Retention and Relationships

There’s a natural tendency to panic the first time retention metrics turn the wrong way.  Don’t.  Start by looking for the outliers in performance right away.  That way you can focus your limited budget and resources on the segments of customers most under threat.  Don’t spread your dollars evenly – focus on the biggest opportunities.

The easiest segment erosion to spot is usually geographic.  If you find regional problems, examine the economics and competition in the region.  Economic issues should be addressed very differently than competitive ones.  That is, determine if the pie is shrinking, or if your share of the pie is shrinking (or both, yikes!)

If you have the information, see if there are differences based on lifespan (vs. historical).  That is, how has retention changed among long time customers(>1yr), relatively recent customers (3mo-1yr), and new customers (<3mo).  Some other areas to explore are cross-category engagement, non-revenue engagement, and net promoter score (if you have it). 

If you have demographic information, great, use that too.  But not many companies have enough to do meaningful data mining with this.

Once you have a sense of where the problem is, you can really focus on the strategy and tactics to reverse the trend.  Remember that small changes have large results, so set your initial goals to maintain your current retention levels and move to improve once you’ve stabilized your business.

This entry was posted on Tuesday, October 28th, 2008 at 11:56 am and is filed under Marketing Analysis, Relationship Marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.