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The Expanding Water Balloon: Patching the Leaks

Customer Database - Patching the Leaks

Acquisition, retention, and attrition are three words that come up every time marketing goals are discussed. Growing and retaining an active customer database is a very clear and very important metric for marketers of all levels and specializations. But all too often we see marketers acquire more and more customers with little to no customer database growth. Marketers point to their successful response and conversion rates, yet the top line is flat or shrinking.

You can think of your portfolio of customers as an ever-expanding water balloon. Brands are spending a lot of money filling up the water balloon; acquisition tools like advertising, paid search, and digital ads are taking most of the marketing budget. Marketers are spending way less on customer retention, which created leaks in their water balloon. All customers are treated the same regardless of lifecycle stage, purchase frequency or lifetime value. Lack of personalization and targeted communications creates customer indifference and poor results. Instead of encouraging customers to take the next step in the lifecycle, we basically ignore them and they slowly fade away In some cases the attrition rate is very close to the customer acquisition rate. This is why the water balloon isn’t growing. Marketers need to refocus their efforts on patching those holes to retain and grow customer database over the long-term.

Patching the Leaks

Patching those holes will take a change in mindset and budget spending. It will take time, but it’s not impossible by any means. Here are some steps you can take to to change your mindset and fill your water balloon with active customers:

  • Focus on Incrementality – Executives are telling marketers that they need more revenue. What’s the marketing solution to this request? Sell more, do more. But these marketers don’t have the right tools. Instead of ROAS or impressions, marketers should focus on metrics that show how their customer base is changing over time. Metrics like active customer counts, revenue per customer, average order value, and lag time are a good place to start when trying to measure your active customer base.
  • Expand Lifecycle Programs – Marketers need to create and expand their reactivation and milestone campaigns. For example, if your first purchase anniversary campaign starts 60 days before the anniversary, and continues for 60 days after, that’s 8 months out of the year where a customer is just receiving the same email blasts as everyone else. When customers don’t feel like they are being spoken to, they are less likely to come back and purchase again.
  • Don’t give up on customers too soon– A typical “active” customer is someone who has purchased in the last 12 months. Now, this can change depending on the brand, but think about how short 12 months is. If someone bought in 2016, but not 2017, marketers should still try to get them back in 2018. They could have had major life changes in 2017 that prevented them from making a purchase; college tuition, growing family, or large milestone purchases all decrease a customer’s expendable income and propensity to make a purchase. This doesn’t mean they don’t want to purchase your product, just that it doesn’t fit their lifestyle this year. Marketers should keep these customers in the loop and continue to market to them through the highs and the lows.
  • Bring the customer profile to the digital world – When a customer makes a purchase in-store, they don’t want to be targeted with digital ads that are no longer relevant to them. By sharing an updated customer profile with a brand’s digital partners, marketers can send relevant messages that keep customers engaged. “Thanks for your purchase” or “Review your experience” are just some of the relevant messages that customers can receive, to create one personalized experience.

Good News, Bad News

The good news is that with a little work and a change in mindset, all of this is possible. The bad news: if you’re not careful and looking at data, you can spend a lot of money on tools and techniques that won’t help. Back to the good news. With Customer Portfolios, marketers have a single view of all their active customers – everyone inside the water balloon. With this actionable intelligence and insight, we can help you execute personalized treatment across the lifecycle to grow lifetime value and generate incremental revenue.