Speaking Directly

It pays to woo old customersThe 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...

It pays to woo old customers

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.

Well, here we are, already 1/12 of the way through 1994.

As the grip of winter tightens, I hope readers of this column will spend an evening by the fire considering the following question: are customer retention activities important to the continued success of my organization?

Cheaper?

The question might be asked another way: is it cheaper for my organization to keep an existing customer than it is to find a new one?

In most cases, the answer to both questions would be ‘yes.’

But, given that customer retention is an important activity, why do relatively few organizations spend time, money or effort on customer retention activities?

In 1993, I received hundreds of commercial messages through the mail, by fax and telephone. Precious few were focussed on customer retention. Many encouraged me to make an additional purchase or contribution, which may be ‘customer retention’ from the organization’s point of view.

But, what about the customer’s point of view?

In my opinion, the airline companies, through their frequent flier programs, truly understand the dynamics of customer retention.

Expert

Barbara Mowry is a recognized expert in this area. Before starting her own consulting company, she managed the Mileage Plus program for United Airlines for nine years.

Mowry points outs that the airline programs offer immediate gratification (an upgrade, for instance) and long-term loyalty through the acquisition, and redemption, of points for air travel.

But, since almost every airline offers a frequent flier program, and since most frequent customers are enrolled in at least two such programs, building and maintaining a loyal customer base goes far beyond the mere existence of an awards program.

My personal experience is limited to three carriers: Air Canada, American Airlines and Canadian Airlines International, and all of them can create a real sense of individuality in a business which is far from individual.

An example. Last year, my wife and I were using Canadian Airlines points, supplemented by some American Express Reward points to fly American Airlines to Sint Maarten.

Complicated

Any quick issuance of the award tickets was complicated by the fact that neither Canadian nor American offers a direct flight from Toronto to Phillipsburg (the capital of Sint Maarten), and the apparent arrangement between the two airlines with regard to the use of Canadian Plus points on American Airlines flights.

In short, you cannot get there from here.

The Canadian Airlines representative patiently explained the problem, and then she promised to look into the situation and call back. Five telephone calls later, our route was settled, and the reservations made.

In the end, we were told, the reservations people had ‘made an executive decision,’ and thrown out the rule book in order to process our request. All of this effort for a non-revenue-generating ticket, no less.

Eight characteristics

Mowry identifies eight characteristics of airline frequent flier programs which are ‘critical’ to their success.

These are: 1) a customer database, which is 2) integrated into all phases of the airline’s operation, which provides a 3) historical perspective on that individual, and which allows for 4) targetted offers that are 5) measurable.

The program is a 6) process, not just a ‘card’ that 7) provides opportunities for customer feedback, and which provides the airlines with some decent data with which to make certain 8) projections by researching program matters with the ‘right’ customers.

Anyone who is serious about customer retention might wish to consider the airline companies’ approach.

As for me, with another week of frigid weather in the forecast, Sint Maarten is beginning to look appealing.

David Foley is a marketing consultant and regular contributor to Strategy on database marketing issues. Foley is also an instructor in database marketing at York University in Toronto. He may be reached at (905) 940-8784; fax (905) 940-4785.