4 developing & retaining customers profitable multi channel marketing march 2010
DESCRIPTION
Developing & Retaining CustomersSo, you’ve acquired a customer (or at least someone who’s bought once). How do you go about converting them into a truly valuable ‘long term’ customer and how do you evaluate how much to spend on them and when to stop?TRANSCRIPT
www.sterlingmarketing.co.ukwww.ivantage.co.uk
Developing and Retaining Customers
www.sterlingmarketing.co.ukwww.ivantage.co.uk
What we’re covering
• Defining the customer• Developing customers• Segmenting your customers• Understanding your costs• Contact frequency• Optimising performance• Contact strategies• Data and Testing• Summary
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Defining your customer
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Who are we talking about?
…. you know about and havebought from you
….. you know about and have never bought from you
….. you know nothingabout and have bought from you
You know nothingabout and have never
bought from you
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Customer Acquisition vs Customer Development
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How does a customer define you?
• Customers buy from you because– You provide a product or service they want at a point in
time– At a price they consider realistic– With a service that they find acceptable– And because they trust you (or at least don’t distrust you)
• Generally they won’t buy from you any more if any one of these elements is no longer true
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Defining ‘a customer’
• ‘Customer’ is a very broad concept• Many ways to define a customer
– buyer– multibuyer– active– best– lapsed– new– profitable– …………..
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Defining ‘a customer’
• ‘How you define ‘customer’ in your business depends on a variety of factors
• Such as:– Cost of recruitment– AOV– Purchase frequency– Lifetime value– Contact cost
• Final analysis - its all down to profitability
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Developing customers
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Developing customers
• You’ve just spent money on acquiring a customer• What do you do next?
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Developing customers
• How do you ‘tempt’ customers to buy more?• How do you decide which customers are most likely to
buy?• How do you decide on the most appropriate
temptation(s)?• How do you decide how much to spend and when?
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Developing customers
• The big advantages of marketing to customers are:– You know who they are– You know what they bought– You know may know what triggered the purchase– You certainly know how they bought it
• Developing customers is about using, and building on, this information to drive sales through a planned contact strategy
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Developing customers
• Who’s going to give the best return?• Most common modelling is RFM
– Recency– Frequency– Monetary
• More complex modelling can refine this but get the basics right first.
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Segmentation
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Segmenting your customersSales per Book
RFM Bands
£0.00
£1.00
£2.00
£3.00
£4.00
£5.00
£6.00
£7.00
00 - 06Month
07 - 12Month
13 - 18Month
19 - 24Month
25 - 30Month
31 - 36Month
37 - 42Month
43 - 48Month
49 - 54Month
55 - 60Month
61 - 66Month
67 - 72Month
73Month +
Time Since Last Purchase
Sa
les
pe
r B
oo
k 4x+ Multi Total
3x Multi Total
2x Multi Total
Single Total
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Segmenting your customers
00 - 06 Month
07 - 12 Month
13 - 18 Month
19 - 24 Month
25 - 30 Month
31 - 36 Month
37 - 42 Month
43 - 48 Month
49 - 54 Month
55 - 60 Month
61 - 66 Month
67 - 72 Month
73 Month +
4x+ Multi Total £5.38 £3.20 £2.51 £1.73 £1.33 £1.07 £0.40 £1.86 -£0.74 £0.47 -£0.31 £1.40 -£1.04
3x Multi Total £2.41 £1.24 £0.97 £1.14 £0.15 -£0.04 £0.16 £1.17 £0.07 -£0.84 -£0.74 -£1.01 £1.61
2x Multi Total £1.48 £0.99 £0.27 £0.40 £0.05 £0.90 -£0.28 £0.03 -£0.41 -£0.41 -£0.10 -£0.69 -£0.92
Single Total £0.64 £0.16 £0.15 £0.04 -£0.07 -£0.05 -£0.05 -£0.32 -£0.19 -£0.03 -£0.20 -£0.29 -£0.54
• Which groups contribute most - and least
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Segmenting your customers
00 - 06 Month
07 - 12 Month
13 - 18 Month
19 - 24 Month
25 - 30 Month
31 - 36 Month
37 - 42 Month
43 - 48 Month
49 - 54 Month
55 - 60 Month
61 - 66 Month
67 - 72 Month
73 Month +
4x+ Multi Total £5.38 £3.20 £2.51 £1.73 £1.33 £1.07 £0.40 £1.86 -£0.74 £0.47 -£0.31 £1.40 -£1.04
3x Multi Total £2.41 £1.24 £0.97 £1.14 £0.15 -£0.04 £0.16 £1.17 £0.07 -£0.84 -£0.74 -£1.01 £1.61
2x Multi Total £1.48 £0.99 £0.27 £0.40 £0.05 £0.90 -£0.28 £0.03 -£0.41 -£0.41 -£0.10 -£0.69 -£0.92
Single Total £0.64 £0.16 £0.15 £0.04 -£0.07 -£0.05 -£0.05 -£0.32 -£0.19 -£0.03 -£0.20 -£0.29 -£0.54
• And how many customers in each?
95% of profitable customers?
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Segmenting your customers
00 - 06 Month
07 - 12 Month
13 - 18 Month
19 - 24 Month
25 - 30 Month
31 - 36 Month
37 - 42 Month
43 - 48 Month
49 - 54 Month
55 - 60 Month
61 - 66 Month
67 - 72 Month
73 Month +
4x+ Multi Total £5.38 £3.20 £2.51 £1.73 £1.33 £1.07 £0.40 £1.86 -£0.74 £0.47 -£0.31 £1.40 -£1.04
3x Multi Total £2.41 £1.24 £0.97 £1.14 £0.15 -£0.04 £0.16 £1.17 £0.07 -£0.84 -£0.74 -£1.01 £1.61
2x Multi Total £1.48 £0.99 £0.27 £0.40 £0.05 £0.90 -£0.28 £0.03 -£0.41 -£0.41 -£0.10 -£0.69 -£0.92
Single Total £0.64 £0.16 £0.15 £0.04 -£0.07 -£0.05 -£0.05 -£0.32 -£0.19 -£0.03 -£0.20 -£0.29 -£0.54
• And how many customers in each?
95% of profitable customers?
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Understanding costs
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Understand your costs
Customer Mailing
Affiliates
PPC
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Particularly in the ‘grey’ areas
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Contact frequency
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Contact Frequency
0-6 Month Multibuyers6 Month Contribution At Differing Contact Frequencies
£0.00
£5.00
£10.00
£15.00
£20.00
£25.00
£30.00
£35.00
£40.00
2 4 6 8 12 26
Contact Frequency (Weeks)
Co
ntr
ibu
tio
n
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Contact frequency
12 -24 Month Buyers6 Month Contribution At Differing Contact Frequencies
-£4.00
-£3.50
-£3.00
-£2.50
-£2.00
-£1.50
-£1.00
-£0.50
£0.00
£0.50
£1.00
£1.50
2 4 6 8 12 26
Contact Frequency (Weeks)
Co
ntr
ibu
tio
n
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Optimising performance
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Optimising Customer Performance
• For the vast majority of your customer base basic analysis tools will work fine.– RFM analysis– Source of initial order– Possibly initial product category
• This will identify both– Your existing ‘best’ customers– Those customer types which provide the best ROI and thus
the ones you want to target and encourage
• Once you’ve got this data and acted on it you could look at more sophisticated modelling – it will fine tune the boundaries but is unlikely to change the general approach
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Optimising Customer Performance
00 - 06 Month
07 - 12 Month
13 - 18 Month
19 - 24 Month
25 - 30 Month
31 - 36 Month
37 - 42 Month
43 - 48 Month
49 - 54 Month
55 - 60 Month
61 - 66 Month
67 - 72 Month
73 Month +
4x+ Multi Total
3x Multi Total
2x Multi Total
Single Total
• Monitor the structure of your database• If the numbers in the top left are rising you’re winning
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Optimising customer performance
00 - 06 Month
07 - 12 Month
13 - 18 Month
19 - 24 Month
25 - 30 Month
31 - 36 Month
37 - 42 Month
43 - 48 Month
49 - 54 Month
55 - 60 Month
61 - 66 Month
67 - 72 Month
73 Month +
4x+ Multi Total £5.38 £3.20 £2.51 £1.73 £1.33 £1.07 £0.40 £1.86 -£0.74 £0.47 -£0.31 £1.40 -£1.04
3x Multi Total £2.41 £1.24 £0.97 £1.14 £0.15 -£0.04 £0.16 £1.17 £0.07 -£0.84 -£0.74 -£1.01 £1.61
2x Multi Total £1.48 £0.99 £0.27 £0.40 £0.05 £0.90 -£0.28 £0.03 -£0.41 -£0.41 -£0.10 -£0.69 -£0.92
Single Total £0.64 £0.16 £0.15 £0.04 -£0.07 -£0.05 -£0.05 -£0.32 -£0.19 -£0.03 -£0.20 -£0.29 -£0.54
• RFM would lead you to focus on the top left hand• More sophisticated modelling, such as regression analysis, might find subgroups to rule in or out linked to other variables• But this is more likely to impact the yellow areas than any other
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Customer strategies
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Customer strategiesContact methods
• Contact drives sales– Variety of Contact Mechanisms
• Mailed catalogues• Other mailings (leaflets / postcards)• Bounceback catalogues• E-mail• Outbound telephone• Text
– And these can be enhanced with• Offers• Promotions• Personalisation
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Customer strategies
• Different types of customer will be best served by differing strategies. For example:– New customers (recent single buyers)– Existing customers (multibuyers)– Best customers (recent 2+ multibuyers)– Fading customers (6 - 9 month buyers)– Lapsed customers (9 month + buyers)
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Customer strategiesNew customers (recent single buyers)
• Objective: Convert to Multi Buyer– Welcome e-mail as soon as order likely to be delivered
featuring:• Greeting to the business• Feedback form asking to comment on experience• Product ‘offer’ related to add on to first purchase
– Catalogue mailing within 4 weeks– High frequency contact strategy (most frequent mailing
and e-mail strategy)
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Customer strategies Existing customers (multibuyers)
• Objective: Convert to higher level multibuyer and maintain recency value– High frequency contact strategy by mail and e-mail– Introduce graduated promotions to contacts after first 1/3
of season
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Customer strategies Best customers (recent 2+ multibuyers)
• Objective: Convert to yet higher level multibuyer and maintain recency value
• These are the most valuable customers AND the ones that like your product and service the most
• The aim should be frequent contact but there should be less need to promote– High frequency contact strategy by mail and e-mail– Tailor e-mail / personalised print communication to reflect
‘special’ status– Exclusive product offers– Delay promotion to last 1/3 of season and focus on
exclusivity / first chance to get offers.
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Customer strategies Fading customers (6 - 9 month buyers)
• Objective: Catch before they fade away– Lower frequency contact strategy– More use of e-mail– Stronger ‘come back’ promotions– Mail at start of season and with Sale catalogues
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Customer strategies Lapsed customers (9 month + buyers)
• Objective: last chance to get back as buyers before abandoning– Low frequency contact strategy– Heavy use of promotions / offers– ‘Last chance’ call to action
• Assess seasonality (e.g. gift buyers at Christmas) and tailor contacts accordingly
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Data & Testing