[an error occurred while processing this directive]
How Loyal Are Your Customers?          Print the current page
by Brian D. Chmielewski

It is a commonly held principle that businesses forfeit five times more time and money obtaining a new customer than retaining an existing one. Buttressing that convention is a 1995 Harvard Business Review satisfaction survey study indicating that customers who verify they are "completely satisfied" are six times more likely to repurchase your product or service and nearly 42 percent more likely to be loyal than those who indicated they were simply "satisfied." This same announcement publicized that customers who are merely satisfied and have alternatives will abandon a product if they believe they can obtain better value elsewhere. Even in competition-scarce markets, providing customers with outstanding value is the only reliable way to attain enduring customer satisfaction and loyalty.

Most companies prefer to focus on retaining existing patrons after they appraise the lifetime value of a customer's patronage and the cost to initiate new relationships. Considering the dynamic nature of electronic commerce on the Internet, with its increased competition, high advertising costs and overabundance of information to sift through, it is clear that web-based businesses cannot ignore any activity that may give them a competitive advantage.

While it is relatively easy to measure sales figures or numbers of units distributed, it is more difficult to capture the results or outcomes of these programs. How can you effectively measure what benefits a specific program produces? How has your product or service impacted your customer? The answers to these questions must somehow be measured to determine if your company is meeting customer needs. The proper analysis of this data has the potential to lead you to increased sales, new customers, more effective advertising and marketing campaigns and customer loyalty.

Overcoming Myths
Two-way communication is the first component in developing a sound customer loyalty principle. Obtaining helpful customer feedback is as simple as asking a small number of your customers to list the pros and cons of your product or service, right? Wrong. A major danger in trying to understand your customer is that clients who are willing to provide feedback typically highlight favorable characteristics of your business. Blinded by these proficiencies a company may charge ahead emphasizing the expansion and enlargement of these attributes, ignoring their weaknesses. Another convention of customer satisfaction articulated in certain service industries states that for every verbalized complaint there are seven that go unspoken. In a world that finds it easier to assign blame than to take personal responsibility, this fact is arguably misrepresentative. So, asking what's failing or what should be improved includes the customer in the development process and makes them aware that their opinion matters.

Another danger in trying to understand your customer is basing key business decisions from the comments of only a few customers or from related feedback that originated during the same time frame. Many business owners and managers will ask a few key employees for their opinions on a specific customer related topic. Those opinions, which often have no statistical or factual basis, can result in misguided business decisions and dangerous and costly consequences. The alternative is to set up a controlled information gathering procedure and to conduct careful analysis of the results. Note: Using a giveaway or incentive to harvest feedback may result in inaccurate data.

Program Customer Loyalty
Once communication is established, you must gauge satisfaction through a customer loyalty program. Although many companies offer customer loyalty programs, their nature and strategies differ, as do their rates of success. So, what factors make a loyalty program successful? This answer depends upon the specific needs of the company and the inclusion of one or more of the success attributes that follow. An incentive or loyalty value-added value item should:
  • be relevant to customers interests and targeted.

  • have an actual cash value that reinforces quality and a perceived intrinsic value for participation.

  • be convenient to redeem and/or offers multiple redemption options.

  • possess longevity or repeated attainment possibilities.

  • provide a service and be simple to use.

Customer loyalty programs are very popular in many Internet niche markets right now as site publishers are growing more numerous and more competitive. The programs are as unique and as creative the imagination of a site's marketing team. Although reticent to the broader Web audience, these types of programs are building customers consent and loyalty in droves.

  • Point-of-purchase (POP) promotions
    Customers are offered immediate discounts on additional purchases of the same or similar product/service. Because of the dynamic nature of the Web, these discounts can be converted into bonuses, selectively offered or abandoned based on domain name, date or time stamps, or quotas.

  • Frequency marketing
    Remind customers that you were their service provider and that they were correct in choosing you to service their needs.

  • Incentive marketing
    As the name implies, this strategy involves giving a value-added push to get customers to make additional purchases. These can be one-time, periodic or constant endeavors. Tactics categorized here include:

    • Post sale communications thanking customers for their purchase and provide soliciting an additional discounted purchase via an exclusive coupon or offer.

    • Cross-brand or cross-product promotions. Present a special offer that for a product similar to the purchased product. For instance, offering Opt-In Direct Email package of 2000 at a discount to customers who purchase another service during the month of September. If both services are highly targeted and proactive methods for communicating to customers, both products can meet the same objectives in independent territories. This represents added value because we have identified the customer's need and presented them with a bonus solution.

    • Earn points or credits for purchases that can be accumulated and applied toward other products in a co-branded relationship.

    • Issue a card or customer number to your customer that they use to accrue and redeem points to receive prizes and other awards from you or your strategic alliances.

First published in WebPromote's Sept. 1998, Vol. 2 newsletter.