How does one define a customer?

The following column, which appears each issue, looks at new and emerging trends in direct marketing. Alternating columnists are Barbara Canning Brown, a leading figure in the Canadian direct marketing industry, and David Foley, a specialist in database marketing programs.Strategy also...

The following column, which appears each issue, looks at new and emerging trends in direct marketing. Alternating columnists are Barbara Canning Brown, a leading figure in the Canadian direct marketing industry, and David Foley, a specialist in database marketing programs.

Strategy also invites other news items or column submissions for this section. Enquiries should be directed to Mark Smyka, editor, (416) 408-2300.

Some months ago, I was discussing the situation at a Canadian direct response firm (one that every Strategy reader would know), when the size of the company’s customer base came up.

‘They have about one million customers, of which 100,000 have purchased more than once.’

This statement raises two interesting questions:

1) How many ‘customers’ does the company actually have?

2) How does one define a ‘customer?’

Numbers wrong

In the case of the subject company, the answer is certainly not one million, nor is it likely 100,000, although these figures seem to represent someone’s method for counting customers.

The assumption, I suppose, is that someone who has bought once is a ‘customer,’ while those who have bought more than once are ‘customers.’ Really?

‘All customers prefer rewards.’

This sentence serves as a cornerstone for relationship marketing, and as a reminder of the four customers types that are common in many organizations.

These are: advocates, customers, prospects and rejectors.

Advocates: These individuals are your non-paid, goodwill ambassadors. They really like your company’s product or service and, as a consequence of their enthusiasm, they actively promote it for you.

Nurture ‘advocates’

Marketers should strive to identify, nurture and protect these individuals since their value to your product/service/ career is immense.

However, advocates are not simply heavy users in disguise; they have an emotional connection to the company, in addition to a habit of repeat use.

Customers: These are the individuals who do business with your company, minus the advocates mentioned above.

Where competing brands are perceived as being at parity with one another, having just a customer may be quite dangerous: if you are unsuccessful at upgrading these individuals to advocate status, they may slip into the hands of the other brand.

Or, they may switch back and forth, promiscuously, between competing firms.

Since the latter is not a positive predictor of future sales volume, one is left to wonder why so much time, money and effort is spent on attracting new customers, and so little (in relative terms) on keeping current ones.

Loyalty marketing programs exist, in theory, to reduce brand-switching, particularly among retailers that are perceived as being at price parity with their competitors.

Zellers’ Club Z premise (‘free valuable Club Z points’) appears in every advertisement for Zellers and, by so doing, reinforces the non-price benefit of loyalty to the firm.

Prospects: These individuals are aware of your company and may, at some time in the future, buy – or buy again – from you.

All ‘inactive customers’ are prospects unless, sadly, they fall into the category which follows.

In the example which introduced this column, the vast majority of so-called customers could be re-classified as prospects.

Rejectors: These individuals are the antithesis of advocates.

They bought and were not satisfied. They complained and, still, they were not satisfied. They despise your firm/brand/ product/service. And, they will let all their friends know precisely how they feel.

It is hard to convert a ‘rejector’ into an ‘advocate,’ although with proper, personal care it can be done, providing the customer relations group really believes in the importance of that dissatisfied individual to its long-term success.

I recall one instance in which, having tried a particular product (a continuity program offered by direct mail) and, in time, discovering that it failed to match my expectations, I wrote to the firm, expressed my disappointment and returned all the items they had sent to me.

I received no acknowledgement or reply to my letter, although the computer continued to send invoices to me.

When I finally telephoned the company, to try to straighten the whole mess out, I was informed I had not followed their procedure for the return of merchandise.

Furthermore, I was told I could expect to receive ‘two or three’ more past-due notices. However, since my account had now been cancelled, I should just ignore them.

‘All customers prefer rewards.’

It’s more than just an acronym for the various classes of ‘customers’ that most organizations have, it’s also pretty good advice.

David Foley Associates specializes in design implementation and evaluation of database marketing programs. Please direct comments and questions to David Foley, David Foley Associates, 48 Woodman’s Chart, Unionville, Ont. L3R 6K7, or call or fax (416) 940-8784.