Next Issue: Beyond
Canned Vs. Customized Solutions
"If you don't take care of your customers
somebody else will."
Today's corporate landscape is rampant with
stiff competition that presumably would intensify by the day. Pervasive
as it is, it has taken its toll on marketing managers across industry
segments. Telecom, credit cards, banking, insurance and retail are only
a few among many where customer churn has become a nightmarish phenomenon.
Marketers are seeking newer and cost effective ways to prevent customers
from moving out of their fold.
Tactical segmentation is one technique that has been widely adopted to
help identify customers who are likely to discontinue a company's services
and products. Customer Retention marketing is a tactically driven approach
based on customer behavior. It is the core activity going on behind the
scenes in Relationship Marketing, Loyalty Marketing,
Database Marketing, Permission Marketing. Here's the basic philosophy
of a retention-oriented marketer:
- Past and Current customer behavior is the best predictor of Future
In general, it is more often true than not, and when it comes to action-oriented
activities like making purchases and visiting web sites, the concept
really shines through. One can tell whether a customer is about to defect
or not by watching their behavior; whilst the marketer can have a shot
at retaining the customer by taking appropriate action by predicting
- Active customers are happy (retained) customers; and they like
They like to feel they are in control and smart about choices they
make, and they like to feel good about their behavior. Marketers take
advantage of this by offering promotions of various kinds to get consumers
to engage in a behavior and feel good about doing it. These promotions
range from discounts and sweepstakes to loyalty programs and higher
concept approaches such as thank-you notes and birthday cards. The truth
is, almost all customers will leave a service eventually. The trick
is to keep them active and happy as long as possible, and to make money
- Retention Marketing is all about "Action - Reaction - Feedback
Marketing with customer data is a highly evolved and valuable conversation,
but it has to go back and forth between the marketer and the customer,
and one has to 'listen' to what the customer is saying. Transaction
data in most marketing scenarios offer the right feed to execute the
sequence thus mentioned.
- Retention Marketing requires allocating marketing resources
Target marketing activities generate fatter profit. The marketer can
keep his budget flat while increasing sales and profits if he continuously
allocates more of the budget to highly profitable activities and away
from lower profit activities. This is a step towards retaining profitable
customers by offering him the right choices.
The marketer has to develop a way to allocate
resources to the most profitable promotions, deliver them to the right
customer at the right time, and not waste time and money on unprofitable
segments. This is accomplished by using the data customers create through
their interactions and transactions with the company to build simple models
or rules to follow. These models are the company's listening system. They
allow the data to speak about the customer. The crux of the matter is
that retention strategies are effectively channelized if tactical segments
for target marketing are identified using the right modeling techniques.
These techniques work well for large, clean and universal data employing
advanced statistical tools in data mining and predictive modeling.
2000-10 DecisionCraft Inc.