LOYALTY PROGRAMMES

Secrets to Customer Retention and Increased Profits

Definition

Loyalty remains a somewhat elusive concept. It is a little bit like art you know it when you see it. Retail loyalty, as defined by some, is different from loyalty in daily life. Lets not even talk about it in Politics Retail loyalty means earning a little extra goodwill, a slight margin of preference and creating an incremental shift in buying behaviour. Loyalty is difficult to define and yet it is absolutely intrinsic to business growth and market share.

Definition

A definition of business-related loyalty developed by Sampson Lee of Greater China CRM categorizes loyalty into transactional loyalty (analytics) and emotional loyalty A good definition of customer loyalty is: a customer who (1) makes regular purchases; (2) purchases across product and service lines; (3) refers others; (4) demonstrates immunity to the competitors pull; and (5) forgives without straying due to an occasional lapse in vendor performance.

What is it?

Do you feel a true sense of allegiance, or is it more like apathy? Or worse, do you feel trapped in a relationship - you keep buying but would switch at the first opportunity Need to acquire, upgrade and retain high value customers, because high loyalty allows companies to benefit from a long relationship. Industry leaders have proven the relationship between customer loyalty and profitable growth.

Points to Ponder

The Value of Loyalty Leadership What Is Loyalty? The Gift That Keeps on Giving Making the Business Case Drivers of Loyalty and Defection It's the Service Mind the Perception Gap Survey Customers and Use Analytics

Points to Ponder

Start Small The Last Straw Predicting Churn The More Things Change... How To Retain or Win Back Customers Identify Potential Defectors Communicate With Customers

Points to Ponder

Listen to Front-Line Staff Treat Valuable Customers Well Be Fair, Even When You Don't Have To Win the Right Customers Back Implementation Considerations What About CRM Systems? The Point About "Points" Programs Getting Your Whole Company on Board

Value of Loyalty

The Value of Loyalty Leadership What Is Loyalty? Loyalty experts generally agree that loyal customers stick around longer and buy more frequently. loyalty leaders enjoy a substantial advantage in revenue growth and profitability. In some cases, customers continue to do business because they have no other alternatives or exit barriers are too high. It's important not to confuse these "trapped" customers, Customers who give recommendations to friends

Points to ponder

Concept of Loyalty: In a December 2004 CRMGuru survey: 64 percent defined loyalty as repeat buying behavior 58 percent as a customer who makes referrals to friends and colleagues 54 percent as a customer's emotional commitment to the relationship. Only 32 percent of the respondents defined loyalty as a customer spending more over time.

Points to ponder

The Gift That Keeps on Giving Reichheld, author of The Loyalty Effect and Loyalty Rules, found that loyalty leaders grow, on average, more than twice as fast as the industry average across a wide variety of industries. Making the Business Case loyalty leaders-those whose executives rated their loyalty programs as "excellent"justified loyalty programs with expected improvements in profitability, revenue growth customer base expansion. It is surprising to learn that improving products and services was also popular, selected by 39 percent of leaders.

Points to ponder

Drivers of Loyalty and Defection It's the Service

In customer loyalty, there's no substitute for good research and planning. You must start by understanding why customers stay and why they leave. Some companies make this mistake by constantly acquiring new customers with price promotions and then wondering why these same customers flit to the next deal offered by a competitor.

Points to ponder

Loyal customers were primarily driven by:

Attitudesabout brand, quality and customer focus Brand Imagesas an industry leader, trustworthy company and innovative supplier Customer Experienceswith product quality, purchase process, technical support and consulting

Points to ponder

Loyalty experts say that emotion plays a much higher role than quality and price in the decision to defect. And poor customer service is the most likely culprit in creating negative feelings that will motivate a customer to bolt.

Points to ponder

Mind the Perception Gap "If only our company had better pricing, the customer wouldn't have left." Or, "It's not our fault the customer's needs changed." Or, "Too bad our product wasn't competitive." Please dig deeper for the real reasons.

Loyalty Programmes

Companies of all sizes can implement a loyalty program

Small business CRM guru Jay Curry of Jay Curry Associates advocates conducting customer interviews with top customers to get feedback on the relationship. Interviews can be conducted in person, for high-value customers; via telephone or web for medium-size customers; or direct mail, for small customers likely to remain so.

The last straw on camels back

The Last Straw

"Everyone in the store ignored me, never acknowledged me. Finally, when I approached a sales representative, my question was responded to flippantly, as if I were stupid for even asking." Poor ongoing customer management

Predicting churn

Predicting Churn "A typical business hears from only 4 percent of its dissatisfied customers. The remaining 96 percent go away, and on average, 91 percent never go back.

Six indicators

Six indicators that a customer was ready to walk out the door for good:

Customer approval of your proposals comes slower. Access to upper-level management decreases. The flow of customer data slows down. Plans for future work become progressively shorter-term. One or more of your products or services are discontinued. The volume of business the customer is doing with you is reduced.

Retention and Recapture

Loyalty experts say that retaining the right customers or winning back defecting customers can be accomplished by following these steps:

Identify potential defectors. Communicate with customers. Listen to front-line people. Treat valuable customers well. Be fair, even when you don't have to. Use exit barriers, carefully. Win the right customers back.

Loyalty through Innovation

Building Loyalty through Innovation Customers, more informed and sophisticated than ever, are now taking service quality for granted. In the flat world, your organisation must differentiate by continually innovating new products and services that your customers cannot do without. This will require, in many cases, partnering with players outside your industry

Loyalty whats that?

If you want loyalty - get a dog. If you want loyalty and attention - get a smart dog. Grant Fairley One wonders if the right word is enticement.