Retention Strategies

I must share an experience that I had while on vacation this summer in Maine. My family and I stopped by an antique shop specializing in wicker. Upon entering the store, we were greeted by a man who later turned out to be the proprietor, Mr. E.L. Higgins. Mr. Higgins looked to be around 80 years old and has been selling wicker for as long as he can remember. When we finished browsing, we commented to Mr. Higgins on his quality wicker selection. He thanked us and offered a postcard he had created to take with us. He said that his phone number and Web address were on the postcard for our information.

I did a double take when he mentioned his Web site, and I asked him about it.

Mr. Higgins had his Web site created in April and sold 10 pieces of furniture on the Web in July alone. Regular customers e-mail him with special item requests and questions. He also has an online catalog that is updated frequently. As I see it, by entering the online catalog business Mr. Higgins is providing options for his customers that may enable him to take a bite out of traditional catalog sales for similar merchandise.

This is just one small and refreshing example of how we can learn lessons from smart retailers and catalogers who understand that the way they do business is changing, and rapidly. If you are a cataloger, retailer or merchant, you must realize that the Web is taking away some of the control you have over your business and transferring it to your customers.

Multiple Channels Challenge Customer Attention, Loyalty

Today’s catalog industry is in a transition period. Industry surveys have found that overall house file response is down. This is typically catalogers’ bread and butter, their biggest source of profit. But customers today have more information, choices and control than ever before.

As information sources proliferate, it gets harder and harder to get customers to pay attention to your marketing message, especially when they are constantly receiving messages through multiple channels. As customer attention becomes a scarcer resource, catalogers must attract and maintain customer attention by meeting their needs for information, entertainment and community.

Not only is it more difficult to keep your customers’ attention, but there are fewer barriers keeping them from buying a competitor’s product or service. All a customer has to do to change loyalty is to simply type www.yourcompetitor.com.

One reason catalogs became popular was that they were a convenient way for busy people to purchase merchandise at their leisure and from their home. Today, because of catalog co-op databases and competition from the dot-com companies, consumers are receiving too many catalogs and few have the time to sift through them all. All of the sudden, this convenient way of shopping at one’s leisure is becoming overwhelming and moving from bulky catalogs to digital pages on the Internet.

Gain Back Control by Maximizing Your Customer Relationship

How do you gain back control? By implementing customer relationship management (CRM) strategies to retain and create more interactivity with your customers. This may mean doing business a different way. For example, in the past when catalogers needed to increase their revenues, they would increase their circulation—seeking growth by mailing more.

Now, catalogers must refocus growth efforts from circulation to retention and maximization of the lifetime value of their customers. This may also mean that you must offer more convenience by selling via the Web, keep track of the stage of the relationship with your customer to better anticipate behavior, measure success in terms of lifetime value/profitability and identify customer communication preferences.

Maximizing the lifetime value of each customer requires maximizing the rate of new customer acquisition, the conversion rate of inquirers to buyers and the repeat frequency of existing buyers. Properly administered CRM strategies will help with the conversion of inquirers to buyers and increase the purchase frequency of your most valued customers. This is done by predicting individual preferences and needs well enough to be anticipatory and proactive in the delivery of the right message to the right person at the right time via the right media.

CRM strategies need to identify and address value, from both the customer and business perspectives. As a business person analyzing your customers, you must put the emphasis on them rather than the product portfolio. So it is essential to understand who your customers are, what and how they buy, why they buy and their value to your organization. Value is typically represented by how much they have spent with your company.

Companies that don’t understand the profit-creating behaviors inherent in their business are at a disadvantage in the marketplace. One of the keys is the recognition that not all customers are created equal because not all customers are equally valuable. Keeping your valuable customers and replicating their behavior in other lower-value customers will generate a significant economic surplus.

Furthermore, the wealth of information gathered from your CRM strategies becomes the foundation for prospect modeling—creating what are known as look-alike models—that can be leveraged to maximize the rate of new customer acquisition. The cost of acquiring customers is substantial and will probably increase, so you want to ensure that you are getting the most for your money. Existing customers are responsible for near-term profits, but new customers will contribute in the future.

Customers, on the other hand, must identify what value your company brings to them if you are to keep their attention. Your value could be a simple as offering convenience, or excellent customer service, or a brand that the customer perceives as valuable. In short, any way to meet a customer’s need will create value. Creating value for customers yields loyalty, which in turn yields growth, profits and more value. Customer loyalty delivers huge bottom-line business impact because loyal customers spend more, stay longer, cost less to service and refer more new customers.

Many catalogers are looking to the Internet for growth. While growth might occur during the short term, the Internet can be a valuable tool for longer-term retention initiatives. One can collect an unprecedented amount of information about individual customer interactions and use it for profitable target marketing. Rules-based personalization, which takes action based on the customer’s behavior and stated preferences, can be extremely valuable in merchandising to help cross-sell and upsell products.

Identify Communication Preferences

Finally, in the challenge of capturing and maintaining your customers’ attention, it’s equally imperative to identify their communication preferences, because ultimately appealing to their preferences will foster a higher response rate. Whether it’s a catalog, a phone call or the Internet, each communication medium has its own strengths and merits, but customer needs and opportunities must be the driving force for your media decisions.

Mr. Higgins’ Web site is offering a convenient way for people who have visited his store to check on new items and request information. We can all take a lesson from Mr. Higgins. If you’re interested, visit his Web site at www.antiquewicker.com. Enjoy!

Tim Swigor is vice president for Epsilon. Swigor is an author and frequent speaker on the topic of customer relationship management. Additionally, he was a founder of two catalogs where he was responsible for their entire operation. His diverse exposure has allowed him to assist many organizations in successfully implementing CRM technologies and strategies. He can be reached at tswigor@epsilon.com.