Customer retention, regardless of industry, is intrinsic to long term success (and survival). Even in industries that put considerable time, effort and budget into acquisition, keeping what you’ve paid for is essential. A robust customer retention strategy will help you to do that.
But retention is only part of the equation as not all customers are born equal. Especially in industries like eCommerce where, historically, customers are trained to look for discounts.
Because eCommerce was always touted as ‘cheaper than the high street’ that’s the expectation every consumer has when they go online.
Amazon’s success has been built on the core principles of ‘right product, right price’ and relies heavily on its add on services to retain customers.
Its monolithic size means it doesn’t need to work hard to retain customers, or worry too much about which customers are the most profitable. Its size and global reach allows it to analyse customers based on averages.
The vast majority of businesses, however, don’t have this luxury. And arguably, even if they did, they shouldn’t take advantage of it.
Lumping customers together into broad, generic, cohorts means communications become broad and generic. As do offers, incentives, rewards and loyalty programs.
This effectively cripples your ability to engage with, and retain, your most profitable customers.
Identifying your most Profitable Customers
Depending on the CRM or CDP a business is using, identifying profitable customers will be easier for some than others.
Moreover, it’s less about which customers spend the most money, rather which customers make you the most profit. By using your first party customer data you can analyse and identify which customers are worth keeping.
The type of industry you’re in plays a part when determining criteria. For eCommerce, profitable customers shop with you all year round and primarily purchase items at full price. As opposed to customers who may spend more but only buy discounted items.
Needless to say, discounted items are less profitable, even when bought in bulk.
The customers who pay full price are valuable to you not just in terms of profitability. If they are willing to pay full price for your products then they see the value in spending with you. That could be because of your brand strategy, social media presence, customer service or all of the above.
For industries like sports betting and gaming, it’s a little harder to reconcile profitability with retention. The most profitable customers are the ones who deposit the most but win the least.
This makes keeping players for the long term a challenge. Historically the industry has relied heavily on incentives to attract players to their platforms. This drives up the cost of acquisition, dramatically reducing each player’s lifetime value and profitability.
However, with the customer retention strategy, it’s possible to retain players for longer regardless of whether they win or lose.
The players who deposit the most aren’t necessarily your most profitable customers because if they lose too much they’ll leave and never come back.
Rather it’s the players who keep coming back regardless of winning or losing because they enjoy the experience.
Value based Customer Retention Strategies
Retaining customers purely on the grounds that they enjoy dealing with you, is the gold standard. It means you have cultivated a relationship of relevance and value, rather than transaction.
Essentially if your product, service and experience is so overwhelmingly positive the cost is almost incidental. Sustaining relevance with customers reduces the risk of churn and the more value you can add the more likely they are to spend.
Shifting focus away from the transaction allows businesses the opportunity to deliver on a great experience instead. The better the experience the greater the propensity the customer has to convert.
Identifying how you can deliver the most value in the ways that matter most to the customer is a challenge. And it varies not only from one industry to another but by business too.
Fast fashion brands benefit from both an engaged customer base and regular purchases.
Car dealerships on the other hand are unlikely to get regular repeat business. Instead they need to add value in other ways to win the aftersales bookings.
For SBG operators, value can be delivered in a variety of ways including personalised goals and rewards or just keeping players up to date with how their team is fairing via real-time sports feeds.
The challenge is that value is relative so what is valuable to one member of your audience, won’t be to another.
Despite this, focusing on delivering value as part of your customer retention strategy is still the best way to ensure long term engagement, and higher customer lifetime value.
An omnichannel marketing approach is the most effective way of delivering value in a customer-centric way, while still driving conversions.
Leveraging Data in Customer Retention Strategies
To deliver the kind of value required to form any kind of customer retention strategy, businesses need data. And lots of it.
First party data is a good place to start. Every time a customer interacts with your website or app you’re accumulating more of it. From search queries to sizing information. And games played to deposits made.
All the information is there to get a high level of insight into the way your audiences behave. This can be segmented and placed into different flows to drive engagement.
The more your audience responds the more you learn. And the better position you’ll be in to start to gather zero party data.
Zero party data is information that your audience gives you either through answering a survey or stating certain preferences on your platform. Zero party is intent. First party data is historical action.
Blended together you get the clearest possible view of what your audiences like and what they’re likely to respond to based on preferences and past actions.
Once you have this comprehensive Single Customer View you can analyse and segment your customers or players into buckets. The depth of data will make it quick and easy to identify which of your customers are the most profitable.
From there you can build out customer retention strategies specifically to meet their needs, add value, build trust and boost customer lifetime value.
An easy way of engaging with your most profitable customers is a loyalty programme, or a VIP programme.
Most loyalty programmes are points based systems that ‘reward’ customers as they spend money. These systems are inherently bad. Primarily because they’re not loyalty programmes. There’s no loyalty involved in giving pennies on the pound/euro/dollar for spending money.
Customers aren’t stupid – they know they’re getting a bad deal but something is better than nothing. But as soon as a cheaper alternative comes along, those customers will leave in their droves. Because money off once a quarter isn’t as good as consistent savings.
Moreover, discounts and vouchers undermine profits and reinforce the view that customers should only spend when something is cheap.
Loyalty programmes are meant to be exactly that. They’re meant to reward loyalty whether that’s customers consistently spending or players consistently making deposits and engaging with platforms.
Businesses have so much data on their various customers, and the means to gather more. Therefore, creating a personalised loyalty programme, complete with bespoke communications and rewards is relatively straightforward.
Simply, segment the customer data and build out the workflows. Football fans can not only receive a content rich email but it can be in the colours of their team.
Rewards for games played or deposits made can be prize draws to win seats to a home game of their choice.
For retailers, exclusive products, limited edition merchandise, behind the scenes content or invitations to shows are effective ways of rewarding loyalty.
It might take more work to execute but by focussing your loyalty programmes on your most profitable customers you’re off setting much of the costs. Notably because they’re not asking to be rewarded in the first place. Therefore any rewards you do offer will have a far greater impact.
Put your Data to Work
To build a core of loyal, profitable customers, you need to build robust customer retention strategies. But the foundation of this needs to be reliable and equally robust customer data.
Consolidate your data into one place, analyse and segment the data and build out engagement campaigns. And you need to do it in real-time. Anything less and you run the risk of your communications being too slow or irrelevant. Irrelevance is the driver for churn.
To learn more about how you can consolidate and leverage your customer data to retain your customers and drive conversions, request a demo of our omnichannel customer engagement platform with built-in CDP.