Halt Customer Defection
Depending on your industry, you may have different types of customer and company relationships that affect the definition and development of data models.
• Service providers. If your company provides a service as part of a fairly predictable, written contract—such as insurance companies and wireless service providers do—you need to take into account contract dates. While a customer can drop the service at any time, the greatest risk for customer attrition occurs when a contract is up for renewal.
• Contract dates define a critical marketing window for conducting retention marketing. It is important to evaluate customer value prior to contract anniversary date so the marketing department can develop a set of offers or a renewal strategy to communicate with these customers. Micro-marketing, or database marketing, which is the concept of using all available data on a prospect to maximize the relationship with that prospect, then becomes beneficial by combining all factors that are needed in creating and implementing effective marketing programs.
• Catalogs. Catalogers often hold “looser” relationships with their customers, and retaining them requires a different type of marketing, because there is not necessarily going to be an event or contract that drives retention or attrition.
Rather, the “contract” that exists with the customer more closely resembles a non-binding brand-loyalty relationship. There is an implicit agreement that the cataloger will provide an on-going suite of products that the customer agrees to purchase. This loyalty is defined in a steady and consistent pattern of purchase behavior over time. Any distinct disruption or absence of purchase behavior over an unusual period of time can be interpreted as a defection or attrition. For example, if a customer has purchased at least one product a year from a catalog for the past 10 years, the absence of a purchase in the eleventh year could be defined as a defection. Other factors, such as rewards plans and bundling a variety of product discounts, can be more useful in strengthening the relationship and are important in retaining customers.