Customer Loyalty: Start with the most engaged

October 18, 2014

A few year’s ago I was working at a large FS company. My team and I created a programme - called ‘Rhapsody’ - to test different loyalty treatments.

We started with data about our customers: their size of wallet and our share of that wallet. The segmentation was based on different combinations of size, share and the number of customers in the segment.

Targeting the biggest opportunity

This analysis showed us that the biggest opportunity was to get people with a large size of wallet to spend more with us.

The logic for targeting these customers was simple: if these lower spenders spent like our average or top spenders we would generate a lot of business.

We also targeted an additional group: recently lapsed customers. Again, the logic was simple: imagine if we managed to re-capture their previous levels of spend.

We created a series of treatments over the course of several months to try to engage these customers and entice them with offers to bring more of their wallet to us.

The engagement challenge

The problem is: people who aren’t engaged with the company… are hard to engage with.

What this meant for the campaign was that these customer groups simply ignored our messages. We tried some really attractive offers and discounts that we knew worked in other campaigns. Despite many attempts with different promotional activity these customers continued to spurn our offers.

Targeting the most engaged

My experience with targeting highly engaged customers is the exact opposite.

These customers are very familiar with what the company has to offer, and any messaging targeting these customers is likely to be heard. So what kind of messaging works:

  1. Asking their point of view These customers are likely to have a strong point of view on your products or services – good and bad. You might consider asking them to share that point of view.
  2. Running a ‘Customer Get Customer’ programme A good proportion of these customers will be advocates for you and your brand – otherwise they would surely find another provider. An incentive for them to tell their friends and colleagues about your terrific products and services can be very effective, especially if both the existing customer and the person they introduce benefit.
  3. Loyalty schemes Loyalty schemes will be most effective for this group – and works to make the customers feel like they are getting something back for their regular custom.
  4. Recognition events and activity Recognition can be an effective tool. Examples include an invite to a new store opening, asking customers to try the chef’s new menu, a preview evening to see the new range, or perhaps a request for input on the company’s new products. All of these reinforce the message that the business values the customer.

Summary

It’s certainly worth testing trying to re-engage recently laspsed customers as well as customers with a lower share of wallet.

In my experience, however, this will be less effective than focusing on the most engaged – the best customers in the base. These ~10% of customers are already driving ~60% of your sales and your opt-in rate to loyalty campaigns is likely to be much higher.


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The intersection of business and technology.
Written by Charles Allen who lives and works in Hong Kong.

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