10 Critical Success Factors Building Profitable Customer Loyalty


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Learn 10 Strategies to Increase Returns and Build Profitable Customer Relationships.
During the lean times and beyond,
smart marketers will use these tough economic times to revisit their strategies to become more efficient and results-focused than ever. Customer Insight Group, Inc.’s white paper, 10 Critical Factors for Building Profitable Customer Loyalty, provides ten strategies marketers can put in place immediately to improve repeat purchases and build long-term customer loyalty.

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10 Critical Success Factors Building Profitable Customer Loyalty

  1. 1. 10 Critical Factors to Building Profitable Customer Loyalty … and why you have to do it, even (or especially) in a recession! s o the economy is bad. marketing costs and increased Institute, 91% of unhappy You still have choices. You sales — not too shabby an customers will never buy again could slash your marketing outcome in any economy from a company that has budget across the board, cutting displeased them and will also If you choose to go this route, both profitable and unprofitable voice their dissatisfaction to at common sense, experience and programs by an equal amount. least seven other people. statistics are on your side. Yes, it cuts costs — but it also According to the Customer service the good news: growth rates soar makes a smaller company. or Institute, it costs five times as for those who are adept at loyalty. you could stop marketing entirely much to attract a new customer Frederick reicheld, author of The — a survival technique that’s the as it does to keep an existing one Loyalty Effect and Loyalty Rules, business equivalent of lying down satisfied. A study by marketing found that loyalty leaders grow on on the highway waiting for the metrics found the average average more that twice as fast as next semi. company has a 60-70% proba- the industry average across a or — smart you — you could bility of selling again to existing wide variety of industries. decide to take action and stack customers, a 20-40% probability so — since I suspect I’m preaching the odds in your favor. You could of successfully selling to lapsed to the choir here — most of us decide to focus your newly customers — but only a 5-20% agree that loyalty marketing pays limited resources on the area chance of selling to a prospect. off, but it’s the how that trips up most companies. t h e a v e r a g e c o m p a n y h a s a 60-70% p r o b a b i l i t y our experience shows that there of selling again to existing customers, but are ten critical success factors o n ly a 5 -20% c h a n c e o f s e l l i n g t o a p r o s p e c t . to cultivating profitable customer relationships. of greatest opportunity: your Losing a customer? that’s where existing customers, specifically it gets really expensive. According Leverage Your Data those who have high growth to studies by the technical As Bill gates said in Business potential. the result is lower Assistance research programs @ The Speed of Thought, “the || ©2009 Customer InsIght group, InC. ph: 303.422.9758 www.CustomerInsIghtgroup.Com
  2. 2. best way to put distance between but unclear objectives. woefully, profile should be a 360-degree you and the crowd is to do an this oversight can sabotage view, combining purchase outstanding job with information. your program from the start. A behavior, attitudes, satisfaction, how you gather, manage and program cannot be offered to the demographics and lifestyles. use information will determine masses and exclusive, loaded once you’ve created the loyalty whether you win or lose.” with benefits and cheap. segments, prioritize them to focus on their potential economic Successful loyalty programs so, develop program objectives impact. Avoid rewarding “free leverage customer insight to: based on your primary business riders” — loyalty members who Attract profitable customers. objectives. Do you want to join your program but give you expand marketing channels with Determine allocation of nothing in return, and instead resources to improve ROI. direct capabilities to improve effi- focus your efforts on profitable, ciency and measure results? Do Evaluate how specific customers loyal customers. react to specific promotions. you want to collect data to be leveraged as a core business Deflect competitive challenges. asset? Do you want to build make rewards realistic Identify trends opportunities. strong relationships with high Any incentive you offer must be Increase customer conversion realistically attainable within value and high growth customer rates. segments? You decide — but you a reasonable time period. By Yeah, data can do all this. design, a loyalty program is a have to decide. balancing act between offering Create a shared Vision Ask Customers some low-cost, easily attainable In a true customer-centric orga- short-term rewards that can be what they want nization, the vision has to be redeemed early in the program If you want to know what will clear and — equally important and more highly valued aspira- make customers more loyal — embraced at all levels by all tional (and more costly) rewards — ask them. Focus on the employees. some key concepts: that can be redeemed later in the features, program structure Over-invest in coordination program. while the short-term and rewards they would add or across all functions. Make sure rewards encourage enrollment remove if they were to (re)design everyone understands program and ongoing participation, the objectives, strategies, areas of your loyalty program. Compare beau ideal rewards serve as an departmental impact and asso- the benefits they want with the incentive for your customers to ciated expenditures. benefits they’re getting. Based consolidate purchases and award ncourage employees to par- E on your customers’ feedback, ticipate in the program as cus- you greater share of wallet. determine the business impact of tomers so they experience first- the requested benefits. Is it finan- hand the program’s value. cially viable to give them what Create a Distinctive reate high-level positions with C they ask for and does it ultimately Customer experience the sole purpose of leveraging achieve your business objectives? while some customers are moved customer data across the organization and serving as by price, others want personal the customer advocate. Know Your Customers attention and convenience. Your Encourage employees to think Look at the customer from customers are diverse; conse- like a customer. a holistic perspective, then quently, your program needs to Incorporate customer focus segment customers that are acknowledge their uniqueness into training and hiring. similar. Create a loyalty profile by speaking differently to each by ranking customers according segment. the better you under- set realistic goals to their value to your company, stand your customers, the better sometimes loyalty programs are and then differentiate them by you can push the most appropriate developed with good intentions, their life cycle and needs. the levers for the specific customer. |2| ©2009 Customer InsIght group, InC. ph: 303.422.9758 www.CustomerInsIghtgroup.Com
  3. 3. Integrate concise, relevant and compelling Value indicates the profitability messages that build relationships of the customer; a decline in A loyalty program is not a silver based on your customers’ needs. value can represent a decrease bullet to solve a company’s core weakness. You can’t manufac- the key to success is to embed in transaction size and your share ture loyalty if you offer shoddy your loyalty program into the total of wallet. measuring value is products, poor customer service, customer experience. more than looking at one transac- noncompetitive prices, or non- tion; instead it is a measurement integrated distribution channels, measure success of your customer’s perceived or if you don’t communicate with Customer satisfaction and loyalty value in the relationship. customers. Instead, a loyalty metrics should be prominent in As Frederick reicheld explains program should be thought of as performance dashboards and in The Loyalty Effect, “Creating a part of your integrated customer visible to the company’s lead- value for customers builds loyalty relationship-marketing program ership, including the Board of and loyalty in turn builds growth, — one that helps you to proactively Directors. You should measure profits and more value.” rFV manage the customer life cycle. results in both the short- and provides you actionable measure Be relevant “creating value for customers builds loyalty loyalty Depending on your business, in turn builds growth, profits and more value.” customer touch points may include mail, telephone, fax, text message, e-mail, instant the long-term. while short-term for enhancing and refining your messaging, chat rooms, catalogs, success is measured by evalu- loyalty program. point-of-sale, signage, web sites, ating the results of promotions, events and customer commu- no matter what the economy is online bulletin boards, and what- ever was invented last week. new nication, long-term success is doing, the quest for loyalty offers forays in Internet-based systems measured by RFV — recency, bottom-line rewards for those include blogs, video conferencing, frequency and value. who prevail. As unique as your podcasts and meeting-sharing customers are, so will be your Recency is the measurement challenges and successes as you systems. each touch point of when the customer last build and refine your program has its own cost implications, purchased. generally it is a good along the way. the pursuit for and perceived benefits to your indicator of potential defection. customer. In developing your customer insight shouldn’t be customer communication plan, Frequency is a measure of how taken lightly or without long-term leverage each touch point to often a customer purchases; it dedication. Dig in. Dedicate for reinforce the value proposition gauges how robust the relation- the long haul and discover that, and focus on what really matters ship is between your customer recession or not, there’s gold in to your customer — creating and the company. them thar customers. about the author: Sallie Burnett is the president of Customer Insight Group, Inc., a strategic marketing company that helps companies improve the return on their marketing investment by developing and executing high-performing acquisition, loyalty, upgrade and retention programs. Explore how 671 Secrest Circle 1 Arvada, CO 80007 Customer Insight Group can help you increase ph: 303.422.9758 sales and build profitable customer relationships www.customerinsightgroup.com by visiting www.customerinsightgroup.com sallie@customerinsightgroup.com || ©2009 Customer InsIght group, InC. ph: 303.422.9758 www.CustomerInsIghtgroup.Com