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a customer who has bought a lot from you, however often,
is not necessarily loyal.
For a better price, better quality and better delivery terms,
he may drop off without giving you a chance to respond.
Second, just by looking at his value doesn’t say much of
anything about his total value — about your share of his
budget. He may be spending just a little with you, but a lot
with the bad guys. To supplement RFM, you must focus on
wallet share.
Retention Programs
Once you’ve identified your best customers, select the right
approach to retention marketing. Here are some options:
•
Differentiated coverage.
After you’ve analyzed your
customers’ value (or potential value), invest more in
covering the high-value accounts. Treat them better,
like giving them the best volume discounts or seminar
invitations.
Differentiating your customers by value makes natural
economic sense on a return-on-investment basis, and it
also makes retention sense: You are truly nurturing your
best customers.
Philosophically, business marketers are already ahead of the
retention curve. They tend to have small universes to play
in, so they instinctively know they have to focus on satisfying
their customer base. It’s the way any good salesman would
manage his territory. Business-to-business direct marketing
does nothing more than replicate the time-honored
approaches of a salesman — just more efficiently.
So how do you nurture your best customers? The same way
a salesman would. You get to know them and their needs.
You make them feel good about doing business with you.
You spend time and money on them according to what
they are worth to you. You sell to them the way they want
to buy. You watch your competitor, and make sure you are
providing at least as much value as he is.
But let’s back up a step. How do you decide who is your
best customer? Most direct marketers rely on recency/
frequency/monetary value to segment customers by value.
RFM is a great tool for analyzing customers by their past
behavior.
But RFM isn’t the whole story. To evaluate “bestness,” RFM
analysis can be a misleading indicator for two reasons. First,
B
usiness and consumer marketers alike need to pay attention to retention
marketing. The consumer world is way ahead with value-based, data-driven
segmentation and frequency-point programs of all kinds. But because it’s rare, the
upside potential is great for business-to-business. You can get a lot of competitive
benefit if you move quickly.
Nurture Best Customers to
Long-term Loyalty
Contact matrix keeps you on track
By Ruth P. Stevens
