Most retailers have never measured the long-term value of a customer. I would bet they do not understand it. In fact, most retailers do not measure their customer acquisition cost. So they do not do the simple value equation of what it costs to get a new customer, what it costs to keep a customer and what it costs to lose a customer.

E-commerce retailers have always measured these KPIs because they have had to. This is one of the reasons e-commerce has been able to move customers away from traditional retail. This lack of understanding a retailer’s customers has lead to the retail issues we are seeing today with chains closing.

Retailers need to understand their customers to survive and thrive. New customers as well as long-term customers. The longer you retain a customer, the better chance you have of creating an advocate.

A retailer loyalty point system is pretty effective for most type of businesses to keep loyal shoppers from defecting. In addition you look to add in these little surprises or unique “thank you” moments or services: E.g. Japanese leading retailer Aeon not only offers a points reward system, it also allows its gold card members (based on spend and frequency) the option to relax inside their in-store lounge area (read newspapers and get free beverages and snacks) — a nice way of saying “thank you, you are special” and having them also try some new product samples.

What a frustration when we, as customers, are given the same treatment as last year’s financial statement and the relationship starts from today or something close to it. I fear that brands have bought into the fickle patron theory more than makes sense for some customers, who are fairly easily recognized from their loyalty points level or even their familiarity with the store and staff.

This reminds me of a major airline that lost my $50,000+/year business to their chief competitor for a similar reason. I have had this happen with a major hotel chain for which I handed them my “loyalty” membership card when they refused to find me a room to replace the one they bounced me out of regardless of their “guaranteed” late arrival.

Bottom line, train your customer-facing staff to acknowledge the tenure of the person in question before they immediately default to the “sorry, we cannot help you” approach.

If brands want to retain tenured shoppers, they should incorporate lifetime value into their initial customer acquisition cost. It is common (and tempting) to simply focus on profiting off of their first purchase. But it’s also critical to analyze and identify revenue and profitability from the entire lifetime of a particular customer. You use the inflection points over a lifetime. Let’s say that once your customer makes a third purchase, then they become customer for life. Outstanding. Or perhaps it takes up to five purchases. Cool. Whatever that magic number is, craft your overall strategy around getting your customer to that inflection point as soon as possible. The honeymoon can’t last forever, but ask anyone who’s been married for more than five years. It gets better, but you have to work at it. 😉

Retailers have a tremendous source of insight into customers through their purchase history. In the mobile carrier example, the history can show if the customer has ever received concessions previously or if they have any activities that might make them less profitable. Conversely, the history may show that the customer is wildly profitable with multiple phones on the account, regular upgrades and insurance on all of them. The response should be based not only on tenure, but on value.

Customers appreciate being recognized and respected, even if you might not give them exactly what they are asking for. When they request something, the last thing they want to hear is NO. It would be much better to acknowledge the long-term relationship and thank the customer for their business. Then work hard to give them something to show that you genuinely want to keep their business going forward.

Telco’s (landline and cellular) have a long history of buying customers in acquisition and then taking loyal customers for granted afterwards. In the long run, constantly refilling a leaky bucket is a losing strategy compared with patching the bucket and focusing on customer retention (loyalty).

Retailers must find a balance between bringing in new shoppers while simultaneously retaining current ones. The problem that can occur with loyalty programs is that they lack the ability to meet each shopper’s unique needs. I recommend that retailers and brands develop a program or system that acknowledges and rewards long-term customers’ loyalty in a way that differs from the rewards new customers see as they begin their customer journey.