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How Loyal Are Your Customers?
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.
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
- 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
- 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
- Earn points or credits for purchases that can be accumulated
and applied toward other products in a co-branded
- 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.