Retention and Relationships : Marketing Thoughts by Michael Greenberg

OK, love is a strong word here.  But gaining insight into share of wallet, especially when it can be cross-tabbed with other data, is one of my favorite ways to learn how customers are engaging with your company.

I looked at a simple data set from Marketing Charts in a post elsewhere which rekindled my love for the metric.  I used this extensively as a direct marketer in a past life, because it told us so much about where there was opportunity for additional revenue.  Plus I tracked it over time, which made it a great leading indicator of softening or strengthening demand.

Lets take a simple example.

Lets say your customers report they spend $200/year at your store, and $1000/year total in your category.  6 months later, they report $250/year at your store, and $750/year total in your category.  You have 2 things to figure out - is my share of wallet increase from 20% to 33% real, and is the 25% decline in category spending real.  But you have good information from which to continue to explore.  In this case, if they are real, then you can get excited about the successful increase in market share, and be terrified by the decline in market size.

Another example is similar to how I looked at the Marketing Charts example - what if top 10% customers spend $1000/year with you and $1500 total, while next 10% customers spend $400/year with you and $1200 total?  The opportunity in the next 10% is actually greater than the top 10%, although the downside risk of not retaining top 10% is higher.  Knowing the difference, however, lets you craft strategies that best accomplish your objective(s) in each segment.

Catching up on past articles - here’s my August 2007 column at Chief Marketer.

I look at the difference between discovery - information and insights about the client - and strategy - what to do with the client to effect change.  It was prompted by the common question I get asked, which is “what should I do?”  So I tend to ask back, “what do you need?” and so on.  Enjoy

Last month’s column for Chief Marketer.  I’d planned on covering the first three elements in more detail before publishing this article, but we’ve been very busy at the office for the last couple of months.

This column touches on the power of recognition, the value of real interaction, the retaining power of collaboration (and the low cost content it can provide), and includes a push to enable advocacy by your customers.

[Things are quite busy on the work front…but I will get back on schedule starting with this post.]

Direct communication, possible once a customer is identified, unlocks a whole new level of interaction, where marketers can differentiate the message.  The various options now available enable a much more nuanced relationship with your customers.  Looking at these options is instructive in understanding the value that this element can add to your overall best customer management.

Triggered email is the high ROI workhorse of differentiated communications.  Expectations for email relevance will only continue to grow, so marketers need to continuously increase their capability to develop and deliver messages that reflect actions, attributes, and environmental factors.

Custom printed or variable printed direct mail is a personalized variation on traditional direct mail.  Ideally the same factors that make triggered email relevant are incorporated into direct mail content, either through differentiated messaging and creative, or “statement”-type data for a formal program.  In reality direct mail can and should eventually have the same level of flexibility as email.  Good marketers will incorporate this capability into their arsenal for one good reason - it works.

Targeted promotions are an evolved version of coupons, with the qualification and award tuned to the individual recipient.  While most marketers can only provide relevance through the targeting (that is, identify segments and craft promotions for each), we’re not far from algorithmically generated promotions taking over.

Site personalization is the one area that should be far more prevalent than it is.  Variable site content has been around for a long time, yet only a few companies capitalize on the increases in conversion and repeat visitation that can result.  If everything is going right, the site is reflecting the activity going on elsewhere, such as the targeted promotions above, with landing pages for the individualized triggered email.

There are other types of direct communication that are still emerging.  Widgets, small client-side apps that can be added to websites directly or via some basic integration, are quickly gaining traction and critical mass.  While many are just distributed links to a site home page, more interesting technologies are available when a company opens up their APIs, with Facebook as the current shining example.

Knowing which individuals are your customers is a crucial task for every company.  It’s easy to do in business-to-business companies, but can be quite difficult for consumer-focused companies. 

There are two parts to this problem – who is the customer, and what did they buy?  While you can solve the first part of the problem without the second, that’s not recommended.  You will have no way to calculate customer value, making future optimization decisions much more difficult.

So the best approach is to tackle both parts simultaneously.  In retail, loyalty programs and credit cards were the traditional way to gather customer identities and connect them to individual transactions.  This approach still works.  The other major approach, data appends, now depends mostly on reverse appending phone numbers, which is much tougher due to rising cell phone penetration (which can rarely be appended).  In certain circumstances, email can be used as the tracking mechanism outside of a loyalty program.

Companies can reduce the barriers to identification with newer technology (such as new point of sale systems) which can be expensive, or with great relationship programs and a great brand.  The former increases the capture rate at the point of purchase, the latter increases a customer’s willingness to raise their hand and be tracked voluntarily.

The mix that makes the most sense for your business depends on your current capabilities, budget, and overall objectives.

If you have nothing today, I’d start with a relationship program with soft benefits, requiring an email address.  If you have a high-throughput point of sale/interaction, think about using phone number as another identifier.  Bar coded cards are the most accurate, but not all consumers are willing to carry them, so you will need a ubiquitous backup identifier, and phone number has the benefit of being reverse appendable (no, its not a word, but it should be).  So at minimum, you could connect multiple purchases over time to a specific phone number, even if you can’t identify the individual.

Down the road, you will end up with more records than customers.  At that point, bring in a professional data hygiene firm to help with merge purge.

My latest at Chief Marketer.

I see 7 key elements in best customer management.  This first column focuses on the 3 basic ones:

Identify - Understanding who an individual customer is and what they have done and bought.

Communicate - Messaging an individual customer with relevance to their needs and prior actions.

Reward - Providing and promising incentives and benefits based on their activities.

I’ll spend time over the next few weeks exploring each of these areas in depth before the second column is published with the other four elements.

My most recent column at Chief Marketer.

I’m finding more and more of our new clients and current prospects would benefit from additional insights into basic loyalty strategy, which prompted this most recent column.

My latest article at Chief Marketer.

The gist of it is a series of non-obvious benefits to loyalty marketing:

Loyalty programs can be very cost-effective, especially after breakage.

Loyalty programs get you more e-mail addresses of buyers.

Points programs let you promote without actually lowering prices.

Loyalty programs build lock-in, especially important for easily substituted businesses.

Loyalty programs improve the customer tracking rate.

Loyalty programs make it easier to reward nonpurchasing—but valued–behavior.

Loyalty programs let you give status to your best customers.

Loyalty programs greatly increase the likelihood of a message being read.

Surprise and delights appeal on a very deep level.

Loyalty programs tend to attract those who are most likely to respond to them.

The details of each of these points are discussed at Chief Marketer.  Enjoy.

OK, I have to admit I did not pick the title…my editor at Chief Marketer did.

But here’s my latest article.  My main point is that marketers should focus on improving their ability to deliver relevant products and messages to an increasing number of smaller customer segments.  Its based on individuality trends that are unlikely to reverse in the coming years.  Enjoy.

I’ve been lucky enough to moderate a number of webinars on the subject of implementing loyalty and relationship marketing programs.  There are two interesting ones on my company’s website.

Keith Lauver, a tech entrpreneur turned artisan food CEO who is the star of the July webinar, is particularly interesting to listen to, as he has the entire perspective from high level strategy to doing the implementation work himself.  I think the most interesting point he makes in this webinar is that sucess can be traced back to the fact that he chose open and extensible systems to run his operations.  This made it easy to attach new systems without requiring custom development and integration.  (Visit his company at www.montanalegend.com.  Good stuff.  Disclosure: Yes, they are a client.)

In this Web 2.0 world, integrability is becoming more and more important to the long term success of an organization, especially one that needs to use disparate data sources to understand the whole picture of customer relationships.  Stay tuned.