CUSTOMER RELATIONSHIPS AS AN ASSET

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1 AN LOCHAN UAINE, AVIEMORE CBP CONFERENCE NOVEMBER 2017 CHRIS GREENWOOD, SENIOR TOURISM INSIGHT MANAGER

2 LOYALTY IN A FICKLE WORLD Successful businesses are built on developing customer loyalty. Research demonstrates that customer retention has a lower outlay and higher value than customer acquisition. What is it worth to build customer loyalty over attracting new customers?

Strathspey Steam Railway, Boat of Garten BEGINNING WITH SOME FACTS 60-70% Probability of selling to an existing customer 5-20% Probability of selling to a new prospect 10 times How much more a loyal

3 Strathspey Steam Railway, Boat of Garten BEGINNING WITH SOME FACTS 60-70% Probability of selling to an existing customer 5-20% Probability of selling to a new prospect 10 times How much more a loyal customer is worth compared to their first purchase 25%-95% Potential increased profits by raising retention rates by 5% 6-7 times How much more expensive to acquire a new customer than keep an existing one 89% Of companies see customer experience as a key factor in driving loyalty and retention

4 Loch Morlich, Cairngorms BEGINNING WITH SOME FACTS 49% 24% 66% 71% Volume of visitors who have holidayed in Cairngorms before and wanted to return. Volume of visitors who have holidayed in Scotland before and wanted to return. Of visitor survey respondents rated their overall experience of Cairngorms 9 or 10 out of 10 (average score 8.9/10) Of visitor survey respondents are extremely likely to recommend Cairngorms as a destination based on a rating of 9 or 10 out of 10 (average score 9.1/10)

5 Jams and preserves at The House of Bruar THE TYRANNY OF CHOICE Does greater choice encourage disloyalty? Research shows that there can be too much choice. The evidence was in the Jam.! The idea of freedom of choice is appealing but Consumers welcome direction of decision making.

6 MOST EFFECTIVE CHANNELS FOR ACQUISITION AND RETENTION Channels used most for Acquisition Channels used most for Retention Websites 89% 56% 81% Social Media 37% Social Media 72% Content Marketing 32% Direct Mail 66% Referral Marketing 26% Search Engine Optimisation 65% Search Engine Optimisation 13% Web Banners 60% Display Advertising 12% Mobile Devices 34% Mobile Advertising 8%

7 Loch Insh, CAirngorms JUDGING THE LIFETIME VALUE OF CUSTOMERS

8 WORKSHOP If we seek retention & acquisition and loyalty & referrals: How do we determine which customers are valuable? What questions should we ask ourselves when addressing value and loyalty? What can we do practically to maximise impact?

9 HOW COULD WE CALCULATE CLV? Calculating CLV is straightforward but may be restricted to your data availability. More realistically you need: Average Spend how much a customer spends at one time on average. N o Repeat Sales how frequently your customer makes a purchase again in a year think segments! Retention Time How long you expect a customer to stick around historic data? Gross Margin its revenue minus operating costs expressed as a %. Customer Lifetime Value CLV = [Average Spend] [N o Repeat Sales] x [Retention Time] [Gross Margin] e.g. 110 x 0.5 x 10 x 5%* = (Leisure) 110 x 2.0 x 03 x 5%* = (Business) x x x

10 Loch Morlich ITS NOT JUST IN THE NUMBERS. Focusing just on profitable customers may be counter-productive. Measuring Social Impact and Social Influence is also important. On average 1 dissatisfied customer tells around 9-15 people. 13% of dissatisfied customer tell more than 20 people. And then there are online reviews

11 EXAMINING CUSTOMER VALUE AND LOYALTY Complete the sentence Our Customers become much more valuable when

12 EXAMINING CUSTOMER VALUE AND LOYALTY Complete the sentence Our Customers become much more valuable when They buy more stuff They pay more They re loyal to the brand They reliably come back to us

valuable when They eulogise for us on social

stuff They reduce our costs They pay more They

products back to us us to new customers They

13 EXAMINING CUSTOMER VALUE AND LOYALTY Complete the sentence Our Customers become much more valuable when They eulogise for us on social media They give us They good buy more ideas stuff They reduce our costs They pay more They try They They new reliably come introduce products back to us us to new customers They They They re loyal share collaborate to the brand their data with us with us

14 EXAMINING CUSTOMER VALUE AND LOYALTY Now think about the sentence And Our best customers become much more valuable when Our typical customers become much more valuable when

15 Glen Ord, the nearest distillery to Inverness & Loch Ness IN CONCLUSION The best investment you can make in measuring customer lifetime value is to make sure you re investing in your customers lifetime value. Michael Schrage MIT Sloan School s Centre for Digital Business

16 ROTHIEMURCHUS FOREST, AVIEMORE THANK YOU QUESTIONS?

17 All The VisitScotland Visitor Survey Reports: sitor_survey.aspx Cairngorms Visitor Survey Report: NationalPark.pdf

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Get the latest from HBR ed to your inbox. Sign up now CUSTOMERS What Most Companies Miss About Customer Lifetime Value by Michael Schrage APRIL 18, 2017 Steven Moore for HBR For managers and marketers alike, the power to calculate what customers might be