To extend the profit stream beyond its expected pattern, a company must develop and implement strategies that: Rebalance from the singular focus on acquisition to retention/growth Drive customer retention (for incremental profits regardless of achieving loyalty) Improve customer loyalty (for long-term referrals and growth) Use a combination of both (leveraging the response and revenue lift from different sets of customers). Acquire strategically to grow most profitably

1. In
proper
propor(on,
to
maximize
profitability
June,
2015
acquisition |
retention |
loyalty

2. 2
©2015
suitecx
–
Confiden(al
2
The
Challenge
To
extend
the
profit
stream
beyond
its
expected
pa4ern,
a
company
must
develop
and
implement
strategies
that:
§ Rebalance
from
the
singular
focus
on
acquisi(on
to
reten(on/growth
§ Drive
customer
reten(on
(for
incremental
profits
regardless
of
achieving
loyalty)
§ Improve
customer
loyalty
(for
long-­‐term
referrals
and
growth)
§ Use
a
combina(on
of
both
(leveraging
the
response
and
revenue
liN
from
different
sets
of
customers).
§ Acquire
strategically
to
grow
most
profitably
Lenskold Group.

3. 3
©2015
suitecx
–
Confiden(al
3
The
Path
to
Profitability
Strategies
to
achieve
goals
Programs
driving
Reten>on/Loyalty
Repeatable
ac>ons
Op>mizing
Incremental
ROI
Driving
revenue
while
maintaining
or
decreasing
costs
The
Opportunity
Evidence/Facts
Emo>ons/Insights

4. 4
©2015
suitecx
–
Confiden(al
4
Though
most
people
focus
on
loyalty
–
reten(on
is
where
the
most
impact/revenue
occurs
“reten>on”
is
defined
as
sustaining
the
exis>ng
profit
stream
from
current
customers,
in
effect
decreasing
the
expected
trends
of
customer
defec(on.
When
marke(ng
efforts
generate
new
customers
or
increase
the
share
of
customer,
a
certain
level
of
con(nued
repeat
business
is
expected.
When
customers
show
paWerns
of
discon(nued
or
decreased
spending,
a
reten(on
opportunity
exists.
“customer
loyalty”
has
a
wide
range
of
defini(ons
that
are
based
on
each
individual
company’s
view
of
the
customer
rela(onship.
From
the
perspec(ve
of
understanding
profitability
dynamics,
we
define
“loyalty”
as
the
customer
behavior
of
a
sustained
profit
stream
without
the
need
for
incremental
marke2ng
investment.
Lenskold Group.

5. 5
©2015
suitecx
–
Confiden(al
5
Acquisi(on
is
the
‘carrot’
that
companies
chase
§ When
you
go
into
most
companies
and
interview
the
CEO
and
Sales
and
Marke(ng
teams,
they
invariably
have
their
acquisi(on
numbers
at
the
(ps
of
their
fingers.
Same
goes
for
the
folks
on
wall
street
who
are
valuing
companies
based
on
new
customer
acquisi(on
and
barely
looking
at
revenue
or
repeat
use.
§ Most
companies
don’t
seem
to
value
their
exis(ng
customers
anywhere
near
as
much
as
new
customers.
The
headline
sta(s(cs
give
an
indica(on
of
the
scale
of
the
problem:
§ 30%
of
companies
say
they
are
‘very
commiWed’
to
rela(onship
marke(ng
§ 46%
say
they
are
commiWed
‘to
a
certain
extent’
§ 22%
say
they
don’t
do
any
rela(onship
marke(ng
§ A
whole
industry
has
sprung
up
around
‘demand
genera(on’
where
both
B2B
and
B2C
companies
spend
millions
crea(ng
awareness
and
considera(on
programs.
§ These
programs
have
complex
channel,
content
and
lead
scoring
strategies
as
well
as
new
marke(ng
automa(on
technologies
that
focus
solely
on
geeng
to
a
sales
opportunity.
§ This
is
a
preWy
astonishing
finding
when
you
look
at
the
figures
for
marke(ng
spend
vs.
customer
reten(on.
There
seems
to
be
a
collec(ve
ignorance
of
common
sense
that
is
driving
companies
away
from
their
exis(ng
customers
and,
instead,
focusing
their
(me,
energy
and
budget
on
acquiring
expensive
new
customers
–
even
when
they
know
that
costs
will
be
higher
and
ROI
lower.

6. 6
©2015
suitecx
–
Confiden(al
6
But
reten(on
is
bankable
and
evidence
based
§ It
costs
a
business
about
5-­‐10
(mes
more
to
acquire
a
new
customer
than
it
does
to
sell
to
an
exis(ng
one
-­‐-­‐
and
on
average
those
current
customers
spend
67%
more
than
a
new
one
(Inc.
Magazine)
§ A
2%
increase
in
customer
reten(on
has
the
same
effect
as
decreasing
costs
by
10%*
§ ROI
is
up
to
10
(mes
higher
for
investments
in
customer
reten(on
than
for
the
acquisi(on
of
new
customers
(Baxter
research
)
§ A
5%
increase
in
customer
reten(on
typically
relates
to
a
75%
increase
in
aggregate
life(me
profits
(Baxter
study)
§ Depending
on
the
industry,
reducing
your
customer
defec(on
rate
by
5%
can
increase
your
profitability
by
25
to
125%*
§ A
first-­‐(me
customer
has
a
30%
chance
of
becoming
a
long-­‐term
profitable
customer.
If
they
buy
three
(mes
rela(vely
quickly,
their
chance
of
becoming
long-­‐term
more
than
doubles
to
67%.
(Loyalty
Magic)
§ Customer
profitability
tends
to
increase
over
the
life
of
a
retained
customer
*Leading
on
the
Edge
of
Chaos
Emmet
C.
Murphy
and
Mark
A.
Murphy.

7. 7
©2015
suitecx
–
Confiden(al
7
In
fact,
customer
reten(on
is
both
cheaper
than
customer
acquisi(on
and
delivers
a
higher
ROI

8. 8
©2015
suitecx
–
Confiden(al
8
So
why
does
everyone
focus
on
acquisi(on?
§ Because
new
is
perceived
beWer
than
old.
§ It’s
an
evolu(onary
fact
of
humanity
that
newer
and
younger
is
always
preferable
to
older
§ Because
it’s
easier
to
measure.
§ Reten(on
is
fixing
invisible
problems,
and
as
a
result
it
takes
more
(me,
money
and
energy.
§ Achieving
posi(ve
ROI
on
reten(on
marke(ng
is
challenging
without
precision
targe(ng
to
reach
vulnerable
customer
segments
§ Thus,
acquisi(on
is
always
more
visible
and
valued
by
leadership
than
reten(on,
though
reten(on
is
oNen
far
more
profitable

9. 9
©2015
suitecx
–
Confiden(al
9
Loyalty
is
strategic,
aspira(onal
and
emo(onal
§ Loyalty
is
a
posi(ve
belief,
generated
over
the
course
of
mul(ple
interac(ons,
in
the
value
that
a
company
and
its
products
and/or
services
provide,
which
leads
to
con(nued
interac(ons
and
purchases
over
(me.
(Oracle)
§ A
properly
executed
loyalty
program
can
deliver
significant,
long-­‐las(ng
benefits
to
the
host
company
in
the
areas
of
customer
knowledge,
product
and
service
differen(a(on,
customer
reten(on,
and
profitability.
§ Conver(ng
new
customers
to
become
loyal
takes
more
(me
and
expense
than
moving
exis(ng
customers
up
the
con(nuum
§ Loyal
customers
generally
have
greater
usage
and
are
more
open
to
upsell/cross
sell
§ Loyal
customers
refer
new
customers
(strategic
value)
while
defec(ng
customers
tell
8-­‐16
others
about
the
reason
for
defec(on
§ Loyal
customers
are
less
price
sensi(ve

10. 10
©2015
suitecx
–
Confiden(al
10
So
why
the
focus
on
acquisi(on
and
loyalty
vs.
reten(on?
Primary
Marke>ng
Goal
of
US
B2B
Marketers
62%
20%
14%
4%
Customer
Acquisi>on
Customer
Reten>on
Brand
Awareness
Other
Source:
eMarketer

11. 11
©2015
suitecx
–
Confiden(al
11
The
boWom
line
–
calculate
these
for
yourself:
§ If
our
company
retained
its
customers
one
more
year
with
their
average
sales,
we
would
enjoy
a
liN
of
$$
§ If
our
exis(ng
loyal
customers
bought
one
more
product
or
service
our
profit
would
increase
by
$$
§ We
would
have
to
acquire
#
more
customers
(based
on
our
acquisi(on
costs
less
how
many
purchases
they
would
have
to
make
to
get
to
exis(ng
customer
LTV)
to
make
up
that
revenue
§ Loyal
customers
would
purchase
#
more
products
and
services
than
an
average
retained
customer,
making
them
the
most
profitable
segment

12. 12
©2015
suitecx
–
Confiden(al
12
Customer
lifecycle
–
get/keep/grow
are
all
interrelated
Inactive
Attrition
Highest
Opportunity
Best
Customers
New to
file
Reduced
UsageLearners
/Tryers
1
23
4
ü Encourage Retention
ü Reclaim Lapsing
ü Reduce Best Erosion
ü Stabilize New

13. 13
©2015
suitecx
–
Confiden(al
13
To
be
most
profitable
all
three
must
be
(ed
together
§ A
loyalty
program
can
be
a
great
way
to
bring
more
engagement
with
your
customers.
But
it’s
not
a
silver
bullet
for
customer
reten(on.
You
must
have
a
complete
customer
reten(on
plan
that
includes
measuring,
monitoring,
and
other
outreach
besides
a
loyalty
campaign
§ When
acquiring
new
customers
you
should
model
for
your
BEST,
MOST
LOYAL
customers
and
look
to
aWract
and
acquire
them
vs.
expending
that
high
cost
on
less
desirable
customers

14. 14
©2015
suitecx
–
Confiden(al
14
Reten(on
is
based
on
a
combina(on
of
things
§ Good
customer
service
is
the
single
aspect
most
likely
to
encourage
people
to
spend
more,
followed
by
personalized
rewards
they
feel
are
relevant
to
them
§ Poor
customer
service
is
the
aspect
most
likely
to
put
people
off
increasing
their
spend,
followed
by
unachievable
rewards,
unrealis(c
points
expiry
deadlines,
or
receiving
too
much
communica(on
§ A
large
majority
of
customers
leave
because
they
are
dissa(sfied
with
customer
service
§ The
company
losing
the
customer,
however,
thinks
customers
leave
because
of
price
Source:

15. 15
©2015
suitecx
–
Confiden(al
15
Reten(on
and
data
flow
lifecycle
Customer
reten(on
strategies
are
based
on
solid
quan(ta(ve
informa(on
pulled
from
internal
company
sta(s(cs
as
well
as
voice
of
the
customer
data

16. 16
©2015
suitecx
–
Confiden(al
16
Strategic
Reten(on
Planning
Step
1:
Iden>fy
Target
Customers
• Iden(fy
&
Segment
target
customers
• Determine
customers’
core
&
secondary
needs
• Determine
customer
base
&
suggest
types
of
reten(on
offers
Step
2:
Commit
to
Price
or
Value
• Decide
to
compete
on
price
or
value,
and
adjust
reten(on
efforts
accordingly
Step
3:
Build
Customer
Rela>ons
• Nurture
customer
rela(onships
• Communicate
with
customers
through
avenues
such
as
personal
aWen(on,
phone
calls
&
surveys
Step
4:
Use
a
Data
Warehouse
• Integrate
separate
informa(on
systems
• Analyze
individual
customers
• Monitor
customers’
behavior
&
react
accordingly
Step
5:
Train
Front
Line
Employees
• Train
employees
to
iden(fy
the
products
&
service
sa(sfying
customers’
needs
• Provide
customers
with
access
to
all
products
&
services
Step
6:
Measure
the
Reten>on
Rate
• Determine
the
program’s
success
• Measure
customer
sa(sfac(on
• Provide
benchmarks
for
improvement

17. 17
©2015
suitecx
–
Confiden(al
17
Loyalty
requires
more
of
a
process
§ A
loyalty
program
provides
detailed
informa(on
on
transac(ons,
demographics,
and
personal
preferences
§ These
are
required
to
successfully
iden(fy
the
unique
segments
among
a
company’s
customer
base
and
then
design
products
or
services
that
meet
those
segmented
customers’
needs.
§ True
loyalty
is
built
upon
a
sequence
of
mutually
beneficial
transac(ons
and
interac(ons,
and
companies
need
to
manage
these
as
a
cohesive
whole.
§ Brand
equity,
which
is
achieved
by
providing
highly
valued,
well-­‐
differen(ated
products
and
services,
is
the
cornerstone
of
loyalty.

18. 18
©2015
suitecx
–
Confiden(al
18
Managing
Loyalty
Every
act
of
marke>ng
and
sales
should
drive
sales
One
popular
applica(on
of
a
customer
reten(on
strategy
is
a
loyalty
campaign
or
loyalty
program.
A
loyalty
program
is
seen
as
the
basis
for
a
customer
reten(on
program
not
a
supplement
to
a
strategy.
Reten(on
is
a
much
deeper
and
complex
problem
to
solve
Loyalty
programs
can
obscure
your
customers
expecta>ons
§ Loyalty
programs
are
rampant.
They
should
not
be
tossed
in
same
conversa(on
as
discoun(ng
and
coupons.
Make
sure
you
can
illustrate
expecta(ons
or
advantages
of
your
product
or
service
before
crea(ng
rewards
that
tend
to
work
against
your
market
posi(on.
Loyalty
programs
can
easily
marginalize
your
product
or
service
value
§ When
you
enter
into
a
loyalty
program,
the
first
items
you
start
to
discuss
are
the
offers
and
discounts
you
are
going
to
present
to
your
customers.
So
you
are
taking
a
voluntary
cut
on
your
margins
to
ask
them
to
buy
the
same
product
they
successful
purchased
before.
§ Unless
you
know
what
drives
a
loyal
customer
to
your
business
you
can’t
not
successfully
create
offers
or
advantages
in
a
program
that
are
low
cost
to
you
and
high
value
to
your
customer.
Don’t
take
the
simple
road
of
killing
your
margins.
Improperly
designed
loyalty
programs
can
create
more
cost
to
your
business
§ Loyalty
programs
can
spend
lots
of
money
in
both
cost,
and
lost
profit
if
they
are
not
done
around
specific
reten(on
targets.
Make
sure
you
start
slow
with
your
loyalty
programs
and
evaluate
return
constantly.

19. 19
©2015
suitecx
–
Confiden(al
19
Integrated
Loyalty
Marke(ng
Lifecycle
Loyalty
campaigns
need
to
be
both:
§ Proac(ve—
targeted
at
improving
customer
profitability
§ Reac(ve—
providing
incen(ves
for
customers
to
purchase
undersold
products
Loyalty
Marke(ng
Lifecycle
Iden(fy
Areas
for
Research
and
Refinement
Measure
Promo(on
Results
Purchase
Ac(vity
Create
and
Execute
Marke(ng
Campaign
Create
Loyalty
Promo(on
Iden(fy
Op(mal
Campaign
Strategy
Iden(fy
and
Segment
Targeted
Members
Analyze
Inventory

20. 20
©2015
suitecx
–
Confiden(al
20
The
Rules
of
Loyalty
§ Keep
it
simple
§ Rewards
that
are
relevant
to
the
individual
rate
most
highly
amongst
consumers,
encouraging
them
to
spend
more
with
a
business.
§ Know
who
your
friends
are
§ Geeng
to
know
and
understanding
your
regular
customers
and
their
needs
is
essen(al
if
businesses
want
to
breed
loyalty.
§ Maintain
service
standards
§ A
loyalty
scheme
isn't
worth
much
if
your
customer
service
s(nks.
If
the
customer
service
in
your
business
isn't
up
to
scratch
it
might
be
worth
concentra(ng
on
that
before
you
can
start
thinking
about
customer
loyalty.

21. 21
©2015
suitecx
–
Confiden(al
21
Steps
to
Ensure
Customer
Loyalty
Step
1:
Iden>fy
Key
Customer
Interac>on
Points
Step
2:
Map
Associated
Business
Processes
Step
3:
Iden>fy
Desired
Business
Outcomes
Step
4:
Iden>fy
Key
Profitability
Drivers
Step
5:
Design
an
Integrated
Marke>ng
Strategy
Step
6:
Define
Loyalty
Analy>cs
Requirements
Step
7:
Segment
Members
Step
8:
Design
the
Incen>ve
Structure
Step
9:
Define
the
Partnering
Strategy
Step
10:
Choose
the
Appropriate
Technologies
&
Vendor

22. 22
©2015
suitecx
–
Confiden(al
22
Why
loyalty
programs
fail
§ There
are
a
variety
of
reasons
for
the
failure
of
current
loyalty
programs
to
deliver
value.
§ First
among
them
is
that
most
companies
do
not
follow
an
op(mal
loyalty
program
management
strategy.
§ The
three
most
common
strategic
mistakes
are
:
§ Failure
to
understand
and
manage
the
long-­‐term
nature
of
loyalty
§ Failure
to
differen(ate
members
by
value
–
the
best
ROI
is
for
focusing
on
best
customers
who
are
likely
to
defect
vs.
was(ng
spend
on
those
who
will
remain
loyal
without
the
incremental
programs
§ Implementa(on
of
customer
value
tracking
schemes
that
do
not
match
members’
true
value

23. 23
©2015
suitecx
–
Confiden(al
23
Customer
Expecta(ons
Customer
Understanding
Marke(ng
Techniques
Strategies
for
Customer
Acquisi(on
&
Reten(on
must
be
synergis(c
Need
for
New
Customers
Need
to
Keep
Exis>ng
Customers
Metrics
Financials
§
Scale
economies/market
posi(on
§
Return
against
LTV/Payback
§ Set
by
Marke(ng
&
Sales
Promises
§
Researched
§
Assump(ve
§
Interrup(on
adver(sing
to
all
§
Offers,
incen(ves,
discounts
§
Volumes
§
Costs
§ Market
posi(on
§ Retained
volume/value
at
lowest
cost
§ Set
by
experience
§
Transac(onal
§
Behavioural
§ More
targeted
communica(ons
§ Offers,
incen(ves,
discounts
§
Volumes
§
Values
§
Costs

24. 24
©2015
suitecx
–
Confiden(al
24
Sustaining
Differen(a(on-­‐
the
right
blend
Above
the
water:
Available
and
Visible
to
All
§ AWract
new
customers
§ Standard
offers
and
promo(ons
§ Maintain
compe((ve
presence
Below
the
water:
Targeted
Communica(ons
§ Special
earn/redeem
offers
§ Target
customers
with
high
ROI
§ Re-­‐engage
at-­‐risk
customers
to
reduce
churn
§ Incent
customers
with
upward
migra(on
poten(al
§ Minimize
ineffec(ve
spend
Visible
to
compe>tors
Stealth
Marke>ng

25. 25
©2015
suitecx
–
Confiden(al
25
Conclusion:
acquisi(on,
reten(on
and
loyalty
all
can
provide
ROI
depending
on
the
specific
customer
§ Companies
must
con(nue
their
efforts
to
build
loyalty
and
retain
customers
while
ensuring
that
investments
can
generate
profitable
returns.
§ Acquisi(on
should
focus
on
geeng
the
best
customer
look
alikes
by
referrals,
targeted
messaging,
etc.
§ Managing
ROI
at
the
customer
level
is
far
superior
than
managing
the
ROI
for
acquisi(on,
reten(on,
and
all
other
campaigns
independently.
§ Companies
need
to
balance
their
strategic
planning
through
greater
integra(on
with
customer
rela(onship
ini(a(ves
and
assign
appropriate
levels
of
investments
across
all
three
areas

26. Thank
You
Valerie
Peck
vpeck@theeastbaygroup.com
@custoholic