Increasing Customer Loyalty

The catalog has been the workhorse of direct marketers since Hammacher Schlemmer, Montgomery Ward, JC Penny and Sears began selling to frontier settlers (or that is how the legend has been spun for me.) Since then a lot has changed, yet at the same time, a lot has not. Digital printing and online delivery of catalog content has revolutionized the cost and customer ordering structure of this business. But the objective is still to engage customers and prospects, get them to look at products, increase purchase intent and then make a purchase. Simple concept, yet often very complicated. The focus for print catalogs is finite; the opportunity infinite.

 

Today the print catalog is still a powerful tool that contributes to converting the coveted sale. Although it no longer stands alone, it feeds the mix of outbound marketing channels, including email, phone, text, and social media. Additionally, the impact of the catalog on consumer's lives and the company's database can vary wildly, depending on the data, segmentation analysis and lifecycle channel understanding that goes into the targeting of those that will receive a company's catalog.

 

Certainly there is skill in the development process and execution that can generate substantial revenue from catalogs. But that revenue by itself pales next to the opportunity of using a print catalog to feed a multichannel retail engine, revving on customer data and its relevant opportunity for high-octane cross-promotions and loyalty programs. The real opportunity is to move beyond the standard catalog mantra of R-F-M (recency of last purchase, frequency of purchases and monetary value of purchases) to segmentation by past purchases, channel preference, lifecycle stage, and next best offer modeling. This is made possible with a marketing database foundation that is fully integrated with all the touchpoints providing a single view of each customer. This view allows for analysis of the customer showing what they have done, what they will do and then showing if they actually did do it. The up-side is infinite.

 

The opportunity now is to use the catalog in the marketing mix for targeting those customers that are most likely to convert via the most relevant marketing “push”, while avoiding those we know will convert with just an email, postcard or on their own with no encouragement. The approach is as traditional as the print catalog, and as old-fashioned as thrift. But with the right mix of print, online, and even socially enabled marketing catalog marketers can  target the right customers with the right catalog to earn decidedly modern revenue. 

I saw another interesting research study today that reported that 50% of email users delete marketing emails within two seconds of opening them. That’s according to Litmus Analytics. I’d hate to be one of those companies. It means they’ve engaged half their customers powerfully enough to get them to take that necessary step. But it means the email content is failing.

Any company suffering from a high deletion rate has most likely made a critical mistake that relates to my June 19 post on improving retail email practices. That one pointed out the need to drastically improve your understanding of the customer lifecycle. All customers are not the same. They don’t buy the same products as their neighbor or colleague now, and they won’t have the same value to your company a year from now. Yet, too many companies send the same email to the same customer at the same time. That will crash your open rate for sure.

I’ll also bet that companies who have high deletion rates do not consider the value exchange inherent in email marketing. You, the retailer, are sending your customers much more than an email. You sending them communications that promises value. They provide value by giving you their money, and maybe even an ongoing stream of information. If you are not giving them a valuable communication in return, of course they aren’t going to you’re your email or share it. They’ll hit the delete button as a force of habit. And you have wasted precious time, effort, personnel and customer equity.

A commitment to value exchange means your company is going beyond asking a customer to join your list with the possibility that they will be invited to special events or extended a discount at some point. Retailing is much more immediate than that. You need to use email to make the customer feel special. And there’s no magic algorithm to do it.

Here’s three ways to improve what I call your value exchange quotient (VQ).

 

1. Base your frequency on customer data. If I say “buy” twice, that translates to “bye-bye.” Email cannot be yet another way to nag customers into a purchase or information-based relationship. Use customer data to understand how often different customers want to receive an email. It’s not about your email marketing program that says “blast the back-to-school discount every week starting August 15.” It’s about the customer data that indicates the email list members that have school-aged kids, and have responded to frequent emails in the past.
2.  Attach an offer. Even if you properly segment your list and send relevant timely messages, include a compelling offer. Just letting the customer know there’s a back to school offer is not enough. Offer a loyalty program if the customer has more than two kids, for example. Offer a discount for holiday purchases to keep the back-to-school customer coming back.
3. Work hard and work smart. I use the exercise analogy. The guy who’s 30 pounds overweight and drinking beer every night in front of the TV is not going to run a marathon next week. But he could go for a walk instead of drinking beer. If you have not been running an email program that extends value now, don’t expect that you will win awards for one next month. But you can begin to identify the communications that will be valuable to them and move customers toward higher value to your company. That takes hard work, rigorous analysis, and always striving for the next level of value. 

Here at Customer Portfolios we’re feeling a little more than vindicated about our bullish view on e-commerce lately. Today comScore issued a report that shows 4 out of 5 US internet users visited a retail site during the month of November. For some categories such as consumer electronics, that’s a 33 percent jump over 2008. Overall holiday business was up four percent online, which is a good number considering the economy. According to a report in The New York Times on January 7, The industry collectively turned in a 2.9 percent year-over-year sales increase at stores open at least a year, according to Thomson Reuters. Some 75 percent of retailers beat analysts’ estimates — the most companies to do so since March 2007. Several retailers — including Macy’s, Nordstrom, Aéropostale, TJX Companies, Ross Stores, American Eagle Outfitters and Limited — expressed their growing confidence by raising their earnings estimates.

 
Here’s why we feel vindicated. This number, and some other success stories show, that it is customer engagement that will attract and keep customers. If a consumer visits a retail website, it’s because they are researching products, reacting to a brand or simply engaging with the retail brand experience. In our experience, consumers do not go to a website to earn points on a retail entitlement program. And it is not in the retailers best financial interest to push a loyalty program online when that program may or may not generate incremental business. Retailing is about excitement over entitlement. Look at Amazon (of course), which did not log its best holiday season because of a loyalty program, but because they did a great job using a new product (Kindle) to drive traffic and generate excitement.

The companies that do well in e-commerce understand that the future state of customer loyalty, behavior-based customer loyalty is based not on predictable behavior from the customer and the company, but on breaking the predictable patterns from the customer and appreciating those most valuable customers with exciting experiences, goods, and or services. Customers should not do the math or even understand the math around customer loyalty programs, they should be excited by them.


The ability to execute exciting loyalty programs depends on a customer command center, which must go beyond feeding simple revenue transactions. It needs to define and measure the more subtle ways in which customers share information and how often they touch a brand across all channels. Customers may sleep but customer information never rests. That’s where the goals of the company need to meet and use the wealth of information.

Here at CP we call this constant customer information “Lights-Out” marketing.  It can automatically execute programs that are relevant to the customer and more importantly relevant to encouraging and rewarding behavior that syncs with the companies marketing and sales priorities at that moment. Lights-Out programs will be executed if there is just one customer that meets those criteria or a million. The programs will be targeted even as the customer grows and their behavior modifies or the loyalty behavior changes. The integrated command center is a closed-loop marketing architecture that automates triggered programs and optimizes the relevance, frequency, and timing of marketing communications.  As stated earlier, customer information is easy and common. Using it to encourage profitable behavior is an art and a science.