Understand ing customer retention Research & Trends In reaction to the recent change in the retail landscape, leading retailers have launched initiatives to understand and drive improved retention. Deloitte conducted a series o executive interviews in June and July 2010 across retail sectors that revealed just how acutely the customer brand loyalty issue is aecting the industry and a variety o innovative and leading practices. The consensus is that customers are leaving at a greater rate overall, and unlike previous periods, those that are leaving span a greater spectrum o the customer base in terms o annual spend. We ound our leading practices that can be used to evaluate the current retention situation and ormulate a strategy or addressing the undamental reasons or customer migration. 1. Get The Basics Right And Track Them Continuously Start by measuring the basics o retention behavior on a regular basis to answer three questions: how oten do customers make a purchase, what types o purchases are those customers making, and what is the value o those purchases? A specialty apparel retailer we spoke wi th tracks a series o basic customer behavior and retention metrics on a rolling 12-month basis. By synthesizing basic recency, requency , and monetary (RFM) metrics in concert with more sophisticated behavioral markers (such as an abandoned online shopping cart analysis), this retailer identifes their valuable customers and targets marketing actions designed to increase proftability. 2. Develop Usable Analytics Develop customer engagement analytics and research to gain a more in-depth understanding o key drivers o retention behavior. One retailer we interviewed learned that new customers who remained active beyond their frst year as a customer were fve times more likely than others to remain customers or multiple years into the uture. Customers ound to be lagging in their interactions were treated with marketing strategies designed to stimulate retention- driving behaviors. Conversely, those customers with higher quality and levels o interaction were not oered marketing treatments or d iscounts. This strategy, enabled by predictive analytics, allowed the retailer to ocus marketing resources where they would count most. The consumer has changed, and so, too, should the way you measure loyalty. by Matt McNaghten and Clark Passino Published in RetailSolutionsOnline.com, June 2011 As used in this document, “Deloitte” means Deloitte Consulting LLP., a subsidiary o Deloitte LL P . Please see www.deloi tte.com/us/about or a detailed description o the legal structure o Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations o public accounting.