The multiple facets of customer retention
Some give you discounts, some take money from you in advance
You may have come across this quote multiple times.
A carousel, a long post, a reel and what not.
Starbucks is secretly a bank.
Wow!
Why?
Because they have a massive loyalty program and that almost ends up making them collect close to a billion dollars in advance - making them a bank.
By this time, I have seen this content being whitewashed and re-created in so many forms that I had to generate a meme to that effect.
So, what are we going to talk about here?
Customer Retention.
Why am I talking about customer retention before talking about customer acquisition?
Well, this Starbucks being a bank post had now started to bother me a lot.
So, who’s retaining and how.
Let’s start with Amazon India.
Amazon ensures that they acquire you as a user, and then under the guise of ‘free shipping costs’ they keep harping to make you subscribe to Prime.
Just free shipping is not exciting enough?
Here, take music for free too.
Still not excited, here’s a few original shows.
Oh, we have James Bond too!
Fine, give me Prime!
What does that entail?
I end up shopping on Amazon, excited for all sale events, consume a lot of content on Prime - video and audio and maybe Flipkart or Snapdeal may not be able to acquire me as a shopper.
For Prime, Bezos at what time had made a great statement -
Let’s now move a little closer home, our very own home grown brand - Tanishq!
Tatas created a massive brand from scratch by addressing a very fundamental problem in the jewellery industry - addressing the trust deficit.
For the longest time, jewellers in India made money by billing you for x grams and making the jewellery for x-y grams.
So Tanishq created a massive trust and ended up opening stores pan-India operating at a scale that none of the other players even ended up getting close to.
Now what?
Enter - GHS, or short for Gold Harvest Scheme
You pay Tanishq a monthly sum for 11 months, and they pay 75% of the 12th instalment.
So let’s say you pay Tanishq 10,000 for 11 months which is 110,000 - and Tanishq tops up this amount with 7,500 entailing you to purchase anything worth 117,500 at the end of 1 year.
Now this has two advantages -
1 - I retain the customer for any high value purchase of jewellery
2 - At the end of one year, there is a high chance the customer ends up purchasing something which is above 117,500
Retention and Upselling.
Now, let’s look at another company from the Indian context - Bajaj Finance
A company that is often remembered for their notorious pushy phone calls of taking personal loans.
But let’s start with how a typical customer of Bajaj gets into their ecosystem.
Bajaj typically onboards customers through white good stores where they end up upselling a fridge, TV or a washing machine by telling you about a no-cost EMI which makes a win win proposition for Bajaj, the customer and the shop keeper.
How?
Bajaj ends up acquiring a customer and can make anywhere between 20-30% on the loan provided (Math is in the video appended below)
The shopkeeper is happy because Bajaj allows them to upsell products - customer ends up buying a higher value TV, Fridge or a Washing Machine.
Customer is happy because they end up paying nothing extra (directly) and walks home with a high value appliance.
In conclusion, while Starbucks is NOT a bank and merely uses the loyalty program as a customer retention tool, we saw 3 examples here:
1 - Amazon: Making you pay for Prime and keeping you into the ecosystem
2 - Tanishq: Making you commit to a high value purchase by letting you park x amount every month (this has now been aped by all major jewellery chains in India)
3 - Bajaj Finance: Provide you a ‘no-cost EMI’ and retain you through the lifecycle of your journey by selling you more loans and financial products
What other customer retention strategies can you think of?