Lifetime Loyalty or Just a Year of Great Dating?

Cathy Traugot, Content Marketing Editor

Cathy Traugot, Content Marketing Editor

You’re probably sick of reading about customer loyalty, the importance of customer lifetime value and how to retain customers for the long haul.

I get it. I’ve been writing variations on these themes for years. “Stop giving your best deals to customers who are just going to leave you.” “Be a little choosier about who you go after.” “Look toward long-term loyalty.”

So I was intrigued when I listened to Jay Dunn’s talk at this year’s IRCE. During his “Customer Lifetime Value: Why Everything You Know is Wrong,” he proposed a serial monogamy approach to customer retention: Customers probably won’t be with you for life, but you can at least aim to have a profitable relationship with them for a year. Dunn is partner and CMO for Chief Outsiders, a marketing consulting firm, and a former executive with brands such as Lane Bryant and Bare Necessities.

Dunn came to IRCE to hold a funeral of sorts for customer lifetime value, at least as a tactic for retailers in the post-mall, Amazon-is-attempting-to-eat-my-lunch era. In short: You can’t depend on a loyalty cycle that is measured in years. If you budget your marketing dollars with the idea that the ROI on a customer won’t happen for three, five or seven years, you’ll be joining the retail bankruptcy parade.

Instead, focus on getting the customer to commit for a year. “In my view, you’ve got to focus on the annual contribution. Take lifetime value to 12 months. Get what you can in 12 months because they’ll be gone before you know it,’’ Dunn said.

Traditional Loyalty Tactics Are Dead

Dunn did not dismiss the concept that it’s cheaper to retain an existing customer than to acquire a new one. But the traditional tactics for obtaining customer loyalty assume that once you’ve got it, it’s going to be a lifelong relationship. Oh, and the tactics assume infinite patience on the part of the consumer. Think about the loyalty program that rewards you after 12 purchases. “Brand loyalty and CLV are myths,” Dunn said. “Brand affinity is about as much as you are going to get.”

“Customers want speed, convenience, savings, choice and options,’’ he said, adding, “Don’t take it personally. This isn’t customers, it is us. I’ve got favorite websites, but I still price-shop.’’ It doesn’t matter if the customer is on a subscriber list or enrolled in a loyalty program. “They’ll still leave you for a penny a gallon.”

Brands just don’t hold the power they once did, he said, pointing to Havas, which publishes its annual Meaningful Brands Index yearly. The company looked at 1,500 global brands, and this year received feedback from 300,000 people in 33 countries. The report showed that people wouldn’t care if 74% of the brands they used now vanished.

Measuring Annual Contribution

Dunn emphasized the need for recency, frequency, monetary (RFM) reporting to be able to tell who is coming back to buy more than once. “Focus on your post-purchase marketing with the same attention, sweat, tears and budget as pre-purchase,’’ Dunn said. For online companies, it’s critical to tweak your post-purchase program. You particularly want to get the second-time buyer to come back a third and fourth time within that first year.

Dunn didn’t detail a lot of specific suggestions for getting to that third or fourth purchase other than deploying email and social, but he did suggest that giving attention to getting those purchases should become a much bigger part of a marketer’s day.

Our Senior Commerce Marketing Analyst Greg Zakowicz has been beating that drum for a while now. When he worked as a marketing strategist, he helped craft many successful post-purchase campaigns for customers, and he has since written and spoken on the topic. This blog post outlines the reasons post-purchase campaigns are critical and some of the ideas for crafting them, from the helpful product care emails to those with a cross-sell or product recommendation suggestion.

Zakowicz says companies should aim for a 50-50 split between emails that offer helpful information and those that sell. “If every message only benefits the consumer, you’re likely leaving money on the table. Aim for a 50/50 or 60/40 consumer-to-company ratio so you both have something to gain in the process,’’ Zakowicz says. He even includes this handy chart:

Post-Purchase Messaging

A New Outlook on Loyalty

Building a loyal customer base should still be a priority, but it was refreshing to hear a different take on how to set your expectations and develop a game plan for the shorter term. One of Dunn’s best tips: “Forget about lifetime value. Focus on annual contribution.” How can you give customers the best experience with your brand and keep them engaged with you for the next year?

This idea that you strike while the customer is enamored with your jeans, kitchen supplies, outdoor gear or jewelry is logical in an era of fickleness. Dunn is essentially telling people to plan for the reality. “The love don’t last long, so get what you can before they move on.”