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Are you ready to build a customer-centric
business?
It’s a well known fact that
it costs 6 to 8 times more to get a new customer than it does to do more
business with an existing customer! That is why loyalty marketing,
relationship marketing, loyalty clubs – whatever you want to call it – are
becoming so popular. Vintage Cellars know that.
38% of their wine club members purchase each month and each member purchases 3
times more than the average customer. Sales jump 15% when the Cellar Press
(their regular newsletter offering specials and notes on new products and
releases) is issued 6 times per year. What is loyalty marketing? How
can it apply to your industry no matter what it is or who your customers are –
B2B or B2C. Well, first of all let’s
describe what loyalty marketing is! It's an expression of your
company's culture - a way of doing business which shows you value your
customer’s contribution to your company. (And
by customers, I don’t just mean retail customers.
Customers can be your distributors, your dealers, your manufacturers, and
even your own employees.) The most important asset of
your business is not your product or your service, but your customers! Loyalty marketing is about
identifying who your customers are, differentiating among them (finding out who
the best customers are … and the
ones that are costing you money), building an interactive relationship with
them, and then customising your product or service to fit each customer’s
needs in such a way that they will faithfully
choose you over your competitors. Loyalty marketing is not
discounts or a lot of short term promotions strung together.
Discounts don't buy loyalty - loyal customers pay full price or more. In
fact, short term profits can fluctuate and paint unrealistic pictures of actual
company performance based on promotions or new sales.
The real value of a customer comes from long term business.
And customer loyalty is the best indicator of strategic success or
failure. Rewards for loyalty are not
gifts or discounts (one of the words I dislike most!) - they are better service,
convenience, benefits, privileges, advantages which other customers do not
receive. Plus recognition,
collaboration and communication. A client of ours was prepared
to give away 5% discount to their customers - that equalled over $600,000!
When we showed them those statistics, they realised that they hadn't
really thought through the cost of buying
market share. They hadn't looked at
the relationship between the value delivered to the customer and the value
created for the company. You can't
afford to give away something for nothing. A loyalty program must reward a
change in customer habits. The value of a customer increases the longer they do business with you. Research has shown that there is a direct relationship between customer retention rates and profitability. Increasing customer retention rates by 5% can increase earnings between 50% and 150%! Loyal customers do business
with you more frequently, they purchase more services or products, they care
less about price, they refer new customers to you, they take less time because
you don't have to do a song and dance every time you want to sell something to
them. If they are comfortable doing
business with you and know the quality and value you provide then they will be
happy to deal with you and buy more and more and more, more often. And that’s the real reason to
introduce a loyalty program, isn’t it? A loyalty program’s objective
is to make your customers become sustainably loyal by offering an arrangement
which has long term benefit for the consumer… and is profitable for you. It is much more profitable to
have 100% of 10 customers than it is to have 10% of 100 customers. OK, so how do you get to know
your customers? To some companies
this seems like a daunting aspect. It’s
not like it used to be in the days of the corner grocery store where the owner
knew every customer’s name and their family history, what they liked and
disliked, their children, and who had said what to whom, etc.
But now there are so many customers, and perhaps a faceless owner.
What do you do?
Thank goodness for the age of technology.
Now we have computers that can track lifestyle, purchasing habits,
seasonal changes – even family members and personal interests!
A bit like Big Brother really. But
very helpful when you want to build a relevant and profitable relationship with
a customer and make it seem like you know him or her personally. And it is done with a database. A
recent article in the SMH quoted a US direct response specialist as saying “companies
are going to fall into two primary camps in the not too distant future.
Those will be companies that have databases, know who their customers are
and what products and services are important to them, ... and companies without
a database that in essence will be going out of business”. So that’s the first step. And how do you build a database
if you don’t already have one? The
simplest and most effective method is to run a promotion or competition – with
a number of questions that will actually build a more relevant profile than just
getting name, address, and telephone number. But you must plan your loyalty
strategy first. Your competition can
gather valuable research information. There
are hundreds of companies that have bags and bags of competition entries and
they do nothing with them! It makes
me cringe to think of all that money wasted when they could have used their
budgets for the start of a beautiful relationship. One of the priorities of a
loyalty program, too, is to make it relevant to the customer. Some years ago we did a home
delivery drive for a major newspaper where they insisted on using an incentive
that was clearly wrong for the target market.
It bombed! The easiest way to find out
what would appeal to your customers (and keep them coming back for more) is to
ask them. Hhhhmmmm, now that’s an
innovative idea! Just something that
a lot of companies forget to do – talk to their customers.
Asking your customer what they think, involving them in the process, not
only makes it easier for you, it shows you care about them and you’re well on
your way to building that all-important profitable relationship. In addition, this helps you to
differentiate your customers. Which
is the second part of implementing your loyalty marketing strategy.
The third part is interacting with them and, of course, the fourth part
is tailoring your product or service to meet your individual customer’s needs. The benefits of a loyalty
marketing program are many. Some
take a long time to achieve and will take a great commitment from you to change
the way you do business – focusing on the customer rather than on the product.
But initial benefits include increased cross-selling, reduced customer
attrition, reduced transaction costs and turn-around times and higher levels of
customer satisfaction. Are you ready for that?
Then you are ready for the future of marketing and the way of building a
more customer-centric business! Director, P S Loyalty Marketing |
