• by Lena Bourgeois , Columnist, December 15, 2016

In an era with more media options, more advertising, and more consumer choice than ever before, brands find themselves in intense competition for customer dollars and loyalty. Faced with so many available options, consumers’ buying decisions are less predictable than they were in the past, largely because cost is not always the primary concern.

Given these changing consumer attitudes, brands should now consider which customers they want to keep and which they are willing to let go. Affluent consumers with higher customer lifetime value are often the most appealing option, and retaining those customers will require marketers to seek new ways to maintain “stickiness” with their most loyal, highest-value customers.

Of course, that requires an evolution in how marketers view their customers. Attrition, or churn, is a part of any business and marketing dollars have often been devoted specifically toward slowing attrition wherever possible. But not all customer losses are created equally. Many brands need to get comfortable with involuntary attrition — those customers who switch brands largely due to cost. This kind of loss is unpreventable, and marketers would do well to realize that throwing budget towards retaining these customers ultimately results in lost marketing dollars. The real danger is voluntary attrition from customers who change loyalty for a product or service because it better fits their needs. Marketers can combat this by making themselves more “sticky,” meaning that customers will view their product or service as indispensable. 

For a better sense of what this looks like, consider the communications industry, which is already experiencing disruption. In this sector, involuntary attrition takes the form of customers who are driven to choose a different provider’s cable or telephone plan because they can’t pay their bills or because they have other fixed costs that limit how much they can spend. Voluntary churn comes from customers who have the money but choose to cancel their service because they find an offer that they deem better. 

The key exercise is understanding how voluntary churn customers define “better.” They may give up on long-term contracts with cheaper products in exchange for something more adaptable to their needs. To meet these customer desires and reduce churn, the communications industry is now offering more flexible options that allow consumers to pay for the kind of programming, content or phone service that they want rather than forcing them to commit to packages that are offered to a mass audience. Catering to customers’ preferred buying behavior is one way of adding stickiness.

Of course, the communications vertical is just one industry where brands need to build their marketing around the concept of stickiness going forward. I have written before that it makes sense to closely monitor customer lifetime value scores and prioritize customers who have the wealth and spending capacity to help a brand earn more over time. This is useful not only for targeting purposes, but also as input to what kinds of products or features will make this high-value audience remain loyal to the brand. Those insights can help make brands sticky across all verticals, including retail, auto and travel as well.

In communications, potential stickiness can be seen in the growth in the Internet-of-Things (IoT) and home services. These open up the potential to offer additional products to consumers with high customer value and appropriate behavior attributes. Rather than stopping at cable and home internet, providers can build packages with other services, such as home security, or the ability to link together all of the IoT devices within a home. This helps brands move away from commoditized packages and expand the amount of revenue they are able to get from the customers with the highest potential lifetime value.

When marketing to today’s affluent audiences, flexibility in both product offerings and purchasing options is key. Consumers with high lifetime value scores are often willing to pay for the kind of service they want, regardless of price. This may result in some companies and brands breaking free of the price and packaging structures that have defined their business for decades. Not everyone will be able to afford every offering, but that’s okay in the long run. If the goal is to gain more revenue over the lifetime of a customer’s relationship, building in “stickiness” is essential for withstanding wider market disruptions.