Archive for the ‘Mktg – CRM’ Category

How to Stop Customers Before They Defect

March 27, 2009

Excerpted from Ad Age, “Are Your Customers About to Defect?” By Chris Dickey, March 16, 2009

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In today’s tough economic environment, the most precious asset an organization has is its current customer base. And maximizing returns on that asset begins with a solid retention strategy … it is possible to curb customer defection before it’s too late. Here are three ways to maximize customer value by decreasing defection.

1. Determine the warning signs. This begins by developing a predictive model to identify the behavioral changes that are precursors to defection. The variables that predict defection, churn and other negative behaviors are often, but not always, intuitive: usage (recency and frequency), average ticket, satisfaction, visits, engagement. A model can identify the most significant variables … so the marketer knows which to monitor …

For example, the model may indicate that usage is the most meaningful variable in predicting defection, and that a 20% change in a given time period exceeds the threshold of concern and is, indeed, a warning sign to be concerned about …

2. Track and monitor changes to warning signs. Once marketers know which customer behaviors to focus on and what levels of change should be cause for concern, they can isolate and track behavior changes over time. They can then monitor those changes in real time by setting up automated tracking processes within a data warehouse.

Marketers can monitor behaviors with database-mining software and view them at a macro level using dashboards.

3. Develop a trigger-based engagement strategy to address behaviors in real or near real time. Marketers can actively intervene before a warning sign becomes a real defection. A trigger strategy must be developed over time, testing and optimizing to see which interventions can most quickly reverse negative behaviors. Interventions should be built around a highly relevant and dynamic message, an offer of relevant and significant value communicated in a channel that takes advantage of real-time data … 

Trigger-based programs are generally easy to set up and automate, and they are highly measurable. They can be geared to a wide variety of customer behaviors, and business rules can be developed to change the message, offer or channel based on other factors beyond just the behavior … By understanding the key warning signs within your customer-behavior data and developing proactive trigger-based programs to intervene, you can more precisely hone your marketing effort to those communications that drive the highest incremental return on investment …

Examples of Warning Signs and Thresholds of Concern

A member routinely visits three times a week for six months. In the past two weeks, usage is down 30%.
A retail customer’s average ticket is in the top 20% range. Her average ticket drops 10% to 20% in a month.
A top customer rates you at five consistently. Overall satisfaction drops from five to four in two consecutive quarters.
A “best” customer visits your website weekly, with an average engagement time of 20 minutes. Average time spent on the site falls 30% in three weeks.

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Full Article:
http://adage.com/cmostrategy/article?article_id=135269

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Using card member databases to protect consumers and boost relationship marketing

February 20, 2009

Excerpted from MSNBC.com, “Dial-a-recall? Stores use cards to warn buyers” by JoNel Aleccia, January 23, 2009

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Jon Lowder usually disdains computer-generated telephone calls but when he got two this week from Costco, he didn’t mind.

The giant warehouse retailer was dialing Lowder to warn him that two brands of peanut butter sports bars he bought for his kids had been recalled as part of a growing salmonella food poisoning scare.

“They’d scoured their database and found any members who had purchased Clif Bars from them and then called them to let them know that they should dump those Clif Bars,” said Lowder. “Did I mention I love Costco?”

Certain shoppers are getting personalized warnings from the stores that sold them. They’re customers who hold membership cards at places such as Costco, or “loyalty cards” used to access discounts and services at some grocery stores.

About 1 million of Costco’s 54 million card-carrying members got calls about peanut butter products this week.

And in the Northeast, the Wegmans regional grocery store chain completed more than 17,000 calls about potentially tainted ice cream on Tuesday, and nearly 3,000 calls about suspect peanut butter cup candy on Thursday, all to holders of the store’s “Shoppers Club” cards who bought the affected items.

“It was really amazing that so many customers had no idea about the recall.”

The outreach is part of a small but growing trend that raises questions among consumer privacy advocates but draws praise from shoppers warned away from suspect products.

Chalk up a victory to “relationship marketing,” in which retailers try to woo consumers with personal reasons to seek their stores. In the case of food safety outreach, it’s a win all around.

But that confidence may come at a cost, noted Alessandro Acquisti, assistant professor of information technology and public policy at Carnegie Mellon University. He said he appreciates the constructive use of consumer data to warn about food poisoning, but worries about less benevolent actions.

“In this case, many consumers would be happy their information was used that way,” said Acquisti, “But they may be very unhappy if that same data is used to send them advertising they don’t want or if it is used in other ways they don’t want.”

Costco started making phone calls within the last two years, after a decade of sending letters about recalled items.

The effort isn’t comprehensive. Costco makes calls only for items identified as potentially serious or deadly Class 1 recalls by federal officials. Calls can only be made to consumers who provide accurate phone numbers and, in the case of Wegmans, only those who provide landlines.

Edit by NRV

Full article:

http://www.msnbc.msn.com/id/28802536/ 

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Feeling special is one thing … really special is another

February 12, 2009

Excerpted from the Journal of Consumer Research, “Feeling Superior: The Impact of Loyalty Program Structure on Consumers’ Perceptions of Status.” by Xavier Drèze and Joseph C. Nunes, April 2009.

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How special does that gold card offered by a hotel or airline make you feel? A new study explores the connection between status and loyalty. Many businesses create loyalty programs to confer a sense of status to their customers. Examples are platinum, gold, and silver charge cards, or red and blue membership levels. The study provides insight for planning programs that enhance consumers’ perception of status.

The authors studied the limits of customer loyalty, testing how far an organization can go in adding status levels to a loyalty program before customers feel they are not so special anymore.The authors tested a variety of options for expanding loyalty programs. They added tiers and people to customer loyalty programs in varying combinations to determine how people would feel if an organization added people to a top-tier program. They asked respondents how they felt when they added more tiers on top of them (platinum on top of gold), or added more tiers below them.

“We find that increasing the number of elites in the top tier dilutes their perception of status, but adding a subordinate elite tier enhances their perceptions of status.”

“Thus, if the firm creates a larger top tier while adding a second status tier rather than persisting with a single small top tier, it can recognize more customers without decreasing the perceptions of status among its most elite.”

In other words, being in the gold level is more special if there is a silver level below.

“A possible drawback a firm always confronts when providing preferential treatment to an elite few is whether it might disenfranchise the masses. Our study shows this concern to be unfounded. We find that given the choice between alternative firms, respondents favor companies that offer elite programs even when it is clear they would not qualify for the lowest elite tiers.”

“In other words, those at the bottom of the pyramid do not begrudge the success of those at the top.”

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Full article:
http://www.xdreze.org/Publications/superior.html 

 

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How much of a discount? Depends on how much you're worth.

January 22, 2009

Excerpted from WSJ “Marketers Reach Out to Loyal Customers” by Emily Steel, November 26, 2008

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With the critical holiday-sales season at hand, there’s a new character joining Santa and his elves on the advertising circuit: the analytics geek…Marketers…are mining their customer databases and reaching out to loyal consumers with targeted ads, instead of relying on the traditional yuletide blitz.

Rather than create one TV commercial or send out a single, shotgun email promotion, uneasy retailers…are tapping statistical models and other technologies to send specific consumers promotions based on what is potentially on their shopping lists…

Persuading a satisfied customer to return is cheaper than attracting a new one…in the struggle to do more with less, that concept is becoming even more important. Acquiring a new customer costs about five to seven times as much as maintaining a profitable relationship with an existing customer…

Sears and Ogilvy have developed a system to identify the categories of merchandise Sears customers have purchased in the past and to measure the chance that they will buy those sorts of items again this season. That helps Sears determine the type of emails and point-of-sale offers to aim at individual customers. When customers buy an item online, Sears confirms the purchase with an email including a promotion tied to that product. A person who buys a new appliance at Sears.com might get an email offering a deal on the store’s extended-warranty program.

Sears is even offering customers differing discounts based on its predictions about the value those customers will bring to the company in the long term.

Companies have long tracked the habits of their consumers, but they have been overwhelmed by the reams of data they collect. Only fairly recently has the technology become sophisticated enough to allow marketers to link all the data points together — and work effectively with their advertising partners to leverage that data in ad campaigns…

Even if marketers get closer to predicting what’s on consumers’ wish lists, it’s going to be a tough sell, with people strapped for cash. Growth in e-commerce sales has already slowed significantly this year…

Edit by SAC

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It is clear that marketers can benefit from targeting customers based on Customer Lifetime Value (CLTV).    This is especially important for retailers facing a challenging economic situation with trimmed advertising budgets and customers who are cutting their spending.  The retailers that take advantage of the technology available to more accurately calculate CLTV and then target the more profitable customers have a better chance at a profitable holiday season. 

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Full Article:
http://online.wsj.com/article/SB122766322705958805.html?mod=article-outset-box

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AMS: Cutting Cell Phone Churn

December 3, 2008

Excerpted from the McKinsey Quarterly, “New ideas for customer segmentation”

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Customer life-cycle management, though a likely and proven strategy, presents a vexing challenge to prepaid mobile operators. They often resort to blanket promotions that risk destroying value by needlessly cutting prices or offering free services.

One alternate way is for marketers to look more closely at their billing systems, which contain a wealth of information; to create segments, often as small as 100,000 subscribers; and to plan tailored promotions for each group.

The exhibit below illustrates one prepaid mobile operator’s strategy to reduce churn rates by segmenting subscribers through their usage patterns. Tracking the number of days before a customer is “lost” helped the company to introduce promotions most likely to increase usage and retention while minimizing revenue lost to scattershot offers and unnecessary discounts.

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Edit by DAF

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Full article:
https://www.mckinseyquarterly.com/newsletters/chartfocus/2008_11.htm

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