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How do you know if a customer is still YOUR customer?

by Paul Schwartz

The loyalty customers have to your business will change over time based on a variety of factors.  Loyalty is not a binary measure, as customers usually don’t switch with a single action.  Most will transition in degrees and slowly move their business to your company or away from it.  The ability to track and act upon this migration will keep your attrition low and allow you to retain and grow your best customers. 

Once you have the business, how do you know you are keeping it?  To start with you need to know what behaviors define your best customers, and you’ll need some measures to track these behaviors.  Then you can segment your customer base and identify your best customers. Next you’ll need a plan to retain your best customers and increase the business from these customers. All of these make up a loyalty roadmap.

The actual behaviors, measures and plan of action will be specific to your business model and objectives.  To get you started, here are some common ways to identify your best customers, customers you may be about to lose, and some who you may not want to keep as customers.  You can segment your customer base by:

• Recency – how recently a customer has purchased.

• Frequency – how frequently a customer purchases.

• Monetary – the dollar volume or total revenue of purchases.

• Profitability – the level of profitability of a customer.

• Satisfaction and loyalty – the result from a satisfaction or loyalty assessment.  

• Customer service usage - frequency of contact, number of complaints, satisfaction with result.

• Product/Service usage – most recent version, costs to switch, or service usage vs. payment (using much less than what one is paying for may indicate defection).

• Future value or life-time value (LTV) which incorporates retention, sales, acquisition costs and profitability.

Much of your ability to implement this type of assessment will depend upon the information you have at the customer level.  You can still make some improvements by tracking these measures for a total customer base, but the closer you can get to individual customer measures, the greater the impact you will have in forging strong relationships.

Remember, once you have your baseline, you are looking for a change in these measures to help identify opportunities to protect and grow relationships with those customers you can do business with most effectively.  Need help creating a loyalty roadmap specific to your business?  Contact us for more info.   Please visit us on the web at www.congruity.biz

Copyright © 2004  CONGRUITY.

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