Here we look at how to improve customer loyalty a problem with nearly all businesses at some time. The simple steps to take to be a winner in your business.
Is customer loyalty really important?
I, first of all, consulted Wikipedia for an idea of where to start with this because at times we are in disagreement and I want to be more correct than the gospel.
The big thing with any business is the lifetime value of a customer. When you annalise this it can be a very big number that will contribute to your way of life for many years.
My wife shops at the local market store instead of the larger super chains. Yes, she has a loyalty card and probably pays a small premium in price but everything is easy to find etc. We spend about $250 a week at the store and have done for the past 10 years and probably the next 10 as well.
Calculate that! She has been worth $130,000 to the store during that time.
Do they ever say Hi Mrs Hanley welcome to our store? Nup not ever.
When do you start building loyalty
It all starts on day one with a warm welcome to any new customer. This is also when you get their details so you can keep in touch in the future and include them in a contact list.
You also bring them into any loyalty programmes you have or shopping services so they feel connected and welcomed.
How I introduced loyalty
Are customers more loyal with a long term contract or a month to month buying plan was a dilemma I faced recently because of the financial effect on my business?
Telephone accounts and Internet accounts are generally associated with term contracts averaging about 24 months. The kids think nothing of signing a 24-month plan to get the latest Mobile Phone but the older generation start to look for value.
I run a Telecommunications business and have opted for no plans or contracts. My reasoning is that if someone wants to leave it is for a good reason, bad service is not one of them but selling a business or closing the doors does happen and I don't want to waste time chasing payments from people who had no choice. It is easier to chase new business than debt collect.
My dilemma is in valuing the business. If you have long term contracts the business value can be amortised against the future income and used as collateral for borrowing money or selling the business. This is besides the principal of how flawed the idea is.
However, the new trend in Telcos trying to enter a competitive market is to drop the term contract to induce the more sceptical among us to use their business. It does work.
A better method would be to average the customer life and strike a point at the mean figure. For example, my business has an average customer life of over 6 years so the value can be extended out.
The other issue is the end of the contract haggling. The customer has to make a decision on what to do instead of just rolling along into the future.
How loyalty programmes contribute to the customer life
If you have no contracts you need a customer programme that follows the life of the purchasing. My wife's supermarket, as an example, has a loyalty card that gives her a cash discount of about 1.5 %. This builds over time and she uses the value for the product.
However, the supermarket has her records stored so they understand her better than even me. Haha
Same with my liquor store where I buy an occasional bottle of good Red. They are part of a larger group and regularly market to me with promotions.
In fact, I even won a paid holiday for purchasing a bottle of wine from them.
The important issue here is keeping track of your customers and staying in contact. It is far cheaper than brand building and commercial advertising.
The need for lifetime customers
We all have a choice of where and when we shop, the choices can be many in a small area and that choice will depend on several important things.
- Know, Like and Trust. The three keys to a successful conclusion
- Convenience. Not a big issue we will drive past an outlet we don't respect.
- regular contact and communications
- Competitive. Price is not everything but it is something
- Value of your products. We simply won't buy bad value
- Loyalty program. An incentive to return time and time again
With all these things happening we will keep them coming back year on year spending money in your future
Long term contracts
Mostly these are based around a regular billing cycle so they have all the details and contact ability to work on. The problem is the end of contract negotiations where we must make a decision to stay or leave and you really need a better deal than you had before.
For most of you, this is not an issue and for some, you will perhaps see the folly in building this platform for your clients.
- Contracts are for a set time only
- They act as a barrier to signing
- Changes are difficult to negotiate
- A marketing disadvantage
Opportunity to channel against contracts
When you sell against a contract you are in a much stronger position to entice the customer with a bond of Trust. You will understand the customer needs and negotiate a fair arrangement that will go a long time without having to arm wrestle a new contract every new period.
When in a contract and things do go bad the customer will immediately go to the authorities to complain. They may be right or wrong but it will still cost you money defending your position. Far easier if they just remove themselves from your service and you sleep at night.
Understanding customer loyalty
You have seen how customer loyalty is really important to your ongoing business and that the lifetime value of a customer can be in the hundreds of thousands of dollars.
However, they stay loyal only if you foster a caring relationship over the journey.
Birthday cards are great and can now be done electronically and automated. Newsletters maintain the story and a shopping cart of some kind is really integral to the like part of the system.
Knowing your customer is part of the process of understanding what to sell them.
Near my home, I have three National pet stores. I buy for my cat about every six weeks and have used all the stores and a member of each. At about every 4 weeks I get a discount voucher by email that lasts for a couple of weeks to entice me to the store. They can see my purchase record and consistently chase my shopping.
They understand me and buy my loyalty with a better discount than the casual shopper.
What are you doing about customer loyalty?
If the answer is a vague “not much” then we really need to help you lift your game.
The first thing is to know who your customers are and you can do this in many ways.
- You can ask them for details
- Enrol them in a newsletter
- Set up a VIP program that provides regular specials
- Grab your billing invoices and record the details in a list
- Run a raffle or competition
There are so many ways to get names it is then just getting information to them.
We have talked about Social Media, Videos, Emails, Newsletters and promotions and now is the time for action.
Remember just 10 customers can be worth a million dollars to you. So every single one is important to your future.
My wrap on customer loyalty
It is just so damn important that it should stand at the head of your marketing objectives.
You have no doubt heard the saying that it is cheaper to keep a customer than get a new one, and it certainly is true.
I own a European car that is now four years old. I generally trade out at about 6 years when I have achieved good value for my investment. Now I am getting offers in the mail to upgrade with the end of year specials, new models, VIP specials etc as inducements to BUY.
You should also know your customers that well and anticipate their moves and buying habits to maximise your opportunities
This is also the time for the up-sell.
What I mean is when the fish are biting it is time to fish. If they are buying a hamburger add some fries or buying a car add those accessories or even pet foods with treats and toys. We are all suckers when we make the hard decisions so you should take the power and up-sell them
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