Customer Loyalty, Human Beings and ROI

My multichannel forensics projects span multiple different business models. Many of the projects are for catalog brands, some are for online pure plays, and some are for classic retail brands with an online and/or catalog presence.

Each project includes an analysis of customer loyalty. I have to decompose the elements of customer loyalty, outlining how marketing microchannels (e.g., paid search, television advertising, email marketing, loyalty programs, free shipping promotions) and physical channels (e.g., online, stores) influence whether a customer purchases again.

Some of the results aren't surprising. Take an online pure play with a 25 percent annual retention rate. The retention rate is decomposed as follows:

• 15 of the 25 points are due to pure brand loyalty;
• 8 of the 25 points are due to marketing microchannel strategy; and
• 2 of the 25 points are due to live chat or a customer calling a customer service representative.

Next is a catalog brand with a 40 percent annual retention rate. Retention is decomposed as follows:

• 15 of the 40 points are due to pure brand loyalty;
• 10 of the 40 points are due to catalog marketing strategy;
• 8 of the 40 points are due to other advertising microchannels; and
• 7 of the 40 points are due to customers who interact with call-center staff via telephone calls or live chat.

For multichannel retail brands, we see even different dynamics. Assume a 50 percent annual repurchase rate:

• 20 of the 50 points are due to pure brand loyalty;
• 10 of the 50 points are due to advertising microchannels; and
• 20 of the 50 points are due to customers interacting with retail store associates or call-center staff.

Each business model has specific advantages. But interestingly, customer loyalty seems to increase as interactions with human beings increase.

For the past two decades, marketers have been taught to “automate” strategies. They work hard to make their websites as user-friendly as possible, making navigation easy for consumers. And that’s not a bad thing.