Marketing to Gain, Regain Loyalty

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Over the years, many have tried to define loyalty and what characteristics can be applied to loyal customers. But as marketers have found, loyalty has no single definition, and loyal customers do not fit a common mold.

However, loyalty does not have to be as elusive as most marketers claim. Naturally, complex back-end response analysis and overall return-on-investment justifications will have to be performed, but from a direct marketing standpoint, there are some often overlooked guidelines to gain, regain and retain customer loyalty.

If these specific guidelines are followed and molded to the uniqueness of a particular industry or product, direct marketers can quickly achieve a more relevant communications plan, and their customers will reward them for it.

Though there is no way to create a model of the perfect loyal shopper, there are ways to ensure that a loyal shopper remains so through direct marketing methods that retain lost or migrating shoppers. The following are some key points when communicating to these key target audiences:

Don't be shy. Be obvious about the context of the correspondence. Let shoppers know why you are trying to communicate with them. Use phrases such as: "We've missed you," "Haven't seen you lately" or "Tell us what we can do better." Customers like to know you care about them and that you are talking to them on an individual level.

Offers. Make sure to deliver the right offer to the right customer. You know that these shoppers are not spending as much as they were previously. You should provide customers with incentives that enable them to return to the spending levels where they once were. Do not try to gain incremental spending over their prior levels in the initial stages of communication.

It is important to note that though you may be sending communication to all lost or migrating shoppers, not all shoppers are the same. You must vary the offers by customer to meet individual needs. Dollar-off or percent-off shopping baskets or products seem to perform the best. In addition, provide multiple offers that are good for an extended period - four to eight different offers good for four to six weeks. Following this period, subsequent continuity offers based on those purchases also help ensure that customers return to the store or brand.

Creative. Make the mailing interactive. Color code multiple weeks of offers and train cashiers and management to look for these customers and begin a dialogue. For example, the initial offer may ask the customer to see the store manager for a special reward. Managers can ask how their store can be improved. Treating the customer as an individual who has been missed in the store will help ensure that the customer experiences personalized service. Another method to help increase purchase frequency is to provide a pre-filled-in application that is positioned as "... and if you have misplaced your frequent shopper card, here's a quick way to get a new one."

Learning. Get free research. The best way to learn from lost or migrating shoppers is to ask them basic questions about why they have changed their shopping behavior. This can be done through in-store surveys, drop boxes or other communications. Shoppers should be given the opportunity to remain anonymous, but rewards can be offered to those who provide identifying information for future communication. The results of these surveys and suggestions should be shared with store/brand and headquarters management teams to help improve their stores or brands.

Frequency builds loyalty. Communicate multiple times. It is not enough to send an initial communication, then stop the dialogue. Upon expiration of the initial offer, you should communicate with your targeted customers at least once more based on their response to the initial mail piece.

Those who responded should be evaluated: Did they return to spending levels? If so, give them another incentive to encourage them to buy more of the brand or increase frequency in the store. Those who did not respond can be sent another communication to encourage spending or can be deleted from the list. However, constant communication is key in developing relationships with shoppers.

Analytics. Measure your investment. All spending from responders should count 100 percent toward your ROI. You can then prorate that spending and profit to 12 months to calculate annual return on investment.

Targeting. Be aware of pitfalls. Traditionally, an industry standard has been to determine first whether a customer is lost or has migrated downward. Typical lost or migrating shopper targeting works like this:

• Baseline period: a defined period of 12 weeks.

• Evaluation period: the immediate four to six weeks following the base line. If there is no activity in this period, missing customers are assumed to be lost. If there is diminished spending, then the customers are assumed to be migrating. Typically, migrant spending behavior is an aggregate decrease of more than 35 percent in total spending dollars.

While communicating with lost or migrating shoppers may seem standard in direct marketing methods, there are key issues to recognize. Be aware of seasonality when establishing the base line and evaluation periods. For instance, if the evaluation period contains summer months, customers may be on extended vacations. In addition, you should understand that if more than six weeks is used in the evaluation period, it may be difficult to bring lost shoppers back. New shopping behaviors may be formed by this time, thus wasting your efforts. If circumstances merit a more than six-week time frame, then your offer values may need to increase.

Finally, though you may be tempted to try to reach all lost or migrating shoppers, you should focus on the top 50 percent of shoppers by spending. This will typically minimize your cost and maximize your returns. Consider this: Do you really want that bottom 50 percent of shoppers?

Direct marketing has long been a standard in attempting to build loyal customers. Creating customized direct mail programs that follow these guidelines to recruit and retain lost or migrating shoppers is the first step in developing those loyal customers.


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