Shine a Light on Customer Retention

In November I purchased some outdoor Christmas lights from a specialty online retailer you likely know. My house and yard decorations looked pretty good (humble brag), but the more than 100 emails I received from the retailer in the roughly two months between the purchase and mid-January left me questioning whether the festive scene was worth it. It wasn’t uncommon to receive multiple emails a day, which ultimately led me to unsubscribe.

The experience got me thinking about the importance of retention marketing, particularly as we start a new year with rumors of an impending recession. Most marketers are likely familiar with the statistic that it is roughly five times more expensive to acquire a new customer than retain an existing one, or that you’re about three times more likely to sell to an existing customer than a new customer.

It took just one poor experience to personally bring those numbers to life. Because for a few weeks after the purchase, I was a satisfied customer. My house looked great. The kids were excited. I thought I detected a hint of envy from the next-door neighbor. But now it’s an open question of whether I’ll buy from the company again, and only because they didn’t make a sincere effort to understand me as a customer.

Retention and Understanding Context

At its core, customer retention is about leveraging an understanding of a customer journey to be relevant across every engagement with a customer. Ideally, relevance is expressed across an omnichannel journey; a brand recognizes the context of a customer journey, and a next-best action includes the channel of engagement as one of many parameters.

The retailer I mentioned didn’t do any of that. Instead, it sent email blast after email blast – mostly about one sale or another. Why? Probably because it was inexpensive, and because it checked the box for a holiday marketing email campaign. And for a small number of customers, perhaps it was effective, and those customers purchased more lights.

But in failing to take a long view approach to retention, the company squandered an opportunity to increase lifetime value for me and likely many other customers. It may have cost almost nothing to send those emails, but true financial accounting should also factor in how many customers were lost, multiplied by average lifetime value.

Pay Heed to Customer Intent

How might my experience have been different had the retailer prioritized retention over a mass marketing approach? Instead of being notified of a sale on an item I just purchased, I could have received a link to a tutorial video with tips on how to string lights or showing the best designs and use of color. Perhaps a phone call asking me if I need installation help and pointing me to local resources. Or, maybe the retailer leaves me alone for a while – wow, what a novel concept. It presumably knows that curb appeal is important to me, so maybe it sends me an email early in the fall offering a discount on Halloween yard decorations.

Any of those options would have shown a recognition that my customer journey – and my intent – changed as soon as I purchased the lights. At this point, even as a first-time customer, the brand knew several things about me – it had my email and physical addresses, it had a device ID, it had a transaction, a browsing history. A simple demographic analysis will have revealed the average home value in my ZIP code. There was no need, in other words, to overuse/abuse the email just because it was a first-party data source. It had enough information to build a fairly comprehensive customer profile that it could leverage to build a longer (i.e. more profitable) relationship.

Retention and the Value Exchange

By treating first-party data as a valuable asset and providing a customer with equal value in return, retention is served because a customer who knows that their data will be used to provide a personal, relevant experience will provide more data, leading in turn to more personalization. The cycle continues, leading to repeat business and higher lifetime value.

A 2022 Dynata survey commissioned by Redpoint explores this value exchange in depth. In the survey, 70 percent of consumers said they receive mistargeted information (including irrelevant emails) at least once a month. Interestingly, more than half of consumers (52 percent) said that they are willing to provide additional personal data in exchange for a better customer experience, defined in part as less transactional friction and, instead, more personalized discounts and promotions.

Consumers are clear: they will continue to engage with a brand, and indeed provide even more valuable, first-party data, in return for a brand demonstrating an understanding that their customer journey differs from another customer.

Related Redpoint Orchard Blogs

What is Customer Lifetime Value (CLV)?

Use a Golden Record to Enhance Customer Experience (CX)

A Bountiful Harvest: Continual Identity Resolution and a Pristine, Profitable Golden Record

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