Retention Marketing: What Have You Done for Me Lately?
Heidi Cohen | June 16, 2005
It's cheaper to retain current customers than gain new ones. To maximize revenue, engage new customers early to build a long-term relationship.
Some marketers assume once they drive customers to their site and acquire contact information, the job is done. In reality, you must create a site customers want to return to. For many online marketers, retaining existing customers is at least as important as acquiring new ones. To maximize revenue, you must engage new customers as soon as possible to start building a long-term relationship. It's cheaper to retain current customers than to gain new ones.
Customer retention challenges online marketers face include:
- Privacy issues. The U.S. regulatory landscape is challenging. California's privacy laws tend to be the most restrictive, so many marketers use them as a yardstick. International privacy laws can be stricter still.
- Cookie deletion. Cookie deletion hinders sites ability to recognize existing customers and to personalize experiences. Negative buzz about cookies has increased the problem.
- Multiple machine use. Multiple machine use, such as different computers at home and work, can hinder personalization. Similarly, multiple people using a single machine can have a similar effect.
- Spam filters. Spam filters reduce a marketer's ability to communicate with consumers via email. A recent Return Path deliverability study finds 22 percent of permission-based email is blocked or filtered. This presents problems for online marketers, as email is how most correspond with customers.
- Credit card issues. Automatic credit card renewals can be problematic. Over 40 percent of credit cards issued a year ago have a "problem" today, according to credit and operations consultant Paul Larsen. Sixty percent of these problems are credit related, such as delinquency and over-credit-limit conditions. Forty percent are due to account churn, either within a card brand, between card brands, or from mergers and acquisitions between credit card issuers.
Marketing strategies to retain consumers and increase revenue include:
- Give consumers choices on the type of communications they want to receive, as well as how and when they'll receive it.
- Target content and renewal offers by customer location, past history, and other relevant factors. Create special offers for returning customers. Use client-side consumer targeting services such as Kefta to maximize results based on multisession performance. To engage consumers, test dynamically tailored content, offers, and editorial.
- Use tailored landing or home pages that track consumers back to a specific offer. To improve landing page results, MarketingSherpa Landing Page Handbook (based on eye-tracking studies conducted by MarketingSherpa and Eyetools) recommends streamlined page layout, readable copy size, a correlation between search keyword and landing page copy, and a focused selling point.
At minimum, acknowledging preexisting relationships boosts conversion for repeat customers. One Optimost client increased return visitor conversion over 15 percent by changing landing page messaging to communicate, "We're glad you're back!"
- Enhance the customer experience and, where relevant, integrate it across channels. Create stickiness by increasing switching costs for consumers and keeping them returning to your site and purchasing.
- Cross- and up-sell relevant products based on past purchases.
- Create alerts and newsletters with information consumers want to drive them back to your site. When you offer multiple choices, customers can decide which content best fits their needs and interests.
- Change pricing presentation to show consumers value. Rivals.com presents its annual membership as a monthly amount.
- Optimize credit card policy to maximize revenue. "By focusing on credit card issues," says Kathy Greenler Sexton, HighBeam CMO, "we've significantly improved our results." Larsen presented some major strategies at MarketingSherpa Selling Subscriptions to Internet Content Summit:
- Have a comprehensive decline-recovery strategy to resolve economic issues (delinquency, over credit limit).
- Participate in account updater programs to keep the card number file current. Use Visa and MasterCard Account Updater Program and American Express continuity billing program.
- Implement strategies to continuously update card expiration dates. ConsumerReports.org actively focuses on this; email and pop-ups encourage customers to update their information.
- Have adequate customer service coverage during those hours when consumers purchase and pay bills to ensure you don't lose sales.
- Send renewal notices before charging customers credit cards. Although this may give customers a reason to stop the purchase, it builds satisfaction and reduces expensive post-charge adjustments.
- Use offline communication as a backup for customers whose email addresses are no longer valid, or when online methods to update credit card information fail. To mitigate costs, use this tactic only after first trying online approaches.
To analyze the efficiency and results of your retention marketing efforts:
- Monitor basic, on-going site statistics to ensure your site continues to engage users. Look at number of visitors, net paid customers/subscribers, time on site, page views, and conversions. Additionally, examine the number of customers you lose by relevant segment. Track how consumers move through your site, and from which page or part of the process they leave, to determine the areas where you can improve.
- Track overall campaign response, revenue, and return on investment (ROI). "We measure every campaign for ROI," says Robin Korman, VP of loyalty marketing for Starwood Hotels and Resorts. "Due to its low cost, marketers have a tendency to over email customers. E-mailing names that won't perform can hurt our ROI and reduces open rates."
- Measure lifetime value by customer segment. Lifetime value measures the combined effect of acquisition and retention strategies. This enables you to determine which promotions maximize customer value over the long term.
- Use A/B testing to determine whether new strategies and tactics work. Maintain a control group to measure the changes outcome. Starwood Hotels and Resorts tracks results for up to 12 months after a campaign to determine a promotion's latent effect.
- Check credit card performance with monthly reporting, including declines, decline recovery, charge backs, card type, and account updater, to deliver information regarding file makeup and process performance. Use these reports to identify problem areas.
Getting customers to your site is only the first step in building a relationship. The challenge is continuing to engage them to establish an ongoing dialogue. Repeat customers know your product, so there's no mystery in the relationship.
Growing identity theft and security concerns, combined with short usable credit card life, mean you must also assess the effect of operational factors on customer lifetime value.
Customers have multiple purchase options. They're always thinking, "What have you done for me lately?" Always have a good answer.
Vote for your favorite products, services, and campaigns! The ClickZ Marketing Excellence Awards recognize ClickZ readers choices for achievement and innovation in online marketing technology, solutions, and execution. Voting runs until Wednesday, June 22 (EOB, EST).