People who order consistently over time are the most valuable segment in your customer database. Their buying patterns provide the revenue foundation for your business. They have higher response rates, average orders, gross margin, and lifetime value.
They are also the most neglected. We take them for granted because they respond on a regular basis and rarely complain. We don’t have to do anything except send marketing materials to get them to act, so we don’t. Our time and money is spent chasing new customers so we can grow our database and company.
It costs 3 – 5 times more to acquire a customer than it does to keep one.
Customers are already trained to expect little from the companies they patronize. They know that the super deals designed to motivate them to make the first purchase disappear once they do. They know that the service they receive before the sale has nothing to do with what happens afterwards. But, what if that service was just the beginning of great things to come? How would it change your business if your customers’ lifespan were increased by 20%? 50%?
People need to feel appreciated. It doesn’t take as much as one would expect. Acknowledging previous orders when a customer lets him or her know that you recognize their contribution to your business. It can be as simple as a “Thank you for your recent order” comment. Adding personalization to a direct mail piece that includes a “Thank you” and special gift or discount is another way to let people know that you are glad they trust you. Creating a special club or promotion also separates your active customers from the newbies, hit-&-runners, and discounters. Letting the people who put and keep your company in the black know that you value them is simply good business.
Standard marketing analytics don’t identify the people who have longevity.
They look at recency, frequency, monetary value (RFM), channel, source, acquisition, and product category to create segmented marketing groups. All of these values have merit, but none of them identifies the people who keep your business going. If you don’t dig deeper into your database to measure retention by longevity, you won’t know if you are losing the people who matter most.
When we perform a customer retention audit, we often find that the company’s database growth is misleading. It looks like the business is growing because the number of buyers with purchases in the last twelve months is increasing. In reality, they are trading valuable long time customers for newbies who may be hit-&-runners or discounters. Knowing how your customer database is evolving is critical if you are planning to stay in business. If it is highly transitional, then your marketing expenses will escalate to maintain the same revenue level. Fortunately, you can change this by implementing a customer retention program that encourages loyalty and improves lifetime value.
If you like this post, please share it with your community. You may also like these:
- Customer Life Cycle Part 4: How to Identify Hit & Run Customers Before They Kill Your Business
- Customer Life Cycle Part 1: Your Customers are Changing – Does Your Marketing Still Fit?
- Customer Life Cycle Part 3: How to Keep Newbie Customers from Eating Your Profits
- Customer Life Cycle Part 2: How to Manage Customer Expectations
- Customer Life Cycle Part 5: Getting Value Out of Discount Customers
Ask Debra!
{ 2 comments… read them below or add one }
Its true that we tend to forget about our loyal customers. We know that they will still be there. They should be the ones that requires the most attention.
Amber King recently posted..Client Testimonials 2
Exactly!
Thank you Amber.
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