The leaky bucket theory relationship marketing

SAGE Books - The Leaky Bucket Theory

the leaky bucket theory relationship marketing

She is known for her work on relationship marketing, customer loyalty and branding, and has been a regular speaker at conferences and events, both in the . Customer retention is one of the key concepts in relationship marketing. Wikipedia] The example "Leaky bucket diagram" was created using the ConceptDraw. From a marketing perspective, it certainly was an attention-getting ad! retention strategies, I like to use the leaky bucket analogy. customer relationships.

Analysts get a surprise when they calculate the proportion of customers who bought a brand in one period who return to re-purchase the brand in a following period.

the leaky bucket theory relationship marketing

The hole in the bucket looks to be very large, indeed. The law-like patterns documented in How Brands Grow are due to polygamous loyalty. And these loyalties follow an NBD-Dirichlet distribution across consumers, which means, among other things, that the typical brand will have a great many light buyers.

Leaky Bucket Theory – Professional Services Marketing Blog

Such customers, and there are many of them, make the bucket look very much more leaky than it is. InAndrew Ehrenberg wrote that there is no leaky bucket: Instead, they are merely relatively infrequent buyers of the brand who buy it regularly but not often.

Causes Small-business owners and marketing managers at large companies need to know the causes of leaks. Miner suggests that these causes may be controllable, which means the company can do something about them, or uncontrollable. An example of a controllable leak is uncompetitive pricing or poor customer service, while an uncontrollable leak could be changing customer preferences and requirements.

the leaky bucket theory relationship marketing

Marketing strategies can address the controllable causes of customer leakage. For example, an improved product mix and a competitive pricing strategy may bring back some customers, but they cannot bring back customers who have moved to new locations.

What Is Leaking Bucket Marketing? | Your Business

Significance Lost customers lead to lower revenues and market share. A large company with a diversified product line might be able to make up for a loss in one product line with gains in another, but for a small business, the loss of even a single customer could have a significant impact on profitability.

Experian suggests that companies may increase advertising to acquire new customers without understanding the root causes of the leaks.

the leaky bucket theory relationship marketing

In terms of business, this means acquiring enough new customers to compensate for lost customers that the business continues to thrive and maintain steady client levels. As explained above, acquiring new customers is a costly leaking bucket market strategy, but one that can work to maintain levels. According to Experian Integrated Marketing, companies delivering acquisition strategies using less aggressive, more holistic approaches stand to gain the highest benefit from this marketing technique.

Sales Tool: The Bucket Theory

Experian also warns against aggressive acquisition tactics, such as offering products at rock bottom, unsustainable prices in an effort to bring clientele in the door.

Speaking With Lost Customers If possible, the Dunvegan Group suggests speaking with lost customers to determine what caused them to leave your company in search of an alternative.

At the very least, this information will provide you with insight on competitor strategies and how to prevent this leak in the future.

Experian further explains that customers want to work with companies willing to expand and evolve with them.