Retention and Relationships

Did an interesting interview with the CMO Council as part of their loyalty research initiative at loyaltyleaders.org, which will show up in their report in a few months.

As with most interviews, some stuff comes out that wasn’t planned ahead of time. But what stuck with me were my comments to focus on just a few social media/marketing options vs. going after many. So I wanted to expound a bit.

Many companies are paralyzed by social media and how it relates to customer retention. Like anything else, start simple. Pick one area and start, learning more and determining how to incorporate the results into daily operations. Over time, the relationship between actions and results will become clearer, and you can make the business case for increased (or decreased) investment.

Once you master one, add another and go through the same process. It doesn’t have to be difficult. What seems to cause so much uncertainty is the proliferation of options that all appeared at once. So my guidance is to simplify, start narrow, and expand over time.

My latest at VentureBeat’s Entrepreneur Corner.

This was an interesting article, primarily since it was very focused on a specific task – generating a second sale.  While repeat visits often happen naturally, nudging customers to return is often necessary.  The second purchase is incredibly important, since it identifies the customer as someone with the potential for a long term relationship.  Additional investment in the relationship will have a far higher likelihood of paying off with these customers.

Thinking about customer loyalty drivers even more, it seems there’s a fourth type – Inertial.  This is loyalty to a brand or company primarily due to a lack of willingness to change.  This is more habit or pattern than loyalty, but is still reflected in preference for one brand over another.

Marketers can take great advantage of Inertial loyalty, through a steady stream of marketing messaging and impluse drivers.  These customers will continue to respond and interact, without much prodding.  At the same time, these customers have no explicit tie to your company, so they can be persuaded to leave at any time.  Witness the 8% increase in churn at Verizon since the iPhone was introduced, which is a lot in mobile.

How do you identify this?  Not easily.  Customers who do not engage with the brand are far more likely to have Inertial or Involuntary Loyalty, although many customers with real loyalty also fall into this category.  The best way to address these customers is to migrate them to Rational or Emotional Loyalty.  At least then you have tools to improve loyalty.  Most likely your Rational Loyalty efforts will also resonate with these customers.

One point I wanted to add to a recent article was the notion of involuntary loyalty.  Many companies have this and mistake it for one of the other types – rational or emotional.  Involuntary loyalty is attachment to a provider or entity due to reasons beyond the individual’s control.  Think Comcast, Hulu, Walmart in many places, many grocery stores, Medicare, your local mass transit agency, and many others.

When there are no realistic substitutes, people are forced to choose a provider involuntarily.  With analysis, their behavior will even look loyal.  Not understanding that many people would choose to go elsewhere if they can might be fatal to many organizations.

My latest article for the web channel at Multichannel Merchant.

I think my point didn’t really get across, but its mostly my fault.  The bigger point here is the separation between loyalty and value, and that customer experience is a great driver of loyalty, which in turn improves value.  Since this is part of a longer series of columns that will eventually tie together, I’ll back and rethink this one.

In my latest post at VentureBeat’s Entrepreneur Corner, I look at why forecasting customer growth is so important for valuation, venture capitalists, and cash management.

I like writing for them since they have a very different approach to content than other places I’ve published.  They are on a high volume, short attention span schedule, so content must be punchier, tighter, and very focused.

If there’s one writer I never tire of, its Seth Godin.  Yesterday’s post on Brands That Matter was a perfect case in point.  Seth’s been banging on the “be different” drum for a long, long time.  But judging from most marketing today, he needs to keep pounding on the idea.  He’s still making the case for brands to stand for something, to make sure the customer experience is consistent with the brand identity, and to continue to come up with ways to stay fresh.  I’d argue that resource constraints often get in the way, but deep down I know that’s no excuse.

On that note, today’s post on Not So Good At Math shows the other side of the coin – that many marketers aren’t necessarily strong mathematicians.  That begs the question – if they aren’t good at creating interesting and distinctive brand identity, and aren’t good at generating insights from underlying data, what are they doing in marketing to begin with?

…is my latest article at Chief Marketer.  Here’s an excerpt:

“It’s inevitable that customers leave.  Your customer base is constantly evolving, and your customer loyalty and retention metrics likely hide that natural dynamic. Traditional measures look at full attrition and ignore shrinkage, maintenance, and growth. Savvy companies look deeper and respond to incremental behavior changes within their customer base.

The two measures presented below, dollar retention rate and replacement rate, let you spot issues in your retention and customer development efforts early and focus your decision making on the results you really want – revenue and profit.”

Read the full article at Chief Marketer.

This was prompted by internal research we’ve been doing to identify trends in customer behavior that can help predict larger shifts in revenue in the future.  We’ve found a lot of interesting stuff and spun off many ideas, of which this was one.

Pandora Radio logo

I love Pandora.  Pandora rules.  I wish everything was like Pandora.  I don’t really have to think or do much, and an incredibly accurate stream of stuff I want to hear just appears like magic.  I can tweak it to get it dialed in to my tastes.  And I now buy MUCH more music than I used to, discovering new music and buying on Amazon so Pandora gets a little affiliate revenue.

The closest we see to this ideal today is Amazon and a few other online retailers.  Borders appears to be using my purchases (finally!) to tweak the email they send me, which is great.

This is the next frontier for retailers and manufacturers.  A whole generation has had their priorities reoriented, much as the Great Depression did 70 years ago.  Consumers will think a bit more before buying and will be much less willing to use credit to finance their lifestyle.  So selling will need to move to a more relevant, customer-specific mindset if a retailer wants to succeed over the long term.

There are already many companies focusing on this space, but it will be a long time before clear winners emerge.  I think the winners will likely be those who can distribute the experience wherever customers want to consume it – which means we still have a ways to go.

Over at VentureBeat’s Entrepreneur Corner I did a guest posting on how entrepreneurs should think about customer loyalty at different stages in their company’s development.  Click here to read it.