Tracking Customer Trends Is Crucial
A process of tracking customers over time provides insights into strategic successes and marketing issues. Executives are always looking for more information and data upon which to base decisions concerning resource allocation and prioritization. Let's look at the types of trends that provide marketing value to the organization.
It's important to gauge how your company is doing in acquiring and retaining customers. The example in the accompanying chart ( Http://www.dmnews.com/pdffiles/ rukstaleschart.pdf )shows customer trends over a three-year period. As can be seen, this company had a net loss of customers in 2001, from about 3.48 million to 3.4 million.
Though the company did improve the percentage of its customers retained, the number of new customers was insufficient to compensate for the lost customers. The company experienced a 2.2 percent drop in customers.
The year 2001 was difficult economically for many companies and that influenced this decrease. Over the next two years, the company continued to increase its retention rate and the number of new customers. This combination led to a substantial year-on-year increase in the size of the customer base.
While this story appears to be all good news for the past two years, the company also wanted to know where this increase in customer activity came from. The chart also shows the three main lifestages of the company's customers.
As can be seen, a majority of customers are families. That segment has increased almost 17 percent over the past three years, from about 1.98 million to 2.31 million. Additional statistics not shown indicate that the family customer is much more profitable than a customer from the other segments on average, so the growth in this segment has a large effect on the company's profitability.
The company has relatively loyal seniors, as shown by the high, and increasing, retention rates. The number of new customers in this segment also rose.
The biggest area of concern is with singles, which have a low and declining retention rate and a decline in the number of new customers. This led to a 25 percent fall in the size of this segment, from 848,000 to 632,000.
With this information, the company knew it had to figure out how to attract singles. Though the numbers don't show it today, the low and declining brand strength among singles could create problems in the future when the singles move into the families segment, the highest revenue- and profit-generating segment.
The marketing department produced further trend reports examining the product groupings that each segment purchased. It identified specific categories that were key to the overall relationship with singles. These trend reports were shared with the product management organization and primary research was conducted with a sample of singles.
This led to new products being introduced into the category and marketing directly to singles for those products. The marketing department also repositioned direct marketing materials to singles, focusing on the lifestyles and products that appealed to them and largely ignoring the other, irrelevant product categories for singles.
Lifestage is but one of many segment schemes that can be analyzed. Customer value tiers, tenure, product bundle segments and business units all can be analyzed with respect to trends. Also, while customer counts and percentages are useful, information such as revenue, profit (calculated as marginal profit or contribution to overhead) and number of transactions or products also provides insights into where a company is successful and where it is not.
Customer tracking and trend analysis usually is used to identify with whom you are having successful relationships. However, it does not prescribe specific actions that need to be taken. It is customary to follow up this type of analysis with further database analysis or primary research to address why customers are behaving as they do, as well as test marketing new concepts and ideas before rollout.
Every company should be able to answer fundamental questions about its business relationships with its customers: which customers are most important to us; how are we doing in our relationships with them; and where do we need to focus our scarce resources to improve performance.