Discover the differences and commonalities between retention, loyalty and customer value marketing

A good read for junior to mid-level customer marketers. If that’s you, then read on.

There’s a difference between the concepts of retention, loyalty and customer value marketing.

However, is there a common thread?

In my customer marketing advisory - Front Foot Marketing - I see marketing teams sub optimally structured to approach the above.

What does that mean?

Well, I see significant differences in opinion between teams when assigning their objectives, setting strategy, deploying activity, and measuring their campaign performance.

I help teams work through the differences to refocus and align customer strategy, prioritise data variables, map technologies and tools to customer journeys, and reset measurement frameworks that prove incremental success.

Lets take retention

Retention, by its name, is retaining a customer and preventing them 'churn' or switching to a competitor.

How you do it is the strategy.

You can retain customers in a myriad of ways.

Making their initial purchase and early-stage experiences brilliant. So much so that they like your product and service and repeat purchase. Obviously early-stage experiences are only one part of the puzzle to retaining customers.

You could lock customers in on a subscription and focus on renewal.

You may focus on a customer support model to create positive experiences out of potentially negative ones.

Or you may create programs to engage customers in more parts of your offering or communities to build deeper knowledge, expertise and connection.

Or you may offer rewards, promotions, points and or deals to retain them.

You may retain them, but is that loyalty?

Loyalty is making someone loyal to your brand, product or service over the long-term.

Some people define it as an emotional attachment.

Keep it positive and customers will be predisposed to repeat purchase.

Others define it as financial loyalty based on repeat purchasing.

I believe you need both.

Plus you can prove that one leads to the other.

For example, surprise customers with random acts of kindness to thank them, and they may simply shop again which results in the third concept – customer value.

The bottom line

The third concept I started this post with is customer value.

This is the financial value of a customer’s lifetime (or lifetime value - LTV) purchase of your products or services. Hence the concept of tenure, frequency, and basket size. With the aim of increasing their purchase frequency, average order value, and advocacy.

And it varies if you look at revenue versus profit or marginal contribution.

I prefer profit or marginal contribution as it gives a better picture of the true value of a customer to a business.

It could be low because the customer is only new.

Or could be low because they only purchase low value or low margin product.

Now this is where it gets interesting

There are a myriad of segments of customers based on the above concepts.

How do you prioritise and focus your team’s time, skillset and budget allocations?

When it comes to customer marketing you need to decide what you would like to offer your customers after their initial purchase to retain them, decide how you will entice them to become more loyal, and ultimately create ideas that result in customers buying higher margin product which makes more profit for your business.

All this should be benchmarked against a control.

If you did nothing, then what’s the baseline trend.

And if you do something, then what’s the incremental lift or impact.

Then you can focus on data management, technology and AI

Plus you’ll need to add into the mix the answers to:

• how you will ensure that your data capture is privacy compliant
• how will you manage all the data that you hold on customers
• how will you achieve a single customer view
• how will you continually ensure that you are enriching their profile
• and how will you utilise your technology tools, systems and platforms, to better segment, target, personalise, communicate and engage with your most valuable and next most valuable customers.

It’s not straightforward.

There’s a lot to consider when gathering requirements for a project and transforming the approach to customer marketing.

So, where to start?

In summary,

• Retention marketing is about keeping customers from leaving.
• Loyalty marketing is about rewarding customers for staying.
• Customer value marketing is about getting the most revenue from your best customers.

Whilst the above seems obvious, I’ve purposely started with customer thinking rather than putting the cart before the horse – tech, AI or data.

Technology and data management are a result of a customer strategy. Avoid the pitfalls of getting tech vendor presentations without clarity on your customer approach.

So, if you’re looking to optimise your activity or better leverage a digital experience platform, or are looking to prioritise the data variables for better precision marketing, then please step back first.

To prepare for change, it’s not only important to assess your current capability and map requirements for future need. But it’s more valuable to flip the marketing funnel and start with your customer clusters and rank the most valuable opportunities.

This way you’ll:

1. establish clear objectives to achieve
2. remain focussed on measuring and proving incrementality from your customer marketing activity
3. and then hopefully deliver the commonality of retention, loyalty and customer value marketing: a positive ROI report to your Executive Leadership

And you may just become customer marketer of the year.

Touch base here if you'd like to have a confidential discussion

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