eCommerce Analytics

Many of the companies we have talked with recently have expressed concerns over the coming recession. Consumer spending will continue to decrease while costs for everything from power to supplies are expected to rise. While the road ahead may look tough for many businesses, I believe the recession offers an opportunity to refocus on getting more value out of your existing customers.

A new report released by the CMO Council (“Business Gain From How You Retain: Addressing the Challenge of Customer Churn and Marketing Burn”) supports these thoughts. The CMO Council in conjunction with IBM, Dun and Bradstreet, and CSC surveyed over 450 marketing professionals about how they “‘operationalize’ customer intelligence” to make better marketing decisions and increase customer retention.

How important is this? Well, they point out some well-known facts:

• The average company loses more than 10 percent of its customers each year.
• Acquiring new customers can cost five times more than satisfying and retaining current customers.
• A two percent increase in customer retention has the same effect on profits as cutting costs by 10 percent.
• Loyal customers are 15 times more likely to increase spend than high-risk, intermittent customers.

Unfortunately, knowing that retention importance is increasing is not enough.  Most marketers do not know their customers well enough to increase customer retention and take advantage of cross-sell and up-sell opportunities. Only 7% of marketers in the survey said they had excellent knowledge of their customers; only 8% said their companies are doing a good job of making customer data easily accessible. More importantly, over 75% of respondents had not implemented some kind of customer intelligence or data integration system to make use of their information.

So what’s the solution to reducing churn? Well, many BI and customer intelligence providers would have you believe that implementing a full scale package will provide you with the reports you need to make informed decisions about your customers. Reports and dashboards are nice, but they provide little insight into the reasons behind why customers are churning. As the CMO article points out: “the reasons for churn are wrapped around the customer experience” and it’s hard to understand this from a bunch of reports.

I believe that the key to customer retention is effective and sustained one on one interaction with customers and to find the best ways to reach out and engage the existing customer base. The CMO Council report makes it clear that understanding your customers is one part of solving the “churn” problem, but I believe the second part of that puzzle is figuring out how to use that information successfully. In the months to come, I hope to offer some tips to make your customer data more understandable, and more important, actionable.