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www.sterlingmarketing.co.uk www.ivantage.co.uk Developing and Retaining Customers

4 Developing & Retaining Customers Profitable Multi Channel Marketing March 2010

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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?

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Page 1: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

www.sterlingmarketing.co.ukwww.ivantage.co.uk

Developing and Retaining Customers

Page 2: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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

Page 3: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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Defining your customer

Page 4: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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

Page 5: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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Customer Acquisition vs Customer Development

Page 6: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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

Page 7: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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– …………..

Page 8: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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

Page 9: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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Developing customers

Page 10: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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Developing customers

• You’ve just spent money on acquiring a customer• What do you do next?

Page 11: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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?

Page 12: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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

Page 13: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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.

Page 14: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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Segmentation

Page 15: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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

Page 16: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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

Page 17: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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?

Page 18: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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?

Page 19: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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Understanding costs

Page 20: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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Understand your costs

Customer Mailing

Affiliates

PPC

Page 21: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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Particularly in the ‘grey’ areas

Page 22: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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Contact frequency

Page 23: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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

Page 24: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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

Page 25: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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Optimising performance

Page 26: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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

Page 27: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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

Page 28: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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

Page 29: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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Customer strategies

Page 30: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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

Page 31: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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)

Page 32: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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)

Page 33: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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

Page 34: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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.

Page 35: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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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

Page 37: 4   Developing & Retaining Customers   Profitable Multi Channel Marketing   March 2010

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Data & Testing