BUSI 442 Week 8 Customer Retention Strategy Project Phase 2 Example

Retention Strategy Project, Phase 2: The Retention Program, Budget and Measurement Plan

Introduction

Phase 1 showed that Northfield Garden Supply wins about 26,000 new retail customers a year at $38 each, yet fewer than a quarter of them buy again the next season. The main causes were failed first seasons, customers forgetting the company by the next spring, emails that no longer fit customers after the spring rush, and the absence of any reason to return beyond product and price. It also found that referred customers and garden planner users stay longer than customers acquired through discount ads. In the textbook's terms, retention marketing is an ongoing program of contacts and experiences designed around each customer's relationship with the firm (Roberts & Zahay, 2018). This phase designs that program for Northfield, explains the research behind each choice and shows how its results will be measured against the Phase 1 objectives.

Program Overview

First-Season Success Program

The most important element helps new customers succeed. Every first-time buyer will receive a planting guide for the products ordered, sent when the order ships, followed by three care emails timed to each plant's needs: watering and hardening off for seedlings, thinning for direct-sown seeds and a midseason check on pests and feeding. Each email will invite questions to the staff horticulturist, whose answers will be posted as short articles for others with the same problem.

When something goes wrong, the response must be quick and generous. Smith et al. (1999) examined how customers judge a company after something goes wrong and found that the payoff from each recovery tool, whether money back, a fast reply, an apology or the company acting before being asked, depended on what kind of failure had occurred and how serious it was. For Northfield, a shipment of damaged plants calls for an immediate replacement without requiring photographs, while a customer whose seeds did not germinate needs advice first, and a replacement packet if the problem was likely the seed. The company will contact first-time customers who report a problem within one business day and follow up after the replacement arrives.

Bolton (1998) showed that satisfaction built up over time keeps customers longer, and that customers early in a relationship are swayed most by what just happened. A first season that ends well, even after a problem, gives a new customer the store of satisfaction needed to return.

Winter Return Campaign

The decision to return is made in late winter, when gardeners plan. Beginning in mid-January, each customer from the previous year will receive a short sequence built from their own history: a recap of what they grew, new varieties related to what they bought, and a seed-starting calendar for their ZIP code. Sahni et al. (2018) showed experimentally that subject lines naming the reader lift opens and sales while cutting unsubscribes, and Ansari and Mela (2003) showed that tailoring each email's content to its reader raised clicks considerably. The campaign will use both: personal subject lines and content assembled from each customer's purchases and planner entries. Customers who did not open the first two emails will receive a printed postcard, since a different channel may reach them where email did not.

Two-Tier Rewards Program

Northfield's rewards program will have two tiers. Every customer will earn points on purchases, redeemable for seeds, supplies or a free flat of seedlings, with the first reward reachable within a typical spring's spending. Kivetz et al. (2006) observed buying speed up as a reward came within reach and found that a head start, even an illusory one, sped progress further, so new members will receive starting points equal to a fifth of the first reward, and progress will be shown in emails and on each member's account page.

The second tier, for the most valuable customers identified in Phase 1, will offer experiences rather than discounts: early access to limited varieties, a free consultation with the horticulturist and an invitation to tour the greenhouse in spring. Kumar and Shah (2004) argued that firms should build both behavioral and attitudinal loyalty and should tie rewards to customer profitability, reserving richer rewards for the most profitable customers. Bolton et al. (2000) found that loyalty program members tended to overlook negative evaluations relative to competitors and stayed longer, which suggests that the program may also help Northfield keep customers through an occasional late shipment.

Two-Sided Referral Program

Customers will be able to share a personal link that gives a friend $10 off a first order and gives the referrer $10 in credit when the friend's order ships. Schmitt et al. (2011) found that customers acquired through a bank's referral program had higher margins and higher retention than other customers, making them more valuable even after the cost of the reward. Kumar et al. (2010) showed that customers differ in referral value and that firms can identify and encourage those likely to make valuable referrals. Northfield will promote the program most to devoted gardeners and to customers who have just rated a product highly, and it will track referred customers' retention separately to confirm the expected advantage.

Win-Back Series for Lapsed Regulars

Lapsed regulars, customers who bought for two or more seasons and then stopped, will receive a three-message series before spring: a short note acknowledging their absence and asking whether anything went wrong, a guide related to what they grew in the past, and a modest welcome-back offer. Customers whose records show a complaint before they lapsed will receive a personal email from customer service first. Responses to the opening question will be read and answered, since a lapsed customer who explains a problem is giving the company a second chance.

Improving the Path From Lead to First Order

Phase 1 found that most new leads receive only a discount email and that planner users receive nothing connected to their plans. The new welcome series will ask each subscriber one question about their garden, such as vegetables, flowers or houseplants, and send three emails matched to the answer. Planner users will receive a shopping list built from their plans two weeks before their region's planting date, with a reminder of the items still needed. These changes aim to raise first-order rates and, since planner users and engaged subscribers come back more often, to recruit customers with staying power.

One Gardener's Year Under the Program

A walk through one customer's year shows how the elements fit together. Imagine a first-time customer who finds Northfield through the garden planner in March, plans a small vegetable bed and receives a welcome series about vegetables. Two weeks before the local planting date, the planner sends a shopping list, and the customer orders tomato and pepper seedlings, earning starting points toward a first reward. The seedlings arrive with a planting guide, and a care email a week later explains hardening off. In June, a few plants show signs of blight; the customer writes to the horticulturist, who explains the cause and sends a disease-resistant replacement variety. The harvest is modest but real.

In September, an email suggests garlic for fall planting, and the customer, now close to a first reward, places a small order. In January, the winter campaign recaps the summer's garden, introduces two new tomato varieties and offers a seed-starting calendar for the customer's ZIP code. The customer orders seeds in February and shares a referral link with a neighbor. At no point did the customer receive more than two promotional emails in a week, and every message concerned the customer's own garden. This is the experience the program is designed to create, and each step is measured so the company can see which ones matter most.

Contact Policy

Six program elements could easily bury customers in email, so the program needs a contact policy. Godfrey et al. (2011) found that relational communications raised purchases up to a point, after which more communication reduced them, with the threshold varying by channel and customer. Zhang et al. (2017) showed that tailoring email timing and frequency to each customer, rather than sending uniformly, could raise the profit of an email program by reducing unsubscribes while keeping responsive customers engaged. Northfield will therefore cap promotional emails at two a week for any customer during spring and one a week otherwise, give service and care emails priority over promotions, and reduce frequency for customers who stop opening. A weekly report will show unsubscribe rates by segment so the cap can be adjusted.

Targeting With the Churn Model and Randomized Tests

Phase 1 proposed a churn model built from first-order problems, planner use, email engagement and purchase categories. The model will estimate each customer's chance of not returning, but it will not decide alone who receives retention offers. Ascarza (2018) found that targeting the customers at highest risk of leaving could be ineffective, because their behavior was not necessarily the most responsive to retention efforts. Northfield will run each retention offer, such as a winter discount, on random samples drawn from every risk level, compare their return rates with held-out groups, and then direct the offer to the risk levels where it changed behavior most. Low-cost elements that serve everyone, such as care emails and the winter recap, will go to all customers, with a small holdout group to measure their effect.

Optimizing the Program Over Time

Optimization does not end at launch. Each month during spring, the analyst will compare the performance of message versions within each element, such as two subject lines for the winter recap or two layouts for the planner shopping list, and adopt the better version for the rest of the season. Over a year, these small improvements add up, and they keep the program responsive to what customers actually do rather than to what the company assumes they want.

Wholesale Accounts

Landscaping accounts will receive a separate program focused on reliability: a dedicated account contact, early ordering for the next season with guaranteed allocations of popular plants, and alerts about shortages before the spring peak. These measures address the practical reasons wholesale accounts leave and cost little relative to the value of each account. The account contact will also call each landscaper after the spring peak to ask what went well and what did not, and the answers will shape the next season's allocations and delivery schedule.

Roles and Responsibilities

The program needs clear owners. The marketing manager will lead the program, set the contact policy and report monthly results. An analyst, shared with finance, will build the churn model, design the randomized tests and maintain the holdout groups. Customer service will own the service recovery standards and log every first-season problem in the customer record. The horticulturist will write care content and answer questions, with a part-time assistant during spring. The owners will review results each quarter and approve changes to the budget. Writing these roles down prevents the common failure in which every department supports retention and no one is responsible for it.

Privacy and Data Use

The program relies on combining customer data that is now scattered, which raises obligations. Northfield will tell customers plainly that it uses their purchases and planner entries to send relevant advice and offers, will let them choose which kinds of email they receive, and will honor unsubscribe requests immediately. Referral links will never ask customers to upload contact lists, and referral credits will be described without hidden conditions. Data used to predict churn will stay inside the company. These practices protect customers and protect the trust on which every retention effort depends.

Implementation Calendar

Budget and Expected Return

The expected return comes mainly from customers who would otherwise have been lost. Moving first-season returns from 22 to 30 percent would bring back about 2,080 more customers a year, each contributing about $72 in gross margin in the following season, or roughly $150,000. Reactivating 15 percent of about 15,000 lapsed regulars would return about 2,250 customers contributing about $50 each, or $112,000. Shifting 2,080 new customers from ad acquisition at $38 to referral at $20 saves about $37,000 in acquisition cost, and the rewards program is expected to add about $40,000 in margin through more frequent purchases by members. Together these effects total about $339,000 in the first year, against costs of about $208,000. Gupta et al. (2004) showed that improvements in retention raise customer value, and therefore firm value, far more than equal improvements in other levers, because retained customers keep contributing in future years. The first-year return therefore understates the program's value, since customers kept this year will continue to buy in the years that follow.

Measurement Plan

Running Tests Responsibly

Because nearly every element includes a holdout group, the company needs rules for testing. Holdout groups will be small, usually a tenth of eligible customers, and no customer will be held out of service recovery or care content for more than one season, since those elements protect customers from harm. Each test will name its measure in advance and run long enough to cover a full buying cycle. No element will grow or end until the analyst and the marketing manager have looked at its results side by side.

Risks

Several risks could weaken the program. Rewards and referral credits could be claimed mainly by customers who would have bought anyway; the holdout comparisons will show whether that is happening. Generous service recovery could be abused; the company will track replacement rates by customer and review unusual patterns while keeping the default response generous. The contact caps could reduce short-term promotional revenue; the measurement plan will weigh that against lower unsubscribe rates. Finally, the data integration in July and August must finish on time, since targeting depends on it; the owners should treat it as the program's first milestone.

Year Two and Beyond

Should year one hit its targets, year two can refine the program instead of rebuilding it. The churn model will be retrained with a full year of program data, the contact caps adjusted by segment, and the rewards catalog updated based on what members redeemed. The company can then consider additions, such as a subscription for seed-starting supplies or regional workshops with partner nurseries, testing each against a holdout group before expanding it. Retention gains compound: customers kept in the first year become the devoted gardeners and referrers of the years that follow.

A Biblical Perspective: Faithful in Little

Jesus said that whoever proves trustworthy with small matters will prove trustworthy with large ones as well (English Standard Version Bible, 2001/2016, Luke 16:10). The principle applies to retention with unusual force, because retention is built on small acts: a care email that arrives when seedlings need hardening off, a replacement sent without argument, a personal note to a gardener who has not ordered in a while. None of these is dramatic, but together they show customers that the company can be trusted. A retention program built on faithfulness in small things honors customers as people, and it earns the loyalty that discounts alone cannot buy.

Conclusion

Northfield Garden Supply loses most new customers not to competitors but to failed first seasons, forgetfulness and irrelevant contact. The program designed here answers each cause: it helps first-time gardeners succeed and recovers generously when they do not, reaches customers in winter with messages built from their own gardens, rewards loyalty in ways that deepen attachment, brings in referred customers who stay longer, invites lapsed regulars back and improves the path from lead to first order. A contact policy protects the email channel, randomized tests direct offers to customers who respond, and every element is measured against a holdout group. The owners' first steps are to approve the budget, begin the customer data integration in July and launch the rewards and referral programs with the fall bulb season.

References

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Ascarza, E. (2018). Retention futility: Targeting high-risk customers might be ineffective. Journal of Marketing Research, 55(1), 80-98. https://doi.org/10.1509/jmr.16.0163

Bolton, R. N. (1998). A dynamic model of the duration of the customer's relationship with a continuous service provider: The role of satisfaction. Marketing Science, 17(1), 45-65. https://doi.org/10.1287/mksc.17.1.45

Bolton, R. N., Kannan, P. K., & Bramlett, M. D. (2000). Implications of loyalty program membership and service experiences for customer retention and value. Journal of the Academy of Marketing Science, 28(1), 95-108. https://doi.org/10.1177/0092070300281009

English Standard Version Bible. (2016). Crossway. (Original work published 2001)

Godfrey, A., Seiders, K., & Voss, G. B. (2011). Enough is enough! The fine line in executing multichannel relational communication. Journal of Marketing, 75(4), 94-109. https://doi.org/10.1509/jmkg.75.4.94

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