Customer Retention

Customer Retention How to use digital media & eCRM to get up close and personal with YOUR customers Thom Poole Jonathan Richards September 2007

Agenda
Understanding how to integrate digital media & direct marketing
Practical methods for identifying & targeting the right customer
Testing your offline and online methods
Measuring the return on investment
Objective setting

Why us? A quick biography of Thom Poole & Jonathan Richards

Thom Poole
Web & digital marketing trailblazer since 1992
Taught digital marketing for 9 years
e-Commerce
Web design for marketers (and the terrified!)
CRM
Written papers on ‘Data Privacy’, ‘The Marketing Art of the Opt-in’ and ‘Trust in Business and Marketing’
Written a book on ‘ethical e-marketing’ called ‘Play It By Trust’
Held senior marketing positions at O2, Black & Decker and Hilti
Fellow of the Chartered Institute of Marketing & holder of an Individual Charter Standard in Marketing
Consultant & business mentor for digital marketing strategy and implementation

Jonathan Richards
Set up Centurion Management Systems in 1996
Specialising in business system implementations for mid-cap organisations
CRM
Human resource
Business Intelligence
Co-founder of Centurion Marketing Systems in 2000
Specialising in Market research software
Has managed systems implementations in UK, USA, South Africa and Australia.

Understanding integration Understanding how to integrate digital media & digital marketing

Definition of Marketing - CIM
Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitably
Customers are at the heart of the process
It is the study of the market forces and factors, and the development of a company’s position to optimise its benefit from them

Definition of Marketing - Alternative
Marketing is all about EXPLOITATION !
You learn all about your customers
Your products and technologies
Your competitors
Your economic environment
Your customers aspirations, etc, etc
And you exploit that KNOWLEDGE profitably
You give your customers what they want
What they think they want
What you can convince them they want
Thom Poole - 2000

Message alignment Buy This buy this Look here Register here

Communications model A linear model of communication (based on Schramm (1995) and Shannon & Weaver (1962) – from Fill (1999))

Brand identity system
A consistent brand identity system should be an early high priority investment because of the impact it can have on your sales and revenue. A brand identity system includes:
Conveys that you are trading viably
Attracts more clients
Increases your credibility
Increases “memorability”
Enables you to stand out
Makes your business look “bigger"
Improves your chance of getting venture capital or selling your business
Brands your business
Explains your company name
Endears your company name to your clients
Describes an unusual type of business
Differentiates you from your competition
Meets expectations
Demonstrates your commitment and pride in what you do

Layers of your brand
Brand foundation
Brand vision
Brand mission
Brand values
Brand basics
Brand identity
Brand content
Brand marketing
Brand offerings
Brand experience
Competitor comparison
Brand positioning
Brand differentiation
Internal measures
Brand environment
Brand promise
Brand values
External measures
Brand awareness
Brand gap
Brand maintenance
Brand alignment
Brand management

Characteristics of Successful Brand Identity
Uniqueness
Repetition
Consistency
Memorable
Meaningful
Clarity
Honesty
Personality
Professional
Trust

Campaigns

Extreme branding

Integrated campaigns
Communication in a cross media environment is becoming a force multiplier in driving the customer relationship
Create brand consistency
Easier to establish an integrated approach
Deliver personalised communication
Leverage interactive technology
Demonstrate accountability
Create customer value

Integrated campaigns – the way to go

O2 Advert © Thom Poole 2005

The relationship
Re -la-ti on -sh ip (r ĭ -l ā ' sh ə n-sh ĭ p')
n.
The condition or fact of being related; connection or association
Connection by blood or marriage; kinship
A particular type of connection existing between people related to or having dealings with each other: has a close relationship with his siblings
A romantic or sexual involvement
From: www.answers.com

Increase your profits!
Customer acquisition
Buy in lists, and communicate relevantly
Follow up professionally on enquiries
Customer retention
Provide a relevant relationship
Be and remain competitive
Understand customer drivers/motivators

Customer churn/defection
There are many reasons a customer or client may leave you, but the ones you will hear most often are:
Customers felt your pricing was too high or unfair
Customers had an unresolved complaint
Customers took a competitors offer
Customers left because they felt you didn't care

Value for your money
Before you spend your time and money going after new customers and clients you do not currently  have a relationship with consider the following statistics:
Repeat customers spend 33% more than new customers
Referrals among repeat customers are 107% greater than non-customers
It costs six times more to sell something to a prospect than to sell that same thing to a customer

Friendship = Trust
‘ People buy from their friends’
Trust builds loyalty
Trust will drive profit
Trust-focused value chain (adapted from Porter, 1998), Poole - 2002

Trust lifecycle Time Level of Trust Unaware Build Trust Confirm Trust Maintain Trust Register/Transact/Confirm Consider/Validation/Assess Browse/Search/Compare Trial Threshold Purchase Threshold Habit Threshold Untrust phase Extrinsic Intrinstic Recommendation © Poole (2005), adapted from Reynolds (2000)

Customer centricity
Know your customer: You can ’t always know each individual customer, but you can segment customers based on common characteristics. The key theme is that each customer has a specific set of needs
Align your resources: What resources are we talking about? Becoming customer-centric includes the alignment of your people and your company ’s structure, processes, technology, products, and services to the customer
Listen and respond: Most company’s conduct some form of customer satisfaction survey. However, simply administering a survey alone is not listening

Resource alignment - 1 Back-office personnel clearly recognise how they impact the customer experience. Everyone is a customer to someone else Back-office personnel detached from the customer Adopting the philosophy: “ T he customer ’s problem is my problem, and therefore, I will facilitate resolution ” “ N ot my problem ” syndrome Clear accountability and ownership of the customer Lack of ownership of the customer Measured based on customer success (e.g. satisfaction, retention, revenue, profitability, share of wallet) Measured on individual and departmental productivity (e.g. new revenue, calls answered) Rewarded for customer-centric behaviour. When deviation occurs outside of tolerance or a negative result occurs, coaching takes place to improve employees ’ future decision making Reprimanded for deviating from process Perform against policies and procedures, under-standing that they were designed to enable the customer to do business with you - n ot meant to be a customer obstacle. When exceptions occur, the objective is to determine how to meet the customer ’s need and facilitate meeting that need without placing the burden on the customer to figure it out Driven by script with no latitude to deviate on behalf of the customer All personnel are skilled in managing interpersonal relationships Not adept at managing interpersonal relationships Your people have the greatest influence on the customer experience Empower them to delight the customer People & structure Customer-Centric Requirements Realities Plaguing Non-Customer- Centric Companies Principle Resource

Resource alignment - 2 Customer ’s entire experience is managed holistically Customers managed on a transactional level (e.g., individual orders, inquiries, issues) Transparency/full disclosure provided to the customer Lack of information. Customer is not allowed to “l ook behind the curtain. ” Being easy to do business with. The customer is buffered from the intricacies of the organisation Organisation is difficult to do business with. Seams of the organisation are exposed to the customer Processes designed from the outside in to enable customers to do business with you Processes designed from the inside out, focused on intra-departmental efficiencies Be easy to do business with Process Customer-Centric Requirements Realities Plaguing Non-Customer- Centric Companies Principle Resource

Resource alignment - 3 Design the customer experience “b efore market” Products and services When launching a product or service, the customer experience is “d esigned ” in advance The customer experience is considered “a ftermarket ” in a reactive manner Needs of existing customers and improving their experiences are the primary driving forces Designed and launched based on features/ functions anticipated to capture “n ew revenue ” from “n ew customers” Implemented to enable customers to do business with you more effectively and efficiently Implemented with a focus on efficiency gains, resulting in obstacles for the customer Implemented to automate improved operating models and processes Implemented in response to business problems, automating existing bad practices Automate effective customer-focused practices Technology Customer-Centric Requirements Realities Plaguing Non-Customer- Centric Companies Principle Resource

The quest for customer-centricity
Locate your starting point
Customer awareness
Customer focus
Customer satisfaction
Customer value
Customer loyalty
Determine if your focus is where it should be
Establish a baseline
Re-assess how you segment and value clients
Identify profitable behaviours and the  factors that promote them
Put your face in front of the client
Review your roster
Flip the hierarchy
Strategise and execute
Source: www.destinationcrm.com

Customer-centric marketers see a higher ROI
The top performers:
Track customer behaviour
Use customer profitability modelling
Maintain centralised knowledge and data management systems
Possess real-time decision support, including business intelligence tools integrated with marketing and customer data, with higher frequency than benchmarked groups
Source: Aberdeen Group

Exercise
List the top 5 customer touch- points with your organisation
How effective are they?
You have 5 minutes

Exercise 5

Exercise 4

Exercise 3

Exercise 2

Exercise 1

Presentations
Please present your findings

Take a break Back in 15 minutes

Practical methods For identifying and targeting the right customer

Customer Relationship Marketing
Be relevant to your customers
Give your customers a reason to trust you
Build a community of customers who you can test ideas on
Use/exploit the knowledge you have about your customers
Align your organisation behind your relationship

Customer Relationship Management Why?
Build and strengthen customer relationships to keep them coming back
Provide value-added services that are difficult for competitors to duplicate
Improve product and service delivery processed
Increase staff awareness of customer needs
Reduce customer frustration by not asking the same questions over and over

Customer Relationships
This is a form of marketing that aims to create relationships with a company’s customers
It involves a process that records all the customer interactions and their outcome
Some complex systems can generate millions of lines of information each day
It is one thing to collect it, it is another to know what to do with it:
HEADLINE: CRM is dead!

Types of CRM E-CRM Propensity Modelling System Complex ERM System CRM System Contact database Simple rotodex

The three aspects of joined up CRM
Operational CRM - automation of support and customer interactions that include a company’s sales or service processes
Collaborative CRM - direct communication with customers that does not include a company’s sales or service representative (“self service”)
Analytical CRM - analysis of customer data for a broad range of purposes
Operational Collaborative Analytical

A word of caution!
Too many projects have gone astray by trying to do
too much too soon.

CRM selection
Have a CRM strategy because CRM initiatives launched without a strategy invariably cause pain
Choose the right CRM partner
Understand the technology
Focus more on business processes than technology
Don ’t try and design the perfect CRM system that will meet 100% of each and every person ’s wish list
Do not try to change the whole organisation overnight
Think about the user interface and plan it carefully
Get help and expect to pay for CRM system implementation
Make it somebody ’s responsibility to own the data, and to make sure that it is correct and complete
User acceptance is the single most important success factor for a CRM system so invest in training
Source: E-CRM Solutions Ltd (www.e-crm.co.uk )

Data collection Know what you know

What do you want to know?
Are you attracting new customers
What is the health of your lead qualification process
How proficient is your conversion to buyers
Does your marketing encourage purchase
What behaviour indicates that a prospect is ready to buy
How do customer segments differ
What attributes describe your best customers
How can they help you target other prospects
How can profiling help you cross-sell and up-sell
What is your churn rate
How do you measure loyalty
Sterne, J. WebMetrics. 2002 pp29

Know what you know!
Most organisations already know their customers well
They just don’t make the most of it!
They are already doing business with them, so they have started to understand the customer
Need to consolidate what is already known
Fill in the gaps

Know what you know!
Start with the basics
Data provided by customer
Transactional data
Third party data

Know what you know!
Data provided by the Customer
Name & Address
Telephone Numbers
What ever you have asked them!

Examples of customer data Company Individual

Examples of customer data

Know what you know!
Transaction and interaction
Inquiries, Purchases, Service requests
Web visits

Examples of transactional data Problem resolution Sales opportunities

Examples of transactional data Accounting data

Know what you know!
Third party data e.g.
Profile
E.g. Turnover, number of employees
Credit rating
Demographics

Examples of 3 rd party data

How to collect data
On the fly
Customer facing staff
Transaction systems
Web visits
Periodic updates
Customer surveys
Credit checking
Segmentation of customers

Examples of collecting data Web forms Workflow key tasks

Know what you know!
When to collect and analyse data?
Often never done
Do it once for a bit of an insight
Do it occasionally to continue learning
Ideal is to do this continuously

What next?
Data mining
“ the nontrivial extraction of implicit, previously unknown, and potentially useful information from data”
“ the science of extracting useful information from large data sets or databases”
Source: Wikipedia

Data mining
In layman’s terms:
Data mining involves sorting through large amounts of data and picking out relevant information.
Data mining identifies trends within data that go beyond simple analysis. Users have the ability to identify key attributes of business processes and target opportunities.

Data mining
Data
facts, numbers, or text
Information
The patterns, associations, or relationships among all this data can provide information
Knowledge
Information can be converted into knowledge about historical patterns and future trends

Data mining - example
US grocery chain used buying patterns to discover:
When men bought “diapers” on Thursday’s and Saturdays they tended to buy beer
These shoppers tended to do the weekly grocery shop on Saturdays
On Thursday’s they bought fewer items
Conclusion - beer was bought for weekends

Possible uses
Increase revenue by moving beer display closer to diapers
Make sure beer and diapers are sold at full price on Thursdays

Data mining - tools Advanced reporting tools – many software products have these built in. Business intelligence tools – have been expensive and hard to use but getting better. Data Mining specific – often little more that BI. Choice depends on how much you want the tool to do for you? Microsoft Excel – now has conditional formatting

Data modelling
Demographic profiling
Behavioural segmentation
Lifetime value modelling
Churn modelling
Propensity modelling
Basket analysis
Brand profiling

Behavioural segmentation divides customers into groups based on the way they respond to, use or know of a product
Behavioural segments can group consumers in terms of:
Occasions
Usage
Loyalty
Benefits sought

Behavioural segmentation identifies consumption rates of a product or service as a means of segmenting markets.
For instance customers of a local leisure centre may be classified as:
Frequent users (Daily visits)
Less frequent users (At least once a week)
Users ( Occasional visits)
Non users. I f a company can identify the characteristics of frequent users (they may live in a certain area and have other common features such as income) they can target those segments in order to increase the number of frequent users

Propensity models help you to maximise Return on Investment by targeting the most suitable audience
Fundamentally, propensity models allow you to score customers or prospects according to their likelihood to undertake a given action, f or example;
l ikelihood to become a customer
likelihood to buy again
likelihood to lapse
l ikelihood to take up a new service

Who will buy a product? Who will repay a loan? Who will display any particular behaviour with a commercial value?
This type of modelling looks at choosing and modifing predictors, how to score (and re-score) individuals in a large database, how to validate and maintain your models, how to deal with the biases that can arise through repeated use of the models, how to exploit fully the opportunities (and challenges) that arise when data is available on very large numbers of customers

What is prospect scoring?
Prospect scoring is simply the scoring of prospects (customers you ’d like to do business with) according to their potential value to your business. It is used for prioritising sales leads and other marketing activities e.g. media spend allocation
Does it matter?
Imagine an upmarket department store, aiming to boost sales of bathroom accessories, offering a free bathroom planning service. The demand for this service might quickly exceed available service capacity

Propensity modelling - example
Does it matter?
The store has several ways to address the problem:
Stop the service - this could alienate those prospects that would have taken advantage of it, leading to lower sales
Charge for the service - this might work but might not be competitively viable
Prioritise the service - by offering the service to customers most likely to spend a high amount on the bathroom accessories following the free service, as opposed to those who might use the service and then buy somewhere cheaper

Propensity modelling - levels
Prospect scoring can be achieved on three different levels:
Intuitive : Niche organisations often know and understand their customers and prospects without formal profiling
Simple segmentation : A single-use model is used for a specific campaign or task and is based on either a simple geo-demographic system or on basic modelling such as campaign response modelling (comparing responders to non-responders)
Complete analytical framework : This involves an integrated approach where initial analysis of customers is the basis for an analytical framework, created by overlaying customer knowledge onto the prospecting process. The model is constantly updated as new factors influence the behaviour and nature of customers

Customer value
What is Value?
Value is not only a combination of revenue, sales and/or profit. It includes a very important aspect of any marketing relationship, that of potential. What is the real customer potential?

Case study - Issue
In January 1999, after extensive TV and press advertising campaigns and a number of similar products have appeared from rival providers and so it is essential that Standard Life Bank can both consolidate and then continue to expand its share of the mortgage market.
To achieve these aims the company's goals are:
to identify the key attributes of clients attracted to the mortgage offer
to cross sell products to the clients of other companies in the Standard Life group
to develop a remortgage model which could be deployed on the group website
to examine the profitability of the mortgage business being accepted by Standard Life Bank
A major part of the project was to develop models that might be successful in identifying customer characteristics relevant to any mortgage product

Case study - solution
Using SPSS data mining capabilities, Standard Life can address a growing number of projects enabling them to deliver better value to their customers
They were able to build a propensity model for the remortgage offer showing the types of client attracted to this product
This model would be easily portable and applicable to other client databases within the Standard Life group
Using the propensity models, a remortgage mailing campaign was planned and executed by the Customer Data Analysis team in conjunction with Standard Life Bank
The mailing included a randomly selected control cell. The model allowed the bank to focus their efforts on the best prospects for the remortgage product and create scores for each customer
These scores allowed them to achieve more targeted direct mail and to score prospects with similar characteristics accessing the website

Case study - results
Overall the data mining exercises undertaken enabled Standard Life to better understand the characteristics of their mortgage clients so they can more easily search for potential new clients with these characteristics
They also have the capability to profile incoming prospects quickly and personalise their web experience accordingly
Amongst the results that made a real difference to the business were that they:
Built a propensity model for the Standard Life Bank mortgage offer identifying key customer types that can be applied across the whole group prospect pool
Discovered the key drivers for purchasing a remortgage product
Achieved with the model, a nine times greater response than that achieved by the control group
Secured £3 3million worth of mortgage application revenue

Break for Lunch Back promptly in an hour, please

Segmentation Dividing your market up

How to approach segmentation
Step 1 : Ensure that the segmentation is directly linked to what drives value to the business
Step 2 : Producing a clear and reliable segmentation
Step 3 : Tailor the outputs to make the segmentation clear and useful
Step 4 : Make strategic recommendations to make the segmentation practical and immediately actionable

Why segment?
In a ‘global’ village of 100 people…
57 would be Asian
21 European
14 American (North & South)
8 African.
52 would be women
70 would not be ‘white’
70 would not be Christian
89 heterosexuals
• 6 people would own 59% of the wealth, and all 6 from the US • 80 would be below the poverty line • 70 would be illiterate • 50 under nourished • 1 would die • 2 would be born • 1 have a PC • 1 have an academic qualification Would you want to talk to everyone?

Example of segmentation
bpriskmanager (BPRM) is a very successful financial services division of BP
BPRM wanted to apply certain customer-centric strategic decisions but did not have the right tools in place to do so
Focus sales efforts and initiatives against the most valuable existing and potential customers
Allocate resources accordingly
Design financial products to appeal to the most valuable customers instead of by intuition
Reduce the customer base by 10%

Assessing current tools for tackling objectives
The customer groupings that BP was using did not accurately reflect the market – the high revenue/volume customers were diluted in the sector groupings
? Axes represent total Average Bubble sizes represent sector size Sector 7 Sector 9 Sector 8 Sector 5 Sector 6 Sector 4 Sector 3 Sector 1 Sector 2 %Volume %Revenue

Determining customer behaviours
By interviewing key stakeholders within BP we identified all these customer attributes that make them valuable to BP
We used BP’s CRM system to find and derive the variables that best reflected all the value drivers identified
VALUE DRIVERS SEGMENTATION VARIABLES REVENUE & VOLUME BUSINESS TO OTHER DIVISIONS CUSTOMER MAINTENANCE CUSTOMER SOPHISTICATION CUSTOMER CREDITWORTHINESS Deal commission per customer Contacts per customer Deals per customer Credit rating CUSTOMER LOYALTY Volume traded per customer Sophistication index

Plotting segments Margin Lucratives (1%) Risky Volume Drivers (2%) Demanding Savvies (9%) Moderates (5%) Occasional Savvies (13%) Risky Occasionals (33%) Safe Occasionals (29%) Safe Low Traders (6%) И Axes represent all customer average Bubble sizes represent segment size 3 6 9 12 150 400 Spend per Customer 4,000 Volume per Customer

Segmentational analysis
The segmentation that was based on all value drivers produced eight robust and distinct segments of BP customers with customers across sectors, regions and using a variety of products
Margin Lucratives Risky Volume Drivers Demanding Savvies Moderates Occasional Savvies Risky Occasionals Safe Occasionals Safe Low Traders % of customers

The net worth of each segment 9% 19% 28% 5% 6% 11% 13% 4% 10% 33% 12% 16% 29% 8% 11% 6% 5% 40% 1% 9% 18% 2% 2% 2% Segment Size Spend Volume Safe Low Traders Safe Occasionals Risky Occasionals Occasional Savvies Moderates Demanding Savvies Risky Volume Drivers Margin Lucratives

Segmentation – an ongoing process
With any segmentation project you come up with a snapshot analysis
Use CRM system to capture variables and assign customers to segments
User CRM sysrem to target based on segments
Need to revisit segment definitions periodically to ensure still valid.

One to one customer needs
At the heart of all e-CRM systems lives a knowledge base with a knowledge-management application. A knowledge base is an electronic collection of information that can be queried for answers to various questions.
To understand personalisation technologies, one need only look at Amazon.com. They are well known for tailoring its product promotions to customers based on their stated individual preferences or previous buying habits
Personalisation enables Amazon.com to “individualise” its offerings, meaning customers who specify an interest in books about Italian cuisine aren't bombarded with indiscriminate promotional e-mails about skydiving, mineralogy or other topics that aren't relevant to them

Amazon

Example of e-CRM

How to get started with e-CRM
You have a CRM system and have been gathering information about your customers.
What next – how do I start down the e-CRM route?
Linking your CRM and website is not as hard as it used to be!

e-CRM example 1
Prospect fills out a form on your website and receives a ‘thank-you – we will be in touch shortly’ e-mail.

The form contents are automatically added to your CRM system
e-CRM example 1

e-CRM example 1 A workflow process kicks in to allocate the lead to the most appropriate sales resource

e-CRM example 1
The salesman sees the lead on his opportunity pipeline

e-CRM example 2
Simon buys your product and can see all issues being dealt with by the support team on your website.

e-CRM example 2 The support team can view Simon’s cases against his record or their own ‘My CRM’

Exercise
List the key information your business needs to sell/support customers effectively
Approx. 10 points
You have 15 minutes

Exercise 15 Going Home Mark Knopfler

Exercise 10 Hymn by Barclay James Harvest

Exercise 4 Heartbeats by Jose Gonzalez

Presentations
Please present your findings

Testing Testing your methods, on- and offline

Difference between on- and offline
Speed to market and of reaction
Low cost
A/B testing opportunities
Increased reach
Competitor analysis & research
Partner/affiliate interface

Taking offline customers online
Cheaper to service
More personalisation
Faster transactions (less chance of churn)
Integrated approach
www.domain.x/tube www.domain.x/tv

Measurement/tracking
Using web metrics, you can track what is happening online
Web metrics are often anonymous, but…
Link outbound campaigns to your CRM & track your actual customers
How often do they respond?
What is their personal ROI?
Do you want to keep them?

Online testing
Use your e-CRM system to personalise every digital touchpoint
Use A/B testing to find out which methods/media work best for each customer/segment
Use control groups, effectively
Monitor each method/technique for replication/ replacement

Google AdWords
Very useful for A/B testing
Very direct advertising method
You only pay for results, so less waste
Anonymous, but tracking/personalisation is possible
This is an artform in its own right

The anatomy of an AdWord Title 25 characters Description line 1 Description line 2 35 characters 35 characters

Exercise
Develop an AdWords campaign for one of your target audiences
Use the template in your slide pack
You have 10 minutes

Exercise 10 Pra Manha Da Lata

Exercise 3

Exercise 2

Exercise 1

Campaign segmentation
Segment by:
Keywords
Territory
Time
Message
Landing page

Let’s take a break Back in 15 minutes

Measuring your Return on Investment You are in business to make money

Basic marketing metrics
Increase marketing ROI
Decrease campaign overheads
Maximise the lifetime value of the customer
Improve customer interactions with the campaign

Website metrics
Unique visitors
Pages viewed
Duration of visit
Key customer journeys
Conversion funnel

Web analytics applications
With functional reporting for each department, from marketing to merchandising to business analysis, you can answer the questions that are most important to the overall e-business as well as each department:
Get the most out of your Web 2.0
Optimise the online experience
Identify which content, channels, partners and campaigns drive conversion
Customise reports for the way you do business
Drive adoption across the enterprise
Easily schedule emailed reports
Optimise conversion for each page, path, and scenario on your site
Run your business by the numbers

Forrester Research Web Analytics Providers

Identifying the most valuable clients
How do you identify your most valuable customers
Part of the segmentation process
Typical metrics:
Past Customer Revenue
Past Customer Value

Identifying the most valuable clients
A better measure is Customer Lifetime Value (CLV)
Forward looking picture
However:
This is a complex subject
Many different ways to calculate

Customer Lifetime Value (CLV)
Knowing the Lifetime Value of your customers is crucial to you and your business as it serves as a benchmark without which you'll be groping in the dark
When you realise that customers are actually an ongoing stream of revenue as opposed to a one-shot sale, you can re-focus your marketing efforts

Customer Lifetime Value
Most models contain the following factors:
Churn rate - The percentage of customers who end their relationship with a company in a given time period.
Discount rate - The cost of capital used to discount future revenue from a customer.
Retention cost - How much a company has to spend to retain an existing customer.
Time period
Periodic Revenue - Revenue collected from a customer in the time period.
Profit Margin - Profit as a percentage of revenue

Customer Lifetime Value
Consider the type of relationship with your customers
Contractual relationships – once gone they are ‘lost for good’
Migration relationships - where a customer not buying now might do so in the future

The Power of Customer Lifetime Value
Viewing a company as a portfolio of current and future customer relationships can provide many insightful perspectives. One is on how to nurture customer relationships – and which ones to nurture.
Such opportunities could be classified into three areas:
For current customers that are creating value:
Increase profitability and/or
Increase volume and/or
Increase duration
For current customers that are value-destroying:
Quickly achieve a value-creating relationship or
End relationship if all else fails
For potentially value-creating customers not currently served:
Identify
Acquire at a reasonable cost

Quantifying the CLV

Integrating sales and financial

E-mail campaigns
Targeting - 600% difference between best & worst lists
Incentives - 400% difference between best & worst
Creative - 35% difference between best & worst
Response device - 15% difference between best & worst
Timing - 10% difference between the best & worst

E-mail marketing lifecycle
E-mails sent
E-mails opened
E-mails with Click-through responses
E-mails forwarded
E-mails bounced
E-mails unsubscribed

E-mail delivery metrics
Open Rate
Click Through Rate
Gross Click Rate (Total Clicks/Total Delivered)
Unique Click Rate (Unique Clicks/Total Delivered)
Click to Open Rate (Unique Clicks/ Total Opened)
Click to Purchase/Conversion
Reach

Why people unsubscribe
The e-mail address collector may have collected the address under false pretences
Your message may have been inartfully sent to the wrong list
Your content is no longer relevant to the recipient
Your content sucks!

Link to a web page
Have a separate page for each content line in your e-mail
Track what works well
Use the tracking information to sell advertising/ sponsorship
Use the tracking to define new content

SMS tracking
SMS sent
SMS received/opened
SMS replies
SMS bounces
SMS unsubscribes
SMS location of opens (if you can get the information from the network operators)

Uses of SMS
Appointments
Warnings
Location based promotions
Immediate gratification promotions
…

A word of warning
Combining CRM and identified web metrics can lead to a feeling of Big Brother
Getting over familiar can worry your customers
Use all the media & media tracking at your disposal, but remember that different departments send messages to the SAME customer - can lead to overkill

Q & A
Any questions as we finish?

Thank you Thank you for your patience, interest and input. Thom Poole - [email_address] Jonathan Richards - [email_address]

Customer Retention

by Thom Poole

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