What’ So Funny About Peace, Love, and Customer Acquisition?

By John Gaffney, Contributing Editor


I’ve been talking to a lot of smart people lately about the obsessive focus many businesses have with customer retention and loyalty these days, and the current wisdom says this picture is a bit out of focus- especially among retailers.

I don’t know when customer acquisition fell out of fashion. Maybe it was that McKinsey report that got a lot of play a few years ago that said it was 10 times more expensive to acquire a customer than it was to retain one. Maybe it is the relative “plug and play” ease that so many loyalty programs have morphed into. Maybe it’s just a simple view retailers developed that drive them to highly value the customers they were tracking and ignore the customers that hadn’t entered their database.

“Too much work centers around customer retention,” says K. Sudhir, Professor of Marketing at Yale School of Management. “The opportunity is in customer acquisition. Customer strategy should be integrated. It should be a blend of acquisition, retention, loyalty, experience and influence. It’s easier to count customers than to predict their behavior, so most companies count. I think business is about the customer you don’t have.”

Whatever it is, retailers need to take a look at customer acquisition as a strategy. On a very basic level, new customers are still the lifeblood of any retail operation. It’s true that it will come with a cost, but I would argue that Internet marketing has driven down the cost of customer acquisition substantially. It’s nowhere near the 10x figure attributed to McKinsey. There’s no easy formula to measure acquisition vs. retention costs, but I’ve heard some sound arguments that say any measurement in this area is flawed.

“They are incalculable,” says Ron Shevlin, VP of Marketing at Epsilon. “Let me put it this way: No one has any idea how much it really costs to retain customers. Do you include all the costs associated with providing customer service to customers in your retention calculations? After all, if you don’t service them, you will have less chance of retaining them. Do you allocate all IT application maintenance and enhancements to your retention calculations? If you don’t continually improve your transaction and interaction service capabilities, your ability to retain customers diminishes.”

So what’s your retention cost? What your acquisition cost? Even if you can answer these questions accurately, the bottom line is that a static customer base will only shrink. A growing customer base may include customers that are not loyal and are not high-value, but there’s also enough marketing wisdom to show retailers how to get close to the customers that look like your currently valuable and loyal ones.

By the time retailers have to take inventory on this holiday season, the data will show who bought what and how frequently. It will also show who bought this year that didn’t buy in 2006, but it won’t show who didn’t buy at all. Therein lies the opportunity.

The Dunnhumby Way: Insights Into How Relevance Marketing Shapes Strategy For Tesco

Many marketers are familiar with the success Tesco has had with its Clubcard loyalty program. With more than 13 million active card holders and 85% of its sales captured on a card, the retail giant is often cited as the gold standard other companies look to emulate as they build loyalty programs. However, most marketers are less familiar with dunnhumby, the company that has been working behind the scenes with Tesco since 1994 to help Tesco achieve its goal of earning the lifetime loyalty of its customers. Founded in the UK in 1989 by Clive Humby and Edwina Dunn, dunnhumby has grown substantially over the past few years through a joint venture with Kroger and more recently via a similar partnership with French grocery giant Groupe Casino.

The company recently marked the fourth anniversary of dunnhumbyUSA division which is based in Cincinnati and also has offices in Atlanta. Growing at a rate of 40% a year, the US division is projected to reach $150 million this year and is planning to add more than 70 new staffers next year.

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Study: Amazon, Best Buy Lead CE
Category In Customer Experience

A new study conducted by Keynote Competitive Research ranks the top online consumer electronics merchants in terms of their customer experience and customer service. According to the report, Amazon.com and BestBuy.com were tops in customer experience while CircuitCity.com and Staples.com lead the list in service.

Keynote Competitive Research, which measures and rates the online and mobile experience of customers, studied 12 leading online CE retailers including Amazon.com, BestBuy.com, CircuitCity.com, Costco.com, Dell.com, OfficeDepot.com, Sears.com, Staples.com, Target.com, and WalMart.com, in order to measure 300 metrics.

According to the study, Amazon.com was the top ranked site in terms of search satisfaction, and was one of the top ranked sites in six of nine key categories such as price satisfaction, product research, and overall site navigation and organization.

Similarly, BestBuy.com was the top ranked site in terms of pure customer satisfaction along with being ranked top in seven of the nine categories in reference to online customer experience, including the ease of the purchasing process and customer support. Additionally, BestBuy.com was selected as the site that showed the most gains in online customer experience throughout the past year.

In addition to the gains made by BestBuy.com, Dell’s website also saw an increase in customer experience and satisfaction throughout the past year. The strong gains were in reference to product interest and visual appeal to the website.

While BestBuy.com and Amazon.com were at the top of customer experience, CircuitCity.com and Staples.com were at the top of service. According to the study, CircuitCity.com had the best reliability whereas Staples.com had the best site responsiveness, the fastest home page downloading in about 45 seconds for dial-up users, and the fastest search results download time at 1.1 seconds for broadband and 12 seconds for dial-up.

Retail Leaders In Customer Service
Cited In Qtrly RealPeople Survery
By Jessica Humphrey

Based on RealPeopleRatings.com’s quarterly customer service survey, Publix, Subway, BP convenience stores, and Walgreens are leading their competition in customer service.

The quarterly survey, (http://www.realpeopleratings.com/) conducted by Corporate Research International, is designed to highlight consumer perception throughout many industries and companies competing in those industries.

This quarter’s survey, which included 3,074 panelists, ranked categories such as fast food restaurants (Subway ranked first), full-service restaurants (Texas Roundhouse ranked first), pizza restaurants (Cicci’s Pizza ranked first), among other categories.

Corporate Research International launched RealPeopleRatings.com in 2005 with the goal of conducting marketing research specializing in mystery shopping and customer satisfaction surveys.

The three highest ranked companies in the supermarket, convenience store, and drug store categories included:

Supermarkets
1) Publix
2) Kroger
3) Safeway

Convenience Stores
1) BP
2) Chevron/Texaco
3) Shell

Drug Stores
1) Walgreens
2) CVS
3) Rite Aid

The quarterly survey also provides rankings for other service industries such as: hotels, airlines, office supply stores, electronics stores, discounts stores as well as other retail verticals.