Before Your
Customers Defect,
Rope Them Back In With a Database
(July 15, 2004: Providence,
RI) – If you don’t believe you have a customer defection problem,
David Williams, founder and President of LoyalTec, LLC, thinks
you’re fooling yourself.
“According to studies, the average retailer loses 30% of their
customers each year,” Williams notes. “If that retailer has
10,000 customers today, at the end of five years they’ll be left
with just 1680. They may not notice because they’re pumping all
their marketing dollars into new customer acquisition to replace
the ones they’re losing. But the problem is, it costs about five
times more to acquire a new customer than to keep an old one.”
While retailers
have seen customer defection as an unsolvable problem, advances in
database technology coupled with creative marketing can
significantly reduce its cost. The key, according to Williams, is
setting up a model that accurately predicts when a customer is
about to defect, and taking action to prevent that defection.
“Once
they’re gone, it’s often too late,” claims Williams. “But if you
can detect a change, based on their individual pattern of visit
frequency, you have a lot of marketing options to bring them
back before they find someone to replace you.”
Williams tells the story of one client who discovered a customer
who had been spending $5000 a year in their establishment, with
a visit frequency of every two days. “When they first came to
me, she had been missing in action for an entire year, according
to my analysis of their data. When I showed it to them, they
were blown away. Here was a customer with a lifetime value in
the neighborhood of $50,000, with a conservative referral value
of another $50,000. Yet no one recognized her name or could
recall her face.”
To help
restaurants and retailers prevent costly customer defection before
it happens, Williams has written a White Paper on the use of data
to identify and keep profitable customers.
Titled
“If Beatrice Blue is Your Best Customer,
How Come You Couldn’t Pick Her Out of a Police Lineup?”
the White Paper explains:
-
the four main
causes of customer defection
-
why analyzing
“average” customers is dangerous to your bottom line
-
the three big
reasons that old customers are more profitable than new ones
-
why a few
days’ delay in reaching out to a defecting customer can mean
losing them forever
-
when to
apologize to an angry customer and when to pretend nothing
happened
-
how small
businesses can use data to defeat the “category killers”
The White Paper
is available for free from the LoyalTec website. To get a copy,
visit www.LoyalTec.net/mia.
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