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You are a business with customers, and you have already decided that engaging with those customers — in a positive, meaningful way — is important. Customer relationship management, or CRM, is critical to business health for two primary reasons:
- Customer engagement reduces attrition, and customer lifetime value (CLTV) is 3000% higher for engaged customers
- Customer upsell drives growth, and it costs 5x less to market to an existing customer than to try to acquire a new customer.
Churn prevention plus engagement and upsell work together to drive customer lifetime value (CLTV), which is perhaps the number one business success metric. Studies show that increasing customer retention by 5% can increase profits from 25-95%. So, in summary, CRM powers CLTV, which in turn keeps your business alive and thriving.
At the cornerstone of customer relationship management is data. Knowing who your customers are, what their key behaviors are, and how they are using (or not using) your product or service are requirements for successful CRM. That’s why, when building your CRM program, you must start with data. And when you look at data, you must address three key questions.
First, are you collecting and storing customer data?
This goes beyond name and email address, or information you gather from web forms. I am talking about behavioral data and potentially demographic data, depending on your business (in a brick and mortar, retail business like a Martial Arts studio or Learning Center, demographic data is critical). If you’re selling a product or service, you want to know how your customers are using that product or service.
- What features are they using and how frequently are they using them
- What is their tenure with your business (i.e. how long have they been a customer)
- What is their spend month over month, year over year, and how has that grown (or not grown) over their tenure
Ideally, you are collecting customer profiles, and those profiles give you the basic, necessary information to manage customer relationships. If you are not collecting this essential data, start collecting it as soon as possible. The longer you are in business and the longer you haven’t been collecting this data, the greater the deficit.
Over time, you will build out these customer profiles with more data, so the relationship — and ensuing communication — becomes more personalized. This brings me to my second question:
Is your customer data accessible to your marketing team, or to those employees communicating with your customers?
I’ve worked at large organizations with millions of customers. And in association with those customers, millions of data points were collected over time (the definition of “big data”). However, none of this data was marketing accessible. Instead, this robust customer data was used for product development and business health reporting — not for customer relationship management, churn prevention, engagement, or upsell. It was not even leveraged for acquisition efforts, or for the creation of lookalike audiences for paid media campaigns.
Instead, the marketing department [at this organization] used forms to collect data and identify their customer base, and those forms dictated who to communicate with and about what. Users would visit the website to sign up for various communications (depending on what product or service page they were on), but beyond a name and email address, and an occasional checkbox for preferences, we knew nothing about them! We couldn’t even confirm they were customers, as anyone can fill out a form on a website. The result: we were marketing products and services to consumers who may or may not have already been using those products and services. In today’s data-driven world, this was a big miss-step and a huge lost opportunity. The average consumer expects you to know who they are, what they are doing with your business, and what they are interested in (and not interested in). Have you ever received an email communication from a company telling you to buy something that you already own? I have, far too many times!
So when I came to this organization, my former employer, I made that robust customer data accessible to the marketing department, so we could start building strong, data-driven customer engagement, upsell, and churn prevention programs. A marketing-accessible database can take several different forms, depending on the organization and its business needs. The most common form is a CRM platform, and there are many such platforms on the market — find the one that works best for your organization. Are there platforms that specialize in servicing your industry, like MyStudio specializes in Martial Arts and Learning Centers? My third and final question (at least for this post), is:
How do you get started using data and CRM?
Whether you have a lot of customer data or a little bit of customer data, it can be overwhelming to come up with a plan and start executing. I always recommend beginning with basic behavioral segments — you can build from there. And most often, those basic segments are where you will earn the bulk of your wins.
The good news: most businesses across most industries focus on similar behavioral attributes, which generally include:
- Purchase and/or usage history
- Product/service usage frequency
- Recency of purchase/usage
- Tenure as customer (measured by create date, join date, first purchase/interaction)
How do you translate the above attributes into segments you can use for targeted, personalized communications and programs that will help you engage customers and reduce churn? At this point you need to spend some time looking at your customer data. Where do your customers “line up” against these key attributes — where are there natural clusters, ranges, and clear divides?
For example, when looking at your data, are there large clusters of customers purchasing products or programs every 3 months, every six months, and every year? If so, those might be your purchase frequency segments. You can then use those segments to determine when to present an upsell opportunity to different customers.
Typically, we talk about active and inactive customers. The latter are more likely to churn while the former are more likely to purchase upgrades and/or make repeat purchases. In looking at your customer data, what would you consider to be an active customer, in terms of recency of use or purchase? From there, you create your active customer segment(s) and your inactive — or at risk of churn — segments. You can talk to your active customers about events relevant to all their recent activities, and you can think of winback-like offers or events for your inactive customers.
If you’re a brick and mortar business like a Martial Arts studio, it would be worth creating a few basic, relevant demographic segments, perhaps around customer age. Say you’re launching a new program or event for children ages 10-12, knowing the age of your customer, and creating a segment for that age range, would be critical when promoting that program or event.
The great news: MyStudio gives Martial Arts schools the platform to collect and capture relevant member data, with easy-to-use tools to then action on that data for personalized, effective communication. Through our trial, program and membership features, schools can automatically capture the age, tenure, events attended, programs enrolled in, belt ranking, and more, for each student. And our customers can easily calculate the LTV for each member.
Just remember that we are talking about customer relationship management, and communicating with/marketing to your existing customers (or in some cases, past customers). So behavioral data points are the most important data points to look at. If you were running a campaign (advertising, social, etc) to acquire more customers in your target market, then demographical and geographical data points would be the most significant.
Conclusion
In summary, effective CRM is perhaps the most critical marketing factor in your business’ success. Retention and upsell can drive significant business growth — at significantly lower costs than new customer acquisition. At the root of great CRM is data, so make sure your organization is doing the following: Collecting relevant data on your customers, making that data accessible to your marketing team, and creating basic segments to power personalized communications and experiences.
