Why Preference Management is the Secret to Customer Retention
At the end of every holiday shopping season, infographics and statistics are released to illustrate how successful retail marketing campaigns were in obtaining new customers or pushing sales receipt totals higher. These two data points are not only connected but easily built by fostering a relationship with the customer based on personalized communication. Obtaining a new customer is one challenge — getting them back to your store or site again is quite another.
According to Deloitte, industry observers forecasted online sales to rise by 22 percent last holiday season. That compared to 5 percent in 2017, when online holiday sales totaled $1.05 trillion. Black Friday and Cyber Monday sales hit another high in 2018, indicating that promotions and marketing campaigns were effective in getting people to spend.
While that’s certainly reason to celebrate, it’s just the beginning of the customer journey. One study found that existing customers spent 67 percent more than new customers, which is a compelling reason to retain existing customers. This begs the question: Are your campaigns built to engage a new consumer in such a way that he or she will be a returning customer next year?
A recent survey uncovered that as many as 36 percent of businesses and retailers are not actively collecting customer preference data. Additionally, another 31 percent aren’t sure if they’re collecting this data. Preference management collection is imperative. It provides retailers the ability to respect customers’ needs and wants, establishing a relationship that results in repeat purchases, increased marketing return on investment, and ensures compliance with a growing number of regulations, such as GDPR and CCPA.
Preference management platforms allow customers to indicate information they want to receive, how often they want to receive communications from the retailer, and through which marketing channels (e.g., text, email, phone). In the same survey, of the 36 percent of companies that said they're not collecting preference management data, a third say they don't know enough about it. Furthermore, 21 percent of these companies say at least half their customer base is frustrated as a result.
In addition, 41 percent of responding companies do not share preference data across all departments and divisions, and 40 percent do not maintain historical preference records. This means the preferences of a customer of a large retailer are not honored if they’re receiving emails from different groups within the same company. Worse, these retailers aren’t tracking the evolution of their customers’ changes in preferences, which is problematic if they have a regulatory inquiry. Finally, it hinders efforts to entice customers to return later for new purchases.
Preference management — the active collection, maintenance and distribution of unique customer characteristics, such as product interest, communication channel preference and frequency of communication — is the ideal first stop for a new customer. By starting off on the right foot — learning what would make them a repeat customer, engaging with them in the ways they self-identify — retailers have a better chance of converting that first-time customer into a long-term customer. Retailers deploying customer-centric strategies such as preference management can be confident that this year’s new shoppers will become next year’s existing customers.
Eric V. Holtzclaw is chief strategist of PossibleNOW, a provider of consumer regulatory compliance and consent solutions.
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Eric V. Holtzclaw is Chief Strategist of PossibleNOW, a provider of consumer regulatory compliance and consent solutions. He’s a researcher, writer, serial entrepreneur and challenger-of-conventional wisdom. Check out his book with Wiley Publishing on consumer behavior – Laddering: Unlocking the Potential of Consumer Behavior. Eric helps strategically guide companies with the implementation of enterprise-wide consent and preference management solutions.