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Customer Loyalty -- A New Look
What’s happened to customer
loyalty? There’s an increasing trend for customers to drift away no
matter how much we spend to keep them faithful. More and more they’re
making their ‘buy’ decisions on the basis of price and other factors
like convenience rather than tradition.
Don’t give up on loyalty
programs just yet, although it is time to take a closer look at what the
business is doing to retain customers beyond just giving them things
like ‘bonus rewards’ and a free gift every now and then. Too often these
are used to compensate for customer service failings elsewhere.
The first place to look is at the business culture. Is there a genuine
customer focus? Does everyone on the team accept that the customer is
the reason they get paid every week? A business is only going to stay in
business if it wins the acceptance of its customers, so their
satisfaction comes first.
Remember the point where customers interact with the business. Unless a
manager is doing everything from answering the phone to handling sales
there is a team to be managed. Be sure the team is given all the
training, development and other resources they need to give customers
their very best.
Customer service includes being flexible in the application of policies.
Credit policies are good examples of opportunities for flexibility;
every situation is different and must be seen as an individual case to
be judged by a greater number of factors than simply time and money. The
business is dealing with a customer it already has and should want to
retain.
The same thing goes for customer complaints. Experience shows that a
complaint is an opportunity to create an even greater bond between the
customer and the business if properly handled. This doesn’t mean simply
giving into unreasonable demands; that can be a quick way to lose a
customer when their respect for the business goes out the window.
A business needs to tell its customers what it’s doing for them. It’s
surprising how many businesses have customer-friendly policies that
their customers don’t know about. Even if it’s something as basic as
free delivery or a discount for multiple purchases be sure they’re
getting the message. Tell the customer something about the business with
every contact.
Listen to customers. Everybody likes to have their opinion valued and
customers will share their opinions about the business if they’re asked.
Whatever they say, whether it’s good or bad will be useful information.
If a business doesn’t know what its customers are thinking, how can it
know for sure if its products, pricing and policies are as good as they
need to be?
A customer focus goes well beyond simply giving good over-the-counter
service. It extends into every aspect of the ways in which the business
deals with its customers and requires ongoing monitoring and management
if genuine customer loyalty is to be built.
Retaining loyal customers is becoming a challenge with the advent of so
many ‘loyalty’ schemes and extra points that can be replicated
throughout an industry. We said not to give up on loyalty programs, but
what’s their point if every competing business offers a similar loyalty
program? All that happens is that customers accumulate points or credits
from every competitor and no genuine loyalty is created.
Sometimes rewarding the high-value customers can backfire. The UK’s
Aberdeen Group found in one study that “…High-value customers no longer
view customer reward and loyalty programs as nice perks…They now expect
and demand them.”
To be effective a company’s loyalty program needs to be correctly
targeted so that it rewards only those for whom a reward will serve as
an incentive to repurchase. A truly loyal customer that will return
regardless of whether or not a loyalty program is in place represents a
waste of money if rewards are doled out to them. The cost would be
better spent in finding out what makes them loyal and giving them more
of it.
At the opposite end of the customer scale is the ‘disloyal’ customer for
whom loyalty programs hold no appeal. They’re in it for the price and
only show up for loss leaders or other low-profit items on special.
Again, it’s a waste to give them a reward for loyalty; they don’t have
any.
This highlights a problem with many businesses’ databases. Unless a
value has been assigned to each customer they all receive the same
treatment. It’s amazing just how many catalogue-based firms still send
their expensive annual production to everybody on their mailing list
without reference to purchase data. The printing and postage costs are
greater than the profits made from a substantial portion of the mailing
list.
One Australian retailer learned its lesson several years ago and stopped
sending its expensive catalogue to the full mailing list. Instead it
segmented its customer database into three groups based on the dollar
volume of their purchases during the previous year. The highest-spenders
received the catalogue as before. The next group was sent a reply-paid
postcard offering them the catalogue on request. The third and
lowest-spending group was sent a flyer with several special offers and
offered the catalogue if they made a purchase from the flyer.
This was fairly simple marketing but it worked so well that the retailer
still uses the system, although with a lot of subsequent fine-tuning
over the years. The catalogue now goes out only to those who are proven
catalogue shoppers and the costs of production and postage have dropped
significantly. A relationship program was developed specifically for
catalogue customers and has been successful in increasing the frequency
of purchases and the value of each order.
Sending a flyer to the lowest spending customers has become a surprise
success with the development of a distinct customer segment that looks
forward to its bargains each year. Although this group has been found to
visit the company’s retail outlets only occasionally at other times of
the year it enthusiastically orders its ‘specials’ from the annual
flyer.
Research has also shown that purchases from the company’s catalogue made
by this group are profitable, indicating a degree of customer loyalty
has been established. The company is now working on ways to better deal
with the middle customer segment that receives their catalogues on
request.
Customer loyalty is a commodity that can’t be bought. It must be earned,
first by gaining a real understanding of the company’s customers, then
by creating a culture that will please customers and encourage them to
return. Only then will there be a place for a customer loyalty program. |
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