What every business needs is a litmus test to prove how loyal their customers really are.
At a recent professional hockey game an intriguing question was flashed up on the scoreboard overhead: “What percentage of our fans told us in a survey they would accept $100 to wear the opposing team's sweater to a game?”
The answer: 38%. Naturally, that disclosure was loudly booed by the home town crowd, believing those fans to be treasonous.
Every business should have an equivalent litmus test that separates the truly loyal customers from those who are neutral or disaffected. Without knowing the proportion of customers who are steadfastly committed, ambivalent or susceptible to switching, marketing spending decisions can get made for the wrong reasons.
Take the example of one long-established brand nearing the end of its lifecycle. Despite the fact that its market share was in sharp decline, no one knew exactly why customers were leaving or where they were going.
Although it was suspected that 40% had switched to competitive products, the brand still elected to divert a major portion of the marketing budget into consumer advertising when a smarter move might have been to spend that money on retaining current users (or upgrading them to another product).
The stubborn allegiance of brand marketers to mass messaging is what keeps CRM on the periphery of strategic thinking. Even if they understand what CRM means, it remains an exotic consideration, low down on the list of spending options.
One of the reasons for this budget myopia is a singular focus on market share: it seems no other metric comes close in importance. Not churn rate, not average revenue per customer, not even share of requirements.
Stephen Shaw is vice-president of strategic services with The Kenna Group, a full-service customer relationship management company. He can be reached at 905-361-4046 or via email: email@example.com.