October 26, 2010

Digital Profiles: Loyalty Dynamics

If customers can downgrade their loyalty, they can also upgrade their loyalty, right?

Let's do something fun.

The top four Digital Profiles are, in terms of customer value:
  • Gold Mine
  • Multi-Channel Mavens
  • Shop Online, Buy In-Store
  • Retail Fanatics.
We'll call these four Digital Profiles "Valuable".

We'll call the remaining twelve Digital Profiles "Marginal".

I ran a query against this dataset. I wanted to see how customers migrate between "valuable" and "marginal" Digital Profiles. Here are the results.

Last Year's "Valuable" Digital Profiles:
  • 8,852 customers downgraded to "Marginal" Digital Profiles.
  • 10,272 customers maintained "Valuable" Digital Profile status.
  • 7,150 customers did not purchase in the next twelve months.
Last Year's "Marginal" Digital Profiles:
  • 27,510 customers maintained "Marginal" Digital Profile status.
  • 8,011 customers upgraded to "Valuable" Digital Profile status.
  • 55,935 customers did not purchase in the next twelve months.
Clearly, the customer file is going through a dynamic transformation, as "Valuable" Digital Profile customers downgrade their status, while a small number of "Marginal" Digital Profile customers upgrade their status.

Another interesting query is to see "where customers come from". Let's look at this year's "Valuable" Digital Profiles, and see what their status was in 2009:
  • 8,011 upgraded from "Marginal" Digital Profile status.
  • 10,272 maintained their "Valuable" Digital Profile status.
  • 7,062 did not purchase last year!
Again, the customer file is a dynamic ecosystem, with considerable customer turnover.

You won't read about this stuff in the marketing literature, folks. But it is important ... really important. Once you realize that your customer file is truly an evolving ecosystem, you approach it in a different way. For once, I'll side with the Multi-Channel Pundits ... there are times when you want to "diversify your portfolio", constantly recruiting customers in a profitable manner from many channels in order to protect the health and diversity of your customer file!

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