Delivering against this customer life-cycle strategy requires an in-depth analysis of a customer’s transactions database. By understanding basic concepts such as how recently a customer purchased, how frequently they purchase and their financial value opens the door for developing predictive models which can profile customers at each stage of their life cycle. These models can then be used to profile an entire customer database and identify which segments can be moved along the revenue/value dimension. And if customer defection is a problem, these same predictive models can be used to identify potential defectors and trigger the implementation marketing programs to retain these customers and increase their loyalty.

Root cause analysis is a powerful tool to help identify the specific reasons customers reached a tipping point and either reduce their spending dramatically, or moved their business to a competitor. With root cause knowledge, process improvement programs can be developed to eliminate those reasons driving defection. A typical root cause analysis can be easily plotted into a meaningful series of paths that explain precisely where the customers’ journey went awry. A hypothetical example follows:

A major benefit of working with ResearchLink Partners is our ability to develop specific corrective action programs which address customer acquisition, upsell, loyalty, retention and win-back programs. With our strong database marketing experience and our past work with major companies such as RJR, the Associates (Citi), Ford Credit and others, we helped pioneer database marketing programs to address customer loyalty issues and the measurement tool to monitor their effectiveness.

Customer Loyalty/Retention

Accenture’s 2013 Global Consumer Poll indicates that a crisis is brewing among companies’ customer bases that pose a significant threat to company growth agendas. The survey conducted among 12,000 consumers in 32 countries found that 51% of customers in the U.S. have switched providers because of bad customer experiences. The cost associated with this level of customer attrition is estimated a $1.3 trillion dollars. ResearchLink Partners finds similarly high customer attrition rates within B2B companies.

The historical rule of thumb suggests that it cost 10X more to acquire a new customer than it does to retain an existing customer. This translates into astronomical amounts of cash and other company resources to just break even and maintain customer bases before any new growth can be achieved.

With the advent of NPS (Net Promoter Score), CX (customer experience), traditional customer satisfaction, root cause analysis and customer database analytics, the opportunities to monitor customer loyalty are greater than ever. But the ability to take corrective action and develop loyalty or retention programs varies greatly depending on which approach and information gathering methodology you choose. We employ all these methodologies to address customer loyalty and attrition issues based on what the client company perceives its churn problem to be.

Companies with long histories of measuring customer loyalty and those looking for a relatively inexpensive approach to gain an early understanding of customer loyalty are flocking to NPS research because of its historical linkage with financial performance. Yet a single metric measurement approach such as NPS does not provide sufficient depth of insight to understand the root causes for declines in business performance or declines in customer loyalty.

CX and customer satisfaction both focus on how much or how little the various touch points in the shopping experience influence future shopping intentions. Both methodologies examine the intricate details associated with the customer buying process to identify those elements that drive loyalty.

In our opinion, the most effective measure of customer loyalty starts with a clear understanding of how customers flow through relationship life cycle to understand why customers defect and the financial value different customer segments generate. Many companies are wedded to the fact the every customer has value. However that can be far from true once the cost of maintaining a customer relationship is factored into servicing customers.

The hard truth is that some customers are more profitable that others and should be overinvested in to optimize total profitability. Some customers are simply not worth keeping on the customer base, or emphasis should be placed on finding extremely low cost ways of servicing those customers to maintain a profitable relationship.

We have long used the following general model to define the array of strategies at work in managing a customer relationship.