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Case studies, data viz, musings and a bit of #humblebrag.

Do you have an executive loyalty dashboard?

Rarely does the subject of customer loyalty reach the executive suite, but forward-thinking CEOs are beginning to realize the tremendous business value of loyalty in this era of commoditization, price transparency and ease of switching.

[For the purpose of this article, “loyalty" does not refer to loyalty programs.  Loyal customers are those that have spent the most, buy the most often, are less likely to take their business elsewhere, and are highly likely to continue their purchase patterns in the future.]

The charts shown below were created from 5 years of anonymized purchase history from two very different online retailers.  Using predictive analytics from Loyalty Builders, we scored every customer record and grouped them into segments. 

At a glance, you can see that both share a similar challenge:  the outsize contribution of their most loyal customers, and the large revenue opportunity represented by the 1-2x buyers who may – or may not – buy from them again.

I think many of us know this challenge exists, but the visualizations emphasize the Herculean effort required to continuously move newer customers toward greater loyalty - and profitability - over time.

Take the first chart as an example: this retailer is quite successful at generating demand at a reasonable CPA, but the vast majority never buy more than once... and the business is shrinking year over year. They have yet to crack the loyalty code.

What would you do differently if could see how much revenue is in the hands of potentially fickle customers?

Here are some ideas to consider when developing strategies to maximize the value of your customer relationships:

  1. Loyalists make the ideal "seed" for lookalike audiences for prospecting. My tests using Loyalists have shown dramatic improvement in campaign performance in head-to-head tests against recent buyer or top spender lookalikes.

  2. Create a welcome or onboarding strategy to nurture new customers, and develop automated, individualized cross-sell campaigns to introduce products they're most likely to buy next. (Note that browse behavior is less predictive than purchase behavior, and only a tiny fraction of your customers are browsing at any given time. Start with cross-sell recommendations based on purchase behavior.)

  3. Underperformers used to be better customers but have started to fall off their buying patterns. They typically have an established purchasing history which makes it relatively easy to make relevant offers. Richer offers/discounts are worth the investment to save these valuable customers - think how much it will cost you to acquire their replacement.

  4. Winbacks can almost be considered as acquisitions because of the effort involved in regaining their business. Start by ordering these customers by their current value to determine the ones worth investing in and test reactivation offers.

In future articles, I'll review how to use loyalty metrics for campaign targeting, and the business impact of migration across loyalty groups . Stay tuned!

Judy Gern