Keeping Your Customers Requires Different Strokes for Different Folks
I’m always surprised that even the smarter entrepreneurs, who understand how to segment their customers by “spend” and – within reason and usually discretely – treat them differently, fail to appreciate that simply approaching customers based on the dollars they contribute to your revenues is at best only taking into account a modest fraction of the whole story.
To really master the art and the science of customer retention, you’ve got to also understand where each customer is from time to time on the consumption cycle (as I described in the last post) and, equally importantly, you’ve got to determine what type of attachment the customer has to your business and the extent of the attachment that he or she has as well. And finally, you have to learn what viable alternatives and substitution capabilities the customer has and how compelling any available competitive offerings may be to each customer.
For the moment, I want to concentrate on the attachment issues because the conclusions you reach about these considerations will be the primary drivers of how you approach and treat each customer. Basically, you’ll need to use different “strokes” (data, incentives and offers) for different folks if you want to succeed in holding on to the vast majority of your customer base. One size never fits all. And, the loyalty profiles of your customers will vary dramatically depending on the industry you’re in and the specific kind of product or service that you are offering.
In the attachment universe, the first thing to determine is what type of connection is common within your industry and for your product or service. It’s not as simple as you might think. And, if you do think this stuff is obvious or that you are already doing the right things simply because you “know” the answers to these kinds of questions (although you have to admit that you never really asked them or thought about them), then you’re most likely in trouble already because anyone today who thinks that they have no “customer” issues or problems is just one step away from the cliff. The choice is always the same – innovate and improve your game or risk becoming irrelevant before you even realize it.
Step one is your industry/product. Soft drink and beer companies have it pretty easy. So do soaps, detergents, and deodorants. In fact, the most likely cause of a change in a beer drinker’s preference is immediately following a divorce. Go figure that out. Probably not a lot of fond memories associated with your ex’s brewski. But, in any case, in these industries you’re looking at customers who have a clear emotional connection to the product and a reluctance to change or even try new products. They think they made a smart and conscious choice; they’re sticking with it; and they’re pretty good spenders as well. They’re not going anywhere and you shouldn’t allocate your scarce resources against this population because you always need to focus on changing the behavior of the “at-risk” customers – not necessarily stroking the ones who are already fat and happy. Call these guys the “HEART” group.
And, at the other end of the fun scale, in the life insurance business, you have an equally important group to ignore. This is another group that’s going nowhere fast and maybe not until they die. I’d say that these people – by and large – apart from seeing the occasional FUD commercial on TV about your uninsured family ending up in the poorhouse and unable to bury you – don’t even think about the product more than once a year; don’t think there’s any reason to change if and when they do; and aren’t really even price-sensitive because who can figure out what any of this insurance stuff costs anyway. So, if the drinkers are emotional, these guys fall into the “just sit there” category. As long as you (or anyone else) don’t disturb them, they’re there for the duration. Same category includes your internet provider (notwithstanding a new bundle every day) and your credit card(s) company. It’s just “too hard” to make a change that isn’t precipitated by something. (By the way, this is not the same for car insurance decisions where there’s so much ongoing and in-your-face advertising at all times that you’re forced to consider apparent economic alternatives.) Call these folks the “BUTT” group.
The next and largest category (and the one you need to engage) can typically range very broadly across a lot of day-in and day-out necessity-driven products and services that we buy and consume almost every day – this can be our grocery shopping (but not personal hygiene items where we have an emotional connection as noted above); clothing for the kids; gas and maintenance for the car; etc. and here we’re pretty engaged and VERY sensitive to and receptive to strokes. These are the folks who think a lot about their purchases (especially in these tough times) and they are regularly trying to evaluate, calculate and select the best deals. They are price/value/performance shoppers and they require a great deal of care and handling because of how quickly their loyalty and shopping habits can shift based on what you might regard as minor changes in price, packaging, bundling, etc. They need to be reassured and provided with continuing demonstrations that their choices and selections are the right ones. Call the guys the “BRAIN” group.
Take some time to figure out where you sit in this analysis and in the next column I’ll tell you what to do about keeping almost all of your customers on board for life.
PP: “You Get What You Work for, Not What You Wish for”
