Who are your loyal customers?
Ask yourself a couple of questions. Do you know your best customers? Are you doing enough to reward them and keep their loyalty? If yes, you are probably a good marketer. If no, it is time to know who they are and think about how you can keep their loyalty.
So why focus on loyalty? Recent research conducted across industries by consultant Bain and Company indicates that a 5% increase in customer retention yields a 75% increase in customer Net Present Value (NPV). We also know from the pareto principle: 80-20 rule that 20% of your customers deliver 80% of your sales (not true in some cases though). Therefore, it is important that there is a loyalty reward program in your marketing plan.
However, there will be some people who will argue with me here. Especially those marketing science researchers and followers who widely believes that there is not much of loyalty in consumer behaviour. True indeed, however I believe that most of the marketing science researches are done on Business to Consumer (B2C) markets where majority of consumer spending are low and of low involvement products/services. Loyalty marketing is still important in most if not all Business to Business (B2B) markets as well as B2C markets with high spending and requires a high level of involvement.
Here are some random articles I found from the web which might be of interesting read for you:
1.) Customer Loyalty by Jim Novo
2.) Reward your best customers by Joanna Krotz
3.) Centurion Card from American Express by Buildingbrands.com
5 comments:
Good evening to all,
Some thoughts on loyalty. Loyalty programs don't work. Yes you see them everywhere and most consumers, at least in the US, Canada and UK have multiple cards for all such programs. Research is showing that buying customers is highly in effective. They are actualy verysmart and have learned how to leverage the programs against each other driving the value of the rewards up, profits down and then they shop the best offer. Some Loyalty.
Rewarding clients outside of the Loyalty program zoo actually has benifits espcially if it is tied to buildig trust abnd related behaviors. When used as a behavior modification reward it is highly effective.
As a customer ervice consultant I have also learned that the 80 - 20 rule isn't as prdictable mathematically as once thought when it comes to modeling customer behavior and behavioral rewards. You can change the percentage split moving it towards the 50% -50% mark.
Just some food for thought. Thanks for the article.
Customer loyalty is paramount to success. However, brand loyalty has suffered over the years as the internet and generation X move toward a more cynical view toward brands and product providers. Loyalty programs have a high level of value if they are structured properly. However, customer service tends to supercede any loyalty program.
-Randy
www.4mysales.com
Loyalty exists in most, if not all, markets. Buyers restrict their purchasing to a limited personal repertoire of brands. But loyalty levels for competing brands are very similar (and predictable - brands with much larger customer bases have slightly higher loyalty metrics). It is not possible for marketers to increase any of their loyalty metrics without also massively increasing the size of their customer base. The implication of this scientific discovery is that loyalty oriented marketing stratgies that focus on a small part of the customer base (eg "golden customers") will to little to grow a brand or increase any of its loyalty metrics.
The Bain and co "research" cited in this article is not an empirical finding, nor true. A 5% reduction in defections does not lead to 75% increase in profits.
See http://www.MarketingScience.info/
Dr Byron Sharp
Professor of Marketing Science
Director, Ehrenberg-Bass Institute, University of South Australia.
Customer loyalty I agree already exists in all markets and yes the marketing to a few really doesn't make sense if they already are loyal unless you want to move them to the customer advocate level. Then it makes sense because these small few are the most likely to make the move in that direction.
So bring your loyalty programs to the next tier down. By the way the 80/20 rule in business isn't consistent nor is it absolute. Only if you main a status quo will it apply.
If you increase your loyalty through the development and deployment of customer experience strategies will the numbers have a tendency to change.
By the way marketing loyalty strategies are highly ineffective as well as customer reward programs. Everyone has one and in today’s market customer/clients shop them just like they would prices.
In fact the current research shows that the average consumer belongs to four competing programs at any given time and this also seams to apply in the area of B2B. In the beginning they were able to create a competitive advantage, but that has long disappeared.
Today loyalty programs all look a likes and those that are different aren't creating enough differential to separate themselves from their competitors.
The next and great frontier is in customer service development based on customer experience management, especially when it is used to provide brand promise fulfillment. Research has shown that most customer experiences happen outside the circle of the sales mantra and decisions to buy are well formed before direct contact with a sales person is established.
Try all the loyalty programs and marketing tricks you want, but until you are customer centered and focused on the customers over all experience with the company or product nothing will change. Recent surveys show that in today’s market place 80% plus businesses are product focused and so are the marketing, branding and loyalty programs that drive them.
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