The adage that it is more expensive to acquire a new customer than it is to retain an existing one (some studies suggest about 5X more) takes on greater significance amid changing consumer behaviors, particularly a shift toward a digital-first mindset marked by expanding consumer choice and fleeting brand attachments. The competition for loyal customers in this new environment is fierce, and highlights the inefficacy of old school retention strategies such as universal pricing discounts. Price and product, already largely commoditized, wane even further with consumers placing greater value on their experiences with a brand.
The flight to digital appears here to stay. According to new research from McKinsey, increases in online commerce of 50 percent or more are expected in several categories of consumer goods, including household items apparel and food/grocery. Further, 73 percent of US consumers admit to having tried a new shopping behavior in the past year – with 80 percent claiming they will continue the new behavior moving forward.
Retention Marketing and a Personal Understanding
In this new environment, retention is critical. And it will rest in large part on providing a differentiated, personalized experience. A customer who chooses a new behavior such as curbside pickup will continue the behavior – and become a repeat customer – if presented with a seamless experience. A brand that devotes a bulk of its resources to acquiring a new customer by promoting a flashy new curbside pickup service, for example, will have a poor ROI if those customers leave after experiencing friction in the customer journey. According to research from Bain, in conjunction with Harvard Business Review, a 5 percent increase in retention produces anywhere from between 25 and 95 percent increase in profits, depending on industry, service or product. Yet at the same time, up to 80 percent of companies spend over 70 percent of their marketing budgets on lead gen, versus just 30 percent on retention.
The key to flipping this script is a digital-first retention marketing strategy based on a detailed understanding of an individual customer’s journey with a brand through all digital and physical touchpoints. At a macro level, churn is easy to understand – and predict. Poor quality, failed promises, a data or privacy breach, a poor UX, or hidden fees will all make customers flee for the exits. At a micro level, the key to retention for the digital-first customer is demonstrating a deep, personal understanding of likes, dislikes, preferences and behaviors and using this insight to minimize churn factors at the individual level.
A routine website visit, for instance, that displays images and products that are hyper-relevant to a customer’s intent will be more effective than the alternative – a static homepage the same for every visitor. Website personalization could fall under retention or acquisition depending on whether you’re targeting a known or an anonymous record, but the point is that this is the type of personalized experience that customers expect. In a recent Dynata survey, 70 percent of consumers said that they will only shop with brands that personally understand them. (In addition, 82 percent said they expect retailers to accommodate preferences and expectations.)
Personal understanding extends to more than just analyzing behaviors, likes and preferences for the purpose of presenting relevant content at the time of engagements. Possible churn indicators could also relate to changes in a customer’s buying patterns (slowing or stopping), less frequent log-ons after a consistent pattern has been identified (such as with a banking website), negative feedback to a call center rep, not opening or clicking on an email, etc. Essentially, any and all customer data may provide important clues that a customer is about to leave, and empower a brand to proactively respond with a next-best action relevant for the customer at a slice in time of the individual customer journey.
Retention Marketing with a Golden Record
A customer retention strategy that rests on a Golden Record offers the accuracy, precision and flexibility needed to engage today’s digital-first customer with personalized experiences to counter individual churn signals. A Golden Record is a single customer view that aggregates customer data from every conceivable source. A Golden Record pulls together data from all sources and all types – structured, unstructured, semi-structured and from known and unknown customer records – to create a holistic view of the customer. Combined with advanced identity resolution capabilities, it provides brands and marketers with a customer identity graph that encapsulates a persistently updated view of a unique customer’s behaviors, preferences, transactions, devices and IDs. Updated in real time and together with a real-time decisioning engine, a Golden Record is the key to providing each customer with a hyper-relevant, personalized experience that is always in cadence with the customer journey.
For retention purposes, use of a Golden Record ensures a brand is never caught off guard. If notes from a call center interaction indicate a customer is dissatisfied with the contents of a shipped order, it might be worthwhile to dynamically switch out email content – sending an apology and a discount offer rather than boilerplate content asking them to rate the online purchase experience. A Golden Record makes this interaction possible because a single customer view eliminates the data siloes that – along with process, people and channel siloes – are largely responsible for introducing friction by being a step (or more) behind the customer.
Retention Marketing and Automated Machine Learning
Customer retention strategies that depend on producing an individualized next-best action at scale for hundreds of thousands or millions of customers, in real time, requires automated machine learning (AML). Code-free, self-learning, in-line analytic models take data scientists and human judgment out of the equation; instead, with AML brands and marketers can deploy hundreds of models simultaneously, each running through optimization scenarios for whatever the desired metric relating to churn reduction. Evolutionary programming strips away anything that is not laser-focused on delivering the chosen metric, ensuring the optimal decision – or next-best action – for the desired business outcome.
With AML models tuned to retention and set to produce a next-best action based on a real-time Golden Record, brands and marketers can be confident that they’re reading churn indicators properly at an individual customer level. More importantly, they can be confident that their response is likewise perfectly tailored to how the customer is moving through a customer journey. Customers moving to digital-first engagements is a certainty, and brands need to rethink retention strategies in line with the flight to digital. Just because customers are in-store less frequently does not give brands the luxury of adopting an “out of sight, out of mind” mentality. That’s a misguided approach that fails to match today’s reality. With customers having more choices and more of an expectation for personalized experiences, retention is in many ways more challenging than ever. A Golden Record takes out the guesswork, giving ambitious marketers a next-level tool to delight a customer with every interaction and stopping any churn indicators before it has a chance to percolate.