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Following the Stars: Marketing Inflection Points – The Key to Profitability

Published
  • February 14 2003, 1:00am EST
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This month’s column was co-authored by Tres Tronvold, a CRM and customer loyalty consultant based in Minneapolis. You can contact him at TresTronvold@mn.rr.com.

Much has been written recently about inflection points – key moments when a fad becomes a trend or a rumor becomes a headline. Understanding these points is critical to understanding how information flows across our society.

 “Marketing inflection points” exist as well, indicating changes from consumer trial into repeat or an occasional visit into a pattern. While these points vary by customer, certain trends can be determined by examining customer behavior at the segment level. Those trends can then be used as benchmarks to identify those inflection points where customer behavior shifts.

In sports, momentum-shifting plays begin a chain of events that can alter a game. These momentum-shifting plays change the pattern and flow and, in fact, often determine the outcome of a game. Momentum-shifting plays occur in consumer behavior as well. Individual consumer transactions are often the start of a chain of events that fundamentally change the value of a relationship between a customer and a company. These are marketing inflection points.

Consider the following examples:

  • One customer is a dues-paying member at health club ABC who has begun running and stopped attending aerobics. Her attendance at the club decreases from five days a week to three days a week and then further declines to only once or twice monthly. Three months later, she decides that the membership isn’t worth $75 a month and cancels.
  • Another customer buys a new Buick every four years, which is always serviced at the dealer while he scouts the show floor to look at the new models. A coupon leads him to break this long-held pattern – he begins to get oil changes and tune-ups at an oil-change specialist instead and no longer wanders the Buick show floor. Soon, he cancels his rewards card in favor of a no-fee air miles card. Six months later a Toyota financing offer leads him to purchase his first Camry.

In these two examples, the customers did not make a conscious decision at one single moment to abandon their current brand. Instead, “the momentum shifted” and they began to explore other options, a little at a time. If you were to examine those customers’ transaction histories, you would not see a dramatic revenue falloff – instead you would see a gradual decline, a slow shift in share of wallet that heralds more significant changes to come. “Share of wallet," by the way, means the percentage of that customer’s requirements that are filled by a particular brand of product or service. A share decline over time implies that the customer is selecting alternative options for more and more of their needs. Note that we did not say that the customer was consciously shifting their purchase patterns – changes can be due to location, sales, product availability or many other reasons. One reason or another, one day that customer wakes up and no longer feels the same conviction to use their old, reliable brand.
The same effect, by the way, also works in reverse, when a customer reaches a point where they begin to have a relationship with a company, rather than just a transaction series. A mix of frequency, unique experiences and external information draws a customer closer to a brand. One day, without conscious consideration, that customer discovers that they have developed a clear brand preference.

As you might guess by this point, marketers must identify those critical points where a customer behavior transforms into a habit. Whether that habit is positive or negative, marketers must identify and understand those inflection points in order to take proactive action to either move that customer into the franchise or “bar the door” to attrition. For example:

  • When Sheila’s activity levels at the health club declined to three days a week and she stopped going to aerobics class, sending her coupon for a free session with a personal trainer might have got her back into the club, back into aerobics and back on the loyal customer track.
  • When Bill had not been in the dealership in nine months, the dealership could have offered him an incentive to return and test drive a new Buick like he used to.

Understanding those marketing inflection points permits marketers to develop communications and promotional initiatives triggered at the point in the customer relationship where it will do the most good – before those inflection points lead customers to adopt another behavior. Whether to encourage “one more try” for a customer who is close to becoming a best customer or to discourage experimentation outside the brand, understanding those key points can focus the triggered marketing communications and promotional initiatives. Measurement of customer behavior at these points can then become key performance indicators for the success or failure of the marketing effort as a whole.
The next problem is, if marketing inflection points are so critical, how do marketers determine what those points are? A combination of customer behavior analysis and qualitative marketing research can provide both an understanding of key behavior points and an understanding of the reasons for those specific points. Let’s examine both the customer behavior analysis and the qualitative research to provide a comprehensive approach to tackling this problem.

Start with the Numbers

Analysis of available customer behavioral data can provide the starting point for understanding marketing inflection points. The key is to arrive on an approximation of best practices for customer behavior by examining history of best customers. It is important that the analysis focus on best customer history, not current behavior – the goal is to determine how best customers came to be so, not what their behavior is today after their relationship has matured over time.

In examining best customer transaction and contact behavior, key patterns tend to emerge for marketing inflection points:

  • Initial product purchases – in some markets, the first purchases that a customer makes become road signs to their future behavior, particularly if the company offers a range of products or services. For example, customers who purchase initially from category X are 50 percent more likely to become best customers than customers with initial purchases from category A, B or C.
  • Purchase frequency – customers with inconsistent purchase patterns may be heavily experimenting with a competitive offering and less likely to become best customers.
  • Pre-purchase contact – customers who educate themselves before their first purchase tend to have less “post-purchase dissonance” and are more likely to stay with the company after all that research.
  • Customer service requirements – customers who have had multiple customer service interactions with their first purchases are likely not to become best customers. Now, great customer service can influence that outcome, but if the customer has called multiple times, they are probably having problems that are not easily resolved which may carry over to a company reflection.

Qualitative analysis is critical to identifying marketing inflection points that can be found in data in company databases. However, to understand the whole story, that data should be combined with strong qualitative research for two reasons. First, since not all customer interactions occur at retail or are captured in the company database, qualitative research will “fill in the blanks” and create a more complete picture of customer evolution. The second reason for qualitative research is to begin gain sense of the “why” behind the “what.” Understanding why the marketing inflection points occur will help understand customer behavior and also provide direction for the approach to influencing that behavior.
The best approach to qualitative research of this type is to combine several approaches and audiences to gain a more complete picture. For example, you could convene focus groups of best customers and lapsed customers, interview customer service reps and talk to store managers. In the research, the objective is often to walk through the life of a customer, understand the experience from the first interaction onward and identify the points where changes in customer behavior could trigger a fundamental shift in the relationship.

For example:

  • Managers of a frequent guest program identified through analysis that loyal customers are likely to shift behavior immediately after redeeming points. Research confirmed that at that point, the customer was much less vested in the program, since they were no longer working toward a specific award or goal.
  • One debit card client market identified that the first three months determine ongoing customer behavior. The goal was to encourage customers to use the debit card not just to obtain cash from an ATM, but also for purchase transactions. Analysis identified that the first 90 days determined if a customer was to become a heavy user. After that point, customers rarely varied substantially from their purchase pattern. Interviews identified that customers experimented during that time period to determine if they could successfully track debit card transactions in their checkbook. If so, the customer would heavily adopt the card.

Inflection points do exist in customer behavior – we all recognize that fact, since we too are customers. Determining those points and then understanding the attitudinal changes that underlie those behaviors provide marketers with necessary tools to begin supporting or altering those attitudes and behaviors to strengthen the bonds with best customers. Understanding inflection points is like understanding the stars for an early sailor – they can guide the way to increased relationships with best customers and, as a result, to increased profitability for those who understand their movements.

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