Category Archives: Marketing thru Operations

Customer Marketing for a Pedicure Spa

Jim answers questions from fellow Drillers

Topic Overview

Hi again folks, Jim Novo here.

I hear from lots of “really small” business owners who are interested in doing “loyalty programs” or similar types of marketing – particularly in service businesses – but think these ideas are too complex or too expensive for a typical owner to handle. I’d say this is not so, the trick is to think through the program features and match them to business needs and resources available. You don’t need a points program to create customer loyalty, my fellow Drillers …


Q:  I came across your website while researching customer loyalty programs and I  am hoping that you may be able to give me some feedback on an idea that I have.

I run a small home-based spa that specializes in pedicures, and have had great feedback from my clients.  So far I have relied on word of mouth and am now ready to do some advertising as I need to be busier.  I have come up with an idea for a program to help with my pedicure loyalty and referrals.  This is a rough idea of it, customers will earn Points in the following ways:

For each friend or family member you send to me, earn 8 points.  You will receive 7 points if you pre-book your next pedicure within a before leaving.  For each pedicure you receive, earn 5 points (except those paid by Gift Certificate).  When you have earned a total of 50 points, you will receive a $25 Gift Certificate!!  (my pedicures are priced at $35).  Your Point total is maintained on your individual file.  The total is updated whenever you earn or redeem points.

I am new to the marketing aspect of all this and I would love to hear your opinions on such a program and also if it seems fair from a customer point of view.  I am also looking for suggestions on a name for it or any other suggestions towards it and presenting it.

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Actionable Customer Retention Measurement

Jim answers questions from fellow Drillers

Topic Overview

Hi again folks, Jim Novo here.

Simple question below, not so simple answer. There’s a lot of conflicting ideas floating around on the subject of how to measure customer retention properly, and to be honest, it really does depend on the type of business we’re talking about. Further, in order to properly measure customer retention – in a way you can take action to improve retention / increase profits – you have to define it first, and that can be as much of a challenge as the actual measurement. Ready for a trip down into the depths of this area? Hang on, it’s quite a ride, you Driller you …


Q:  How do most companies measure customer retention?  Is there a formula?

A:  The short answer is not many companies outside of specific industries are very adept at customer retention – yet.  For traditional (not-online-born) companies, it is most commonly used in telecommunications, financial services (including insurance), direct marketing (catalogs / web sites, etc.), subscriptions / publishing, and the travel industry.

The reason for this concentration: these industries have traditionally collected detailed data on customer interactions as part of the offline business model.  Now that many other industries are collecting data on customer interactions online, the lessons learned in these “lead” industries are proving quite valuable for industries new to direct customer interaction.

A “standard” way to measure it, if you are looking to align your metrics with Wall Street and your financial statements for example, is “12 month active”.  Any customer you have had contact with in the past 12 months is still a customer, any customer with no contact in the past 12 months is a defected customer.

This is a retail / mail order oriented view, and if you sell products, then “contact” means “purchase”.  If you are in the services business, it could be any contact – phone call, e-mail, sales call, download.  Divide the number of 12 month active customers by the total number of customers and you have your retention rate.

There is no reason you can’t use “24 month active” or “36 month active” or “5 year active”.  The point is to define what retention is for your particular business and stick with it.  Get agreement on what makes sense for a measuring stick and try to improve.  Often your own data will tell you what the best “no activity cutoff” is for your business.

Retention is really a “continuum”, and retention rate is always “relative” to your perspective.  If you use a very “tight” definition like “12 month active”, you will lower your retention rate.  As you expand the time period, your retention rate rises.  The problem with most companies is they expand this cutoff time period to infinity, meaning every customer is still a customer unless they notify you they are not.  Is this a useful measurment? Doubt it…

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Set Up Retention Program Measurement for Wireless

Jim answers questions from fellow Drillers

Topic Overview

Hi again folks, Jim Novo here.

So, how to you actually set up the measurment for a retention program? Since you will ultimately want to conclusively prove that what you are doing is working, the 1st thing you have to is measure what the current retention rate is, hopefully by segment so you have a basis for creating successful program features. But how do you do that? Read on, fellow Driller!


Q: I got the job of servicing the top users on our network.  I must confess I dazzled the interviewers with statistics from your Recency, Frequency, and Monetary model !!!

A:  Congratulations!  Well done.

Q:  I know I should be paying you for this but I would like to communicate with you once in a while to tell you what’s going on..?  If you are not happy with this I really understand.

A:  I’m fine with it, as long as it doesn’t become a full time job!

Q:  Here’s my plan:

1. I would like to start by segmenting high users by usage, (usage bands)

2. Next I would like to profile demographics for each usage band

Continue reading Set Up Retention Program Measurement for Wireless