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Do you love your customers as much as your 401(k)?

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Do you love your customers as much as your 401(k)?
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Think of your customer base as an investment portfolio. Wikipedia defines a “portfolio” as a collection of financial assets such as stocks, bonds, and cash. Most are designed according to generally accepted principles that match the investor’s risk tolerance with their investment objectives. Portfolios can be evaluated to determine market value and values are expected to change over time.

Your customer base is similar in nature. In the course of business you make investment, incur risk, and evaluate performance against your objectives to determine if you are on the right course. Every type of portfolio carries a cost of acquisition. For the stock trader, there is the price of the equities purchased. For the marketer, there are costs of advertising, direct mail and other methods to build awareness and engagement. The investment must be made to create the portfolio and, for retailers, this equates to generating store or web page visits. One key contrast between your investment and customer portfolio is that while you probably spent time researching firms before making an investment decision, your customers were the ones conducting the evaluation before they decided to make a purchase.

The risk profiles associated with building these two types of portfolios are markedly different. The potential risk of investing in publicly traded equities is unlimited. Put simply, you can lose your entire investment if things go wrong. On the other hand, customers investing in your brand subject themselves to minimal risk, tied to the nature and magnitude of their first purchase. There may be more perceived risk to brand value for a consumer purchasing an automobile or expensive electronics than when buying a sweater, and the level of potential brand damage from a bad experience with an expensive item may take longer to repair.

How do we define this “risk” in real terms for a retailer? It’s risk of earning customer satisfaction, risk of stimulating a return visit, risk to the reputation of the brand, and – yes – risk of being able to create enduring customer loyalty. A product purchased might not live up to expectations in any number of ways or a friction-filled experience while purchasing the product, whether in store or online, might diminish post-purchase satisfaction levels. Retailer risk  can be hedged by generous return policies, though limitations of return value to store credit for future purchase can place a ceiling on customer satisfaction.

Determining the optimal customer strategy for your portfolio of customers has tangible benefits that can be measured, graphed and evaluated just like any investment fund. While fund managers seek acceptable levels of risk by balancing investment across a range of equity choices, marketers should seek to balance their investment of precious marketing dollars across the segments of a customer base with the greatest expectation for return.

Successful investors follow a chosen philosophy of investing. While “buy and hold” is recommended to many, there are other ways to enter the market and make money over time. Marketers can arrive at different approaches to campaign execution, but all are advised to select their chosen path through use of a tested planning methodology.

Developing a data-driven marketing strategy represents the most efficient marketing vehicle available to most brands. Customer analytics and predictive modeling are fundamental elements to inform a successful strategy and consumer research, including social media monitoring, can validate strategy instincts, ensuring that the preferences of even the brightest planning group are not biased by their own point-of-view.

Your investment in a customer strategy can be measured and, in a world of increasing accountability, marketers can take comfort knowing they have something to measure. Measurement stimulates insights leading to improvements, creating tangible means to show the boss they are on the right track.

When the performance of your stock portfolio misses expectations, you can sell out, stem your losses and plan for a better day. In the world of consumer marketing, it’s more complex to “fire” customers, but every brand has the right to redirect marketing dollars among customer groups to reach their highest return. If some groups are starved off in the process, the ensuing attrition will be most welcome to the brand.

I like the idea of framing the work we do for clients as helping them find the “optimal customer strategy” rather than creating “loyalty strategy”. Thinking in these terms helps to set the bar higher and to consider a wider range of choice in campaign execution to reach goals. The vibrant nature of any customer group creates the need for constant vigilance by the fund manager, er marketer, as he or she is challenged to build, grow and maintain value among customer groups to maximize shareholder value.

Stewards of any portfolio carry a fiduciary responsibility. The next time you open up the Wall Street Journal and are prompted to call your investment counselor to ask “what happened”, think next about how you react to similar news about the performance of your customer base. There are root causes for swings in business just as there are for any stock market fluctuation. Maybe it’s time to invest as much time, energy and money in our customer portfolio to get the results we’re seeking as we do in our beloved 401(k)’s.



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