The greatest challenge for retailers today is customer churn, driven by how easy it is to switch and how many choices (quality, price and service) that are out there. Customer churn is not nearly as inevitable as most retailers and others might think. In fact, churn and attrition are preventable problems that require great focus and a carefully-thought-out strategy. After all, the cost of acquiring new customers in the digital age remains relatively high while the cost of retaining the ones you have, especially the good ones, has become much cheaper; it’s a far easier process as well.
In a digital world, it’s all about where you put your resources.
Know Your Customer
Preventing churn and attrition starts with knowing which customers have the highest lifetime value. Only when you know where each customer falls can you decide how much retention effort is appropriate. This is where customer loyalty marketing enters the picture as a highly cost-effective, interactive way to decide what resources to commit and where. Customer loyalty marketing takes the guesswork out of who to retain and how to go about it.
And the market matters less than you’d think. Regardless of industry, churn management through customer loyalty marketing is remarkably consistent. It comes down to knowing the risk factors for churn, modeling churn’s dynamics, knowing the cost and benefit, being proactive and timely with intervention, and constantly seeking ways to measure and improve the overall system. If this came down to a series of manual processes, we’d be in trouble. Fortunately, it doesn’t.
Know the Tools and Techniques
Customer loyalty marketing in the digital age is a combination of powerful tools and smart techniques. Analytics is the basis for an attrition propensity index that drives action in the right moments, based on key factors proven to affect churn. That index shifts depending on real-time input from industry-specific factors like time remaining on contract (telecom) to distance from the store (retail). The takeaway is that each factor has a role to play in how an attrition propensity index morphs over time and customer life events.
Lastly, automation of customer loyalty marketing means more than points and plastic cards. Tracking the factors for churn and attrition is the job of a technology platform.
This post first appeared on the Loyalty Lab Blog and has been lightly edited.