Halt Customer Defection
• Purchase behavior demonstrates not only who purchased from you, but also what they bought and how much they spent. It is important to note when the first contact took place and when the first purchase took place, as well as the frequency and content of subsequent purchases. Whenever possible, it also is beneficial to examine your customer’s purchase behavior over a number of years. With all other things held constant, consumers who purchase across multiple product categories are likely to have lower attrition rates than single product purchasers.
• Customer interaction frequency provides a look at a customer’s interactions with your company or organization that could add to the “stickiness,” or staying power, of the relationship. Customers who buy frequently, but don’t interact and ignore promotional activity tend to have a high attrition rate.
• Demographics and lifestyle information provide important customer background such as marital status, age and income. This information can help you tailor campaigns to the groups that are most important to your organization.
• Data segmentation incorporates existing customer management segmentation. For example, some organizations divide customers into segments based on purchase incidence. Other segments could include new to file/new customer or multiple purchase, which then can be broken down into medium and heavy purchasers. Typically, these three segments behave differently. Transactional history won’t exist for new customers, so their risk profiles are largely dependent on non-transactional data such as demographics.
• Metrics should include the dollar value of purchases to determine the current value of each customer to the organization. In many cases, when using retention modeling, you will want to take a different marketing approach to risky customers who are of high value vs. risky customers who are of low value to your organization. A risk-value matrix provides a sound framework for managing the financial value of risk of attrition.