Minimize Customer Turnover

Inventory turnover is great for a retailer. A moderate degree of staff turnover is always good for a retailing business, although excessive turnover both signals and creates problems. Customer turnover, on the other hand, is to be minimized.
     A pair of business analysts at INSEAD-Belgium and Boston Consulting Group suggest techniques for doing this. They started by identifying three top drivers of customer turnover:

• Infrequent use. Funeral homes, landscape architects, and real estate agents are examples of services retailing businesses that must draw a continuing stream of new prospects in order to succeed. Strategic partnerships with other businesses can help. Real estate firms often build cross-referral networks and a system of referral commissions with banks and insurance companies.
• Long duration of use. The retailer who sells refrigerators, automobiles, or a trade school education might not see the same customer for the same item often if there’s a high rate of customer satisfaction. Encourage each satisfied customer to make a referral to others. Carrying a variety of products is also important when long use duration results in high customer turnover. Trade schools can create alumni groups, and appliance retailers can establish user programs. The social facilitation of the group energizes participants to make referrals. In addition, group gatherings face-to-face or online can be employed to introduce follow-on products and services which keep customers buying.
• Narrowness of customer demographics. Baby stores, bridal shops, and retirement communities each appeal to relatively narrow demographics. This is a clear advantage when it comes to creating distinctive offerings and targeting the marketing initiatives. However, these retailers can suffer from a dearth of repeat business. The answer is to satisfy customers thoroughly and then encourage each of those satisfied customers to recommend you to others in that demographic group. Rewards to customers for successful referrals will build business.

     Beyond these techniques, the business analysts recommend having migration paths for current customers:

• The retailer carrying Gerber baby foods could carry all six product lines, starting with Birth+ and moving on with the same set of customers to Supported Sitter, Sitter New Tastes, Crawler, Toddler, and Preschooler.
• The retailer carrying Lego blocks intended for children could also carry the Duplo line targeted to toddlers.
• The retailer could add more advanced levels to the loyalty program, keeping the customers returning by upping the challenge. If you have a silver level and gold level now, add a platinum reward level.

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Give Loyalty Program Members Prestige