Customer retention has come under a lot of flack in particular since Byron Sharp’s “How Brands Grow” burst onto the scene back in 2010.
The central thesis of this marketing bible is customer disloyalty:
“I just want to emphasise that so-called loyalty schemes have very little impact on the behaviour of regular customers. If you operate one, you’re mainly rewarding guests who would have stayed with you anyway.”
Mr. Byron Sharp, Ehrenberg-Bass Institute
The best way for brands to grow, he argues, is chasing ‘chance’ customers who are interested in a ‘good deal’.
In the current financial climate, this strategy is especially relevant for consumers facing difficult financial decisions driven by rising energy costs and other cost-of-living challenges. Value for money becomes a hugely important factor in consumer decision-making, leading to more promiscuous shopping behaviour.
For many B2C brands, recession-proofing will mean communicating a clear value proposition to their consumers.
So if you are responsible for growing a brand or an entire business, why bother with retention? If your loyal customers are ultimately going to become disloyal (and even more so because of the current financial climate) why not just lower the price and draw in those deal-seekers?
Here are four good reasons:
1. Product
2. Promotion
3. People
4. Place
It’s easy to forget that price isn’t the only lever brands can pull to impact your customers’ internal ‘good deal’ calculator.
Simply put, price and value aren’t necessarily the same thing.
Marketers have it in their power to construct a retention strategy to convince existing and historic customers that their brand represents the best value, without relying on price.
How might a data-led CMO do this? Here are the four steps they could follow:
- Power Of Prediction – Use predictive analytics to forecast and identify which of your customers are most likely to leave (aka ‘churn’).
- Relevate Your Comms – Continuously engage your customers in a way that is hyper-relevant to their individual preferences and needs. Tailor tone-of-voice, imagery, offers, information, deals and promotions that are objectively based on their preferences and interests to show the customer you recognise, remember and value them through your communications strategy. This approach is data-heavy and ideally relies on segmentation and predictive analytics MarTech tools (such as Pre.dict and Uplift).
- Everyone Has A Price – Apply data analytics smarts to estimate the Customer Lifetime Value (CTV) for individual customers and get a handle on how much each of them is worth to your brand. Once you’ve done this, ask yourself if you want to stay in a relationship with that customer, deepen that relationship, or simply let that customer relationship go? Only with a true estimate of the individual customer value can you decide the right course of action.
- Data. Data. Data! – Continuously acquire zero and first party data on your customers through web forms, surveys, reviews, and even interviews / focus groups to gain insight into their needs, preferences, triggers and barriers. Go back to Step 2 and use that information to improve the relevancy and relatability of your communications to drive better returns on your marketing investment.
Steps 1 and 3 will help the data-smart CMO identify the true value of individual customers and how likely they are to leave, which gives you an idea on the financial risk to the business should no action be taken to stop them taking their custom elsewhere.
Steps 2 and 4 give a savvy CMO the opportunity to relevate their comms by using first and zero party data to understand individual customer preferences and ensure they are communicated to in the way that delivers impact (and most importantly, sales!).
This ensures customers who have the highest value and are the easiest to save don’t walk away.
All of the above steps require the cool-headed and deliberate application of a data-led approach aided by Data Science wizardry and possibly a sprinkle of punchy MarTech capabilities via a snazzy platform like iota-ML.
If you would like to learn more about the power of a great data-powered retention strategy, feel free to open a conversation with our professional Data Science guru, John Conway. You can reach him at john@iota-ml.com.