Teleflora worked with Custora to minimize churn by segmenting its customers according to their brand loyalty and delivering precisely targeted messaging to each segment.
In today’s increasingly challenging retail environment, focusing on customer lifetime value (CLV) is the key to growth. Almost every brand struggles with the so-called “one-and-done problem,” that is, the fact that most consumers will make a single purchase with a brand and never come back. What’s more, the combination of a hyper-competitive retail landscape and a widespread lack of brand loyalty has meant that even a brand’s highest-value repeat customers are always at risk of “defecting” to a direct competitor.
This high-lifetime value customer churn can have a major impact on a brand’s bottom line, which is why it’s more than worth it to make a concerted effort to retain one’s best customers. In fact, even a 1% improvement in high-lifetime value customer retention can boost a brand’s profitability by as much as 75%.
Many retailers rely on traditional, fairly generic approaches to churn prevention—something like sending a promo code to any customer who hasn’t made a purchase in 90 days. Such an approach is simple, but is it effective? In our experience, it’s certainly not as effective as it could be.
We sat down with Tommy Lamb, Director of Loyalty and Retention at online flower retailer Teleflora, to explore how his brand’s customer-focused marketing practices have helped level-up its churn prevention.
How Teleflora Prevents Churn
Teleflora takes a more nuanced approach to preventing churn than your average retailer. On the one hand, the standard “promo after 90 days” approach isn’t particularly effective at engaging Teleflora’s many weekly customers.
On the other hand, discount offers delivered within a shorter window after a customer’s most recent purchase fail to take into account the fact that many of the brand’s customers are only interested in purchasing flowers on major holidays. These customers are going to make a purchase on Valentine’s Day and again on Mother’s Day, and the only outcome of offering them promo codes in the intervening months is a decline in margins on the bouquets they purchase for mom.
As such, Teleflora takes a more customer-centric approach to churn prevention. The brand strategically segments its audience in a way that enables its marketing campaigns to be calibrated to the specific behaviors of well-defined customer groups. This results in fewer resources being wasted, and ultimately a better sense of each campaign’s ROI. But how does Teleflora’s marketing team know which campaigns will work—both in the short and long term? That’s where Custora’s cutting-edge customer analytics platform comes into play.
Testing to Prevent Churn
Testing is how you zero in on good data—not general industry trends, but data specifically about your customers. It’s one thing to go through the motions of segmenting customers according to their brand loyalty, but that alone is not a retention strategy, let alone a method to elevate customer lifetime value.
To climb this mountain, Teleflora uses Custora to test whether specific marketing campaigns or offers are effective at boosting return rates within its various customer segments.
As part of this test, Teleflora sorts its customers into four loyalty buckets:
“Highly at Risk”
But these buckets aren’t as straightforward as, “This customer hasn’t made a purchase in 30 days.”
If a customer who has historically only made one purchase per month goes missing for 30 or 60 days, Teleflora will likely classify them as “Cooling Down.”
But if a customer who has historically made a purchase every day or two goes missing for the same period, Teleflora will immediately place them in the “Highly at Risk” bucket.
By using Custora for these customer-centric tests, Teleflora is able to better understand how effective a campaign is with a specific set of targets.
According to Lamb,
“The ‘Cooling Down’ people are more likely to come back—they only need a modest offer, maybe 10%, maybe 15%. That offer scales up as you move down the funnel.”
Using this new approach to customer data, Teleflora saw revenue increases in each bucket:
“Cooling Down” +17%
“At Risk” +3%
“Highly at Risk” +21%
Using Creative to Avoid Churn
Good creative can be a mechanism with which to help customers feel like they are making a novel choice—even if you’ve just repackaged your tried-and-true messaging. Some 30% of U.S. consumers will change brands simply for the sake of variety, but if you can keep customers engaged with your creative strategy, they may be less inclined to go looking elsewhere.
According to Lamb, Custora helped Teleflora “diverge from its traditional creative language. We started using more social images — it’s a very different look from our traditional emails.” Thanks to Custora, Lamb and his team were able to see how effectively they could move the needle on certain customers before dedicating resources to launching the new strategy to a larger audience.
Working Hand-in-Hand with Custora
As Lamb puts it, “Custora is more of a partner than a piece of software.”
Because this particular push was actually the second time Teleflora teamed up with Custora, the retailer already had much of its data and analytics ready to go, which made spinning up the testing remarkably easy.
One team worked on data and analytics to ensure their accuracy. Another worked with Lamb to come up with fresh, data-informed creative. By integrating these teams’ outputs in Custora, Teleflora was able to quickly sort customers into the relevant buckets and perform A/B testing to evolve its campaign tactics.
The fundamental principle of Teleflora’s success was quite simple: when you know, you can act, then you can measure—and then you start the cycle all over again. Refine, refine, refine.
Gathering Interesting Insights
Using this method has allowed Teleflora to unearth interesting information about its customers’ preferences and behaviors. For instance, on the creative side, the brand found that its customers responded much more positively to emails with background images.
On the data side, the brand discovered that in 2015, its customers preferred dollar-off promos, whereas, in 2016, they gravitated more strongly toward promos that offered a percentage off.
After running additional customer-centric tests, Teleflora found that customers in the “Cooling Down” and “Highly at Risk” buckets displayed a preference for dollar-off promos, while customers in the “At Risk” and “Lost” buckets preferred percentage-off promos.
The underlying cause of these differences in preference isn’t yet clear—the brand is in the process of testing several hypotheses that emerged from these results—but the fact that Teleflora now knows these differences exist is itself extremely valuable.
Knowledge, awareness, and insight are the crux of effective churn prevention. To stop customers from jumping ship, retailers need to know which customers are already several strides down the plank. That knowledge can only be derived from customer-centric testing, which is why partnerships like Teleflora and Custora’s have so much potential for driving meaningful results.
This is Part 1 of a two-part series exploring Teleflora’s work with Custora. Click here to read Part 2, or check out our entire conversation with Tommy Lamb here.