Category Archives: Measuring Engagement

When Acquisition Spoils Retention

Jim answers questions from fellow Drillers
(More questions with answers here, Work Overview here, Index of concepts here)

Topic Overview

Hi again folks, Jim Novo here.

OK, here’s a bit of a tough one – what if while investigating customer retention problems you find out that customer defection is highly correlated to specific salespeople or marketing programs? What if I told you this correlation is pretty common – but unrecognized, because hardly anybody goes looking for it? And if found, find trouble doing something about it?

Two issues – you can try to predict / save a customer in the process of defecting, and / or you can hunt down / fix the source of the defection – why is it happening in the first place?

Welcome to the politics of customer retention – and make sure to put your Drillin’ shoes on …

Please note: XXX is a major cell phone provider…

Q:  I’m an XXX customer – I saw an ad for a new phone I wanted for $230.  I went in to the XXX store and asked for the phone – the clerk rang it up at $580!! I showed him the ad.  He said that price is for new customers and he could not give it to me at that price.  So it made me feel that XXX did not value my business.  I then cancelled with XXX service and have told about 10 people about this situation.

A:  Right, this is a pretty common problem with companies that don’t understand
customer retention.  They’re so focused on acquisition that they cause defection and that’s where a lot of the churn in that particular business comes from.  I’d chalk it up to totally clueless marketing management.  

The irony of this situation:  XXX used to be one of the “gold standard” 1-to-1 marketers in the good ‘ol days.

In the first place, companies should not “broadcast” these kinds of offers, because you understand the impact, the leverage, the “costs 5x as much to acquire a customer as retain one” and so forth. If you want to make offers like that, you try to use discrete channels – direct mail and so on, as opposed to newspapers or radio / TV. The strategic issue is people are defecting at such a high rate the company thinks they need to really drive acquisition to make up for it instead of concentrating on retention, which would be less costly and more profitable overall. But even worse, these aggressive acquisition programs are actually increasing the likelihood of customer defection!

Continue reading When Acquisition Spoils Retention

How to Define “Frequency” Metric in B2B

Jim answers questions from fellow Drillers
(More questions with answers here, Work Overview here, Index of concepts here)

Topic Overview

Hi again folks, Jim Novo here.

If you’re not really clear on what you’re trying to accomplish, designing a successful customer retention program can be a bit of a struggle. Hey, maybe you just don’t know what to look for / what needs fixing / where to start? Gotcha, fellow Driller, the current value / potential value matrix is a great place to start – for you, and perhaps more importantly, your boss / the CFO. Ready to try on some focus? Let’s get to the Drillin’ …

Q:  I am totally getting into your book.  I am up through chapter 17 and have completed my RF Scoring.  My company [my day job] is a custom software company.  It was difficult for me to get my head around the units thing yet, so I just used the “M” as you put it.

A:  Thanks for the kind words, I’m glad it’s working for you!

Q:  In term of companies, we are probably like the B2B example you used in Chapter 8.  So, I could not get my head around the units deal yet because I have not studied the data enough to see if there is a progression.  I think I would need to look at it year to year; but should I stop now and do it first?

A:  Well, customer analysis always starts with an objective…what are you trying to look at / prove / do?  It’s hard to comment without knowing the business problem or issue you are facing…and without any information on how your business really works.  I can rarely find that out from looking at a web site…

“Units” would probably be the total number of “jobs” you have completed for a client.  It also could be the total number of hours the client has used, if that is more logical for the business.  It’s hard to tell without a bit more information.  The point of the “units” variable is to look at the Frequency of commitment, so use whatever makes sense for the business.

Q:  So, my question is, should I go back and do what you suggest in chapter 9 – setting up a look at Latency by customer to get the progression before I continue with Chapter 18.

Continue reading How to Define “Frequency” Metric in B2B

Customer Marketing for a Carpet Store

Jim answers questions from fellow Drillers
(More questions with answers here, Work Overview here, Index of concepts here)

Topic Overview

Hi again folks, Jim Novo here.

OK Jim, so what if the small business is “old school”, you know, not a lot of computer stuff other than billing / scheduling and so forth, and knowledge of spreadsheets is limited. Can the business till take advantage of the ideas you are putting forth without a lot of Excel going on?

You betcha fellow Driller – as long as you don’t mind a little paper and pencil madness …

Q:  Like most of your readers and visitors, I am absolutely bowled over at the prospect of what can be achieved by studying customer behaviour on a simple database/spreadsheet and using the resultant insight to drive unique High ROI customer marketing programmes to increase profits and reduce marketing costs.

A:  That’s a mouthful!  Welcome to the club.

Q:  I have to say that prior to meeting you, on your website and in your book, I had been intrigued by Arthur M. Hughes’ Strategic Database Marketing, but regretfully had reached the conclusion that its inspirational techniques were just not capable of being actioned by me, an Access/Excel illiterate and not so good on the figures either.

A:  Arthur Hughes is a hero of mine though I have never met him.  Some very nice folks have told me my material reminds them of Hughes, sort of a “next generation” Hughes.  That’s very good company for me to be in…

Q:  But your Drilling Down methods and the possibility of your consultancy help, has revived my enthusiasm to learn all I can about these wonderful techniques and to make use of as many of them as I am able.

Here is my challenge:  Father and son business.  Together about 12 years, but moved to present premises four years ago when they extended their product range and re-launched with new branding- under our stewardship!  They are a typical, small company turning over just under the $1M mark and spend around $30,000 – $40,000 pa on their marketing, mostly direct mail (works for them) and email.  Their product range has consisted of fitted carpets, flooring and Oriental rugs.  They have now doubled the size of their store by taking the first floor too.

Continue reading Customer Marketing for a Carpet Store