Building Loyalty: Placing a Real Value on Your Customer
- 14th June
- Neha Kale 289
Effective loyalty strategy will set the stage for a more intimate relationship with your customer, drive growth and shape the future of your business.
According to A New Approach to Brand Loyalty, a 2011 report by Forrester Research, retailers are failing to effectively manage their customer relationships and maintain a successful loyalty strategy. The report, which surveyed 50 marketing leaders, found that 40% of chief marketing officers admit that their brand loyalty programs are underperforming or producing unstable results. It also established that revenue growth, rather than customer satisfaction, was the preferred metric for loyalty initiatives and that for more than half the participants, these campaigns were not aligned with the brand being promoted. Perhaps the most glaring flaw highlighted by the report is that for most CMOs, building loyalty was considered a means to an end, rather than a long-term strategy and their approach was heavily skewed towards short-term financial goals.
The problem with this emphasis on short-term gains is that it ignores the fundamental tenets of lasting relationships and the conditions that breed customer loyalty. It also forgets that in a world of multiple channels and near-infinite product choice, customers remain fixated on valuable experiences with businesses they can trust. The most successful retailers today understand the importance of forgoing quick sales, to invest in the longer-term benefits of customer loyalty. This willingness to accept customer experience as the primary driver for loyalty and the ability to effectively incorporate this into your business is the secret to competitive edge.
For many businesses, the issue lies not with a failure to recognise the importance of loyalty but an inability to identify what this looks like in a cross-channel world. Matt Hampshire, CEO of Contiigo believes that a focus on customer value is a good place to start.
“Loyalty programs need to reward customers according to their value to their business. So if you’re not segmenting, then you’re at risk of rewarding customers who are bargain hunters anyway and who aren’t going to be loyal. You need to consider analysing your best customers according to their frequency and offer them the best rewards, rather than giving everyone the rewards,” he offers.
Segmentation allows retailers to target customers more precisely and better allocate marketing resources. When coupled with predictive analytics, it becomes an important tool to gain insights about customer value and tailor customer-centric products, support and services. Mastering customer segmentation is the first step towards building powerful customer intelligence and moving towards the engagement and relevance at the heart of customer relationship marketing best practice.
Ivan Schwartz, Director of AdvantageCard confirms Hampshire’s view that building loyalty depends on a more nuanced understanding of the customer.
“Until a business, whether it be a retailer or a traditional wholesaler, understands who their more valued customers are and what their drivers are for doing business with them, they really are at sea. As all the marketing theorists and practitioners will tell you, it costs the order of ten times as much to acquire a new customer as it costs to retain an existing customer. For that reason alone, it’s so commercially useful for a business to have an integrated loyalty program that will identify who your more valuable customers are, what their drivers are and what your best customers look like,” Schwartz says.
For more insights and advice about building loyalty, download the full Power Retail Special Report, Building Loyalty: Customer Relationship Management Best Practices.