Difference between retention and loyalty

I am struck often by the number of clients that confuse customer retention with customer loyalty.  As I often say, what gets measured is what matters, and if retention is the primary measurement, then loyalty is likely to get short shrift. 

Now, I do not want to cast aspersions on companies that do measure retention, since that metric, in and of itself, is often overlooked.  However, if the goal is to increase revenue faster than costs, then loyalty is one metric that must get higher attention.

Retention, of course, is the percentage of customers who make repeat purchases over a period of time.  Not too difficult.  Note, however, that this calculation does not include some key factors that determine both profitability and loyalty:

• what products they purchased, and at what margin
• how often they shop in the category
• how often they shop with you
• where the bulk of their dollars are spent

Now, if loyalty is defined as an expressed preference and a willingness to personally refer friends and family (Reichheld), then these additional factors will begin to address those issues.  But how do you get this information, when the bulk of it is not included in your database?

Breaking thru the clutter

I was working at two different clients today, and the subject came up in both locations — how can we break thru the clutter and make ourselves relevant to the customers we wish to contact.  Now, this problem is not a new one — marketers have been struggling with such issues for years, only now exacerbated by channel “mayhem” between web, email, direct mail, TV, mobile, etc. 

No, the problem we discussed this morning (and afternoon, respectively) is how to distinguish ourselves to our Best Customers.

Welcome to my world…

As I begin writing this column, it seems to make good sense to introduce myself and the purpose of this conversation.

I am Mark Price, the Managing Partner of a consulting firm called M Squared Group, that focuses on helping marketing clients gain knowledge of their customers in order to generate incremental revenue and profit in the short term, as well as develop a vision of the long-term opportunity.  Our work includes data mining and customer analysis, as well as qualitative research, all concentrating on delivering the specific information that a client needs in order to execute specific already-determined actions.  We are based in Minneapolis, but have clients that range from Boston to Los Angeles.

I have 15 years experience in customer-focused data mining, with such clients as Best Buy, Target, Panera, Patterson Dental, and Avery Dennison.