Keep Them in the Fold

Strategies and tactics for retaining continuity customers

October 2007 By Shari Altman

multipage

Done well, continuity marketing can be quite a lucrative business. But it also can be a risky business as the profit from continuity marketing comes from a marketer’s ability to acquire a customer once and ship paid products to him or her multiple times. Most marketers lose money acquiring continuity customers or, at best, break even. To be profitable, you must retain customers beyond the initial order.

To improve retention you must:

• Add or increase the number of retention-driving tactics; and

• Reduce or eliminate actions that are retention killers.

Retention drivers are policies or promotion tactics that increase the length of time customers gain meaningful value from retaining their relationship with a marketer. Retention killers have the opposite impact. Note: The key point is that the customer is in the driver’s seat. Assessing whether a policy you are about to implement or a promotion tactic you want to test is a retention driver or killer means putting yourself in your customer’s mind-set. Consider if the action or offer causes customers to feel better about the products they already received, and more or less favorable about getting more items from you in the future.

But remember: “You can’t polish sneakers.” If your auto-replenishment or “product of the month” concept is flawed, no number of retention drivers or elimination of retention killers will keep customers around.

Retention drivers and killers can be measured in lifetime value (LTV) increases and losses. Faced with high acquisition costs, you can best determine how to spend your retention marketing dollars by measuring LTV changes. Confirm that what you think is a retention driver truly is one by looking at its impact on the LTV of your customers.



Keep ‘Em Close

Flexibility is the biggest tool in your retention bag and the most effective tactic for avoiding potential cancellations. “Members want to be in control of their destiny,” counsels Gail Terry, U.S. director of the PONY Book Club at Danbury, Conn.-based Stabenfeldt International. “Don’t let cancellation or return be their only choice,” she adds.

Different customers have different needs. Some prefer to make one payment, while others prefer stretching payments out. Some customers want to receive monthly shipments, and others prefer to receive shipments every other month. The more you can be flexible and let customers determine when they receive shipments, what components are included and how they pay, the more likely they are to find a combination that works for them. This especially is true for auto-replenishment programs.

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