. A good strategic plan defines customer profiles and responds appropriately to their marketing and operational needs.

Relationships Still Rule

Companies don’t have relationships with their customers; rather, it’s the contact between your employees and customers that creates the bond. The best service organizations encourage their employees to connect with customers. It’s those relationships that help marketing and operational initiatives match customer needs. LTV can be increased by improving the customer experience.

Data integration from all sources provides the information for customer intelligence. With this information, a company can model its business around its best customers and create a relationship incubator. Customer contact and service is customizable, increasing LTV.

Ellis can be reached at (828) 626-375, or by e-mail at: http://www.wilsonellisconsulting.com.