Series 2, Part 2: The Reality of Customer Loyalty

In my previous post on AQUA, I exposed the myth of customer satisfaction. Even extremely satisfied customers may not be loyal, while many loyal customers are not sufficiently satisfied. Despite the fact that customer satisfaction is important, it is merely a means to an end. The real goal is customer loyalty, and that is measured in terms of customer retention. The simple fact is that to be successful long term, retailers must create repeat customers that continue to buy from them each and every year. 

Customer retention should be a top priority for any retailer. That’s because keeping current customers is one of the most important keys to revenue growth and business success. With so much at stake, measurement of retention is essential. Yet my experience is that very few swimming pool retailers sufficiently understand customer retention, let alone measure, track and improve it. 

A case study in customer retention

As mentioned in my previous post, our research was conducted in cooperation with retailers of varying sizes across the U.S. and included more than 10 million data points derived from retail point-of-sale transactions. One of our participating pool retailers was randomly selected for a case study in customer retention. We specifically identified all of its active aftermarket product customers in 2009 (7359) and then tracked the purchases of those same customers over the next four years through 2013. Chart 2-2 shows the outcome.

B2

The results

Chart 2-2 confirms that after four years, this company retained only 44 percent of its original 2009 customers. Starting with 7,359 active customers in 2009, only 3,235 were still buying from this retailer in 2013. We also tracked annual sales from these customers, which dropped from $2.3 million in 2009 to only $1.2 million in 2003. Why did these customers leave and where did they go? Which ones were worth holding on to? Can any of them be recovered? At this point no one knows.

Your turn

Does your company know how many active customers it had in 2009 and how many of those still made purchases in 2013?  If you had a list of customers who defected from your company since 2009, what would you do with it? Would it be valuable to have help with understanding and improving customer retention?

See the previous post in this series: The Myth of Customer Satisfaction
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