How to Use Data Driven Marketing to Keep the Customer Relationship Alive - dummies

How to Use Data Driven Marketing to Keep the Customer Relationship Alive

By David Semmelroth

Many industries sell products with an explicitly defined lifetime and they employ data driven marketing to do this. Your automobile lease is a two-year contract. Your auto insurance card needs to be renewed every six months. Your season ticket is only good for one season. Customer retention in these industries comes down largely to getting the customer to renew or re-affirm their relationship.

How data driven marketing is convenient

The good news for data driven marketing managers in these types of industries is that these “defined lifetime” products come with built-in triggers. There is no mystery here about which customers are potential flight risks or when they are most likely to disappear. You know when their contract is up.

The basic database marketing strategy here is obvious: Don’t wait until customers become ex-customers before contacting them. If you do, then someone else probably has their business.

On the other hand, competition in these industries can be fierce. The media, both broadcast and digital, is full of advertising for car companies, insurance policies, and cellular phone services. Such media presence requires a significant marketing investment, which makes it all the more important for these industries to keep their customers in the fold.

One approach is to remind the customer and streamline the process. In many states, the DMV sends out a notification that your driver’s license is about to expire. In many cases, you can renew it via mail or online. Any business that’s dependent on annual memberships could do something similar. Theme parks, museums, and golf courses could all benefit.

This approach takes advantage of the fact that a customer’s membership information is already on file. In other words, a renewal is much simpler than signing up a new customer. The customer can verify and update their information without having to leave the house.

The timing of a renewal reminder is important. It may be tempting to trigger the communication based on an upcoming expiration. But sometimes it’s far more effective to trigger the reminder based on the customer’s usage. A customer may have had a recent, presumably positive experience at your theme park. You want this experience to be fresh in the customer’s mind when they consider renewing their annual pass.

This also means it’s not a really good idea to pitch them an annual pass renewal if they’ve just called in to complain about poor service.

How data driven marketing applies to automatic renewals

Another common strategy is to provide automatic renewals. This happens at the time of the initial purchase. The customer essentially gives permission for the annual renewals to be charged to a credit card or other account. The renewals then happen automatically until the customer says to stop. This is a popular approach with software companies who offer annual licenses.

Automatic renewals appeal to both the seller and the buyer because of their convenience. But there is some risk for the consumer. Convenience can sometimes become forgetfulness. Consumers sometimes fail to cancel the renewal when they no longer want or need the product. If they’re not carefully watching their bank statements, they may not discover this for quite a while.

You need to protect your brand and your company’s reputation. Your customers can be quite sensitive to, and even angered by, automatic renewals if they aren’t done in a straightforward way. Relying on confusing offers to mask the fact that an automatic payment has been established is a sure way to annoy your customers.

Equally annoying is a confusing and difficult cancellation process. Be clear with your customers when you sign them up for automatic renewals.

Because of this sensitivity, it’s preferable to put some safeguards in place. Checking to make sure the consumer is getting software updates may indicate they’re still using your product, for example. Another, very inexpensive safeguard is to simply send out an e-mail confirmation of the automatic payment. In any case, setting up an automatic renewal doesn’t mean you should just ignore the customer.

Many products have a fairly predictable lifetime. Some products wear out. You might need to stain your deck every three years. Your air filters need to be replaced every three months. The cars need to be serviced every few months.

The lifetime of other products has more to do with their becoming obsolete, at least from the customer’s perspective. Many people like to have the latest and greatest. This is true of cars. In fact, it’s one reason why auto leases are so popular. They tend to be fairly short — only two or three years.

A lease allows the consumer to get more car for a lower monthly payment than a purchase. And the best part for some people is that they get a new car every couple of years.

This shiny-new-toy mentality is especially true in the technology sector. Many people get new cell phones every few years while others keep their old model forever.

The point is this: Cars and computers and cellphones don’t come with the same kind of explicit expiration dates as an annual pass or an auto insurance policy. But they have an implicit lifetime. That lifetime depends on the customer. But you have a great deal of data in your purchase history that can tell you which customers are replacing products and how often.

Armed with an understanding of your customer’s purchase cycle, you can design communications that talk about the latest shiny new toy. You can base your communication timing on the amount of time that has elapsed since they last bought the product. And you can get these communications in front of customers at the time they’re beginning to bet bored with their now not-so-shiny old toy.