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8/3/2019 Understanding Customer Retention
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Understanding customer retention
Research & Trend
In reaction to the recent change in the retail landscape,
leading retailers have launched initiatives to understand
and drive improved retention. Deloitte conducted a series
o executive interviews in June and July 2010 across retailsectors that revealed just how acutely the customer brand
loyalty issue is aecting the industry and a variety o
innovative and leading practices. The consensus is that
customers are leaving at a greater rate overall, and unlike
previous periods, those that are leaving span a greater
spectrum o the customer base in terms o annual spend.
We ound our leading practices that can be used to
evaluate the current retention situation and ormulate a
strategy or addressing the undamental reasons or
customer migration.
1. Get The Basics Right And Track Them
Continuously
Start by measuring the basics o retention behavior on a
regular basis to answer three questions: how oten do
customers make a purchase, what types o purchases
are those customers making, and what is the value o
those purchases?
A specialty apparel retailer we spoke with tracks a series
o basic customer behavior and retention metrics on a
rolling 12-month basis. By synthesizing basic recency,
requency, and monetary (RFM) metrics in concert with
more sophisticated behavioral markers (such as anabandoned online shopping cart analysis), this retailer
identifes their valuable customers and targets marketing
actions designed to increase proftability.
2. Develop Usable Analytics
Develop customer engagement analytics and research to
gain a more in-depth understanding o key drivers o
retention behavior.
One retailer we interviewed learned that new customers
who remained active beyond their frst year as a customer
were fve times more likely than others to remain
customers or multiple years into the uture. Customersound to be lagging in their interactions were treated
with marketing strategies designed to stimulate retention-
driving behaviors. Conversely, those customers with
higher quality and levels o interaction were not oered
marketing treatments or discounts. This strategy, enabled
by predictive analytics, allowed the retailer to ocus
marketing resources where they would count most.
The consumer has changed, and so, too, should the way you measure loyalty.
by Matt McNaghten and Clark Passino
Published in RetailSolutionsOnline.com , June 2011
As used in this document, “Deloitte” means Deloitte Consulting LLP., a subsidiary o Deloitte LLP. Please see
www.deloitte.com/us/about or a detailed description o the legal structure o Deloitte LLP and its subsidiaries.
Certain services may not be available to attest clients under the rules and regulations o public accounting.
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Copyright © 2011 Deloitte Development LLC. All rights reserved.
Member of Deloitte Touche Tohmatsu Limited
3. Track Retention Across Channels
Enable tracking o engagement and retention markers
across retail channels to minimize retention gaps created
when customers migrate rom one channel to another.
These types o markers are generally a predictor o uture
purchase behavior. One retailer is using its website click
stream data, social media trafc, and other nonpurchase
engagement actors to identiy these customers at
dierent points in the purchase lie cycle. The
engagement score developed rom this data is then
leveraged to reward that customer or their loyalty to the
brand by giving them targeted incentives to make
purchases, inviting them to unique events, and making
special service channels available when needed.
4. Inject Voice Of Customers
Establish a systematic method or getting the VOC (voice
o customers) captured, analyzed, and leveraged or
identiying retention improvement opportunities. An
upscale retail client had historically recorded retentionmetrics that varied signifcantly across the customer base.
They ound that their commission-based sales associates
were fghting over the best customers and ignoring
customers with unknown value. This skewed service
model was essentially driving customers to competitors’
stores that oered more egalitarian service. The insight
that the sales and service model was causing customers
to deect at both ends o the spend spectrum led to
changes intended to create a more teambased selling
approach targeted at known highvalue customers.
Take Action
Retention measurement is a undamental building block
or success in today’s retail environment. Get started wit
inormation that is easily accessible, only adding data
and resources when the organization’s capabilities are
mature enough to use them and the business case is
warranted. Engaging valuable customers in today’s
environment is an achievable objective. Those that do it
well are already using a variety o resources to make a
positive impact on customer retention.
For more information, please contact:
Matt McNaghten
Senior Manager
Deloitte Consulting LLP
+1 216 589 3756
mmcnaghten@deloitte.com
Clark Passino
ManagerDeloitte Consulting LLP
+1 312 486 5854
cpassino@deloitte.com
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