Customer Loyalty Marketing: Strategies, Programs & Processes


Rajib Roy
NSHM Knowledge Campus

Dr. Partha Pratim Sengupta
Department of Mangement Studies

Being customer driven has become a business mantra these days. Customer loyalty is the ultimate expression of customer driven business strategies.  Loyalty is measured by repeat purchase behavior and by attitudes. Loyal customers consider your total product offering to be significantly better than your competitors.

Why Seek Customer Loyalty?

Raising your percentage of loyal customers improves growth and market share. Loyal customers buy your product over and over, while non-loyal customer simply defect to your competitors. Defection lowers your market share and loyalty raises your market share.

Customer loyalty takes into consideration customer satisfaction, brand loyalty, customer relationship Management and among all these I believe this is mostly related to the later. While this forms certainly a significant part of CRM, it is still debatable whether this is an end route of customer relationship management.

In any case let us first define what customer loyalty is. Of all the definitions that could be a part of this write-up I would advocate for the following :

Customer loyalty is a company's ability to retain satisfied customers. Better and faster issue resolution ensure strong loyalty. Information technology can help companies achieve customer loyalty by providing tools for analyzing customer data to assist in informed decision making, and managing customer relationships from the sales process through to fulfillment and support.

A Company can achieve Customer Loyalty through giving valuable insights on  most or all of the following aspects :

1. Service Leadership
2. Customer & Employee Satisfaction Studies
3. Performance Management Systems
4. Marketing & Communication Strategies
5. Service Solutions
6. Customer Relationship Management Systems

But above all one should have a systematic strategic plan for improving upon customer loyalty.

Though it takes a lot less money to increase your retention of current customers than to find new ones-but normally companies don't give it as much effort as It should because it does take a lot of energy and effort.

If you currently retain 70 percent of your customers and you start a program to improve that to 80 percent, you'll add an additional 10 percent to your growth rate.

Particularly because of the high cost of landing new customers versus the high profitability of a loyal customer base, you might want to reflect upon your current business strategy.

These four factors will greatly affect your ability to build a loyal customer base:

1. Products that are highly differentiated from those of the competition.
2. Higher-end products where price is not the primary buying factor.
3. Products with a high service component.
4. Multiple products for the same customer.

How to market to your own customers :

Giving a lot of thought to a company's marketing programs aimed at current customers is one aspect of building customer loyalty.

When you buy a new car, many dealers will within minutes try to sell you an extended warranty, an alarm system, and maybe rustproofing or even discount coupons on further purchases of spare parts. It's often a very easy sale and costs the dealer almost nothing to make. Are there additional products or services you can sell your customers?

Three years ago my house was painted, and it's now due for another coat. Why hasn't the painter called or at least sent a card? It would be a lot less expensive than getting new customers through his newspaper ad, and since I was happy with his work I won't get four competing bids this time : Keep all the information you can on your customers and don't hesitate to ask for the next sale.

Use Complaints To Build Business!

When customers aren't happy with your business they usually won't complain to you or the company - instead, they'll probably complain to just about everyone else they know - and take their business to your competition next time. That's why an increasing number of corporates are making follow-up calls or mailing satisfaction questionnaires after the sale is made. They find that if they promptly follow up and resolve a customer's complaint, the customer might be even more likely to do business than the average customer who didn't have a complaint.

In many business situations, the customer will have many more interactions after the sale with technical, service, or customer support people than they did with the sales people. So if you are serious about retaining customers or getting referrals, these interactions are the ones that are really going to matter. They really should be handled with the same attention and focus that sales calls get because in a way they are sales calls for repeat business.

Reach Out To Your Customers :

Contact . . . contact . . . contact with current customers is a good way to build their loyalty. The more the customer sees someone from the company, the more likely you'll get the next order. Send greeting cards in every meaningful occasions, see them at trade shows, stop by to make sure everything is okay.

Send a simple newsletter to your customers-tell them about the great things that are happening at your firm and include some useful information for them. Send them copies of any media clippings about your firm. Invite them to free seminars. The more they know about you, the more they see you as someone out to help them, the more they know about your accomplishments-the more loyal a customer they will be.

Loyal Customers and Loyal Workforces :

Building customer loyalty will be a lot easier if the company has a loyal workforce-not at all a given these days. It is especially important for you to retain those employees who interact with customers such as sales people, technical support, and customer-service people. Many companies give a lot of attention to retaining sales people but little to support people. Only a handful have been fortunate to have the same great people in customer service for years-and the compliments from customers make it clear that they really appreciate specific people in your service function.

The increasing trend today is to send customer-service and technical-support calls into queue for the next available person. This builds no personal loyalty and probably less loyalty for the firm. Before you go this route, be sure this is what your customers prefer. Otherwise my suggestion is to assign a specific support person to every significant customer.

In this dynamic and extremely competitive business environment, it has become imperative for organizations to become more customer oriented. Loyalty marketing has become prevalent across verticals, as businesses are realizing measurable gains from the strategic decision to become more customer focused.

The present trend advocates a step forward towards loyalty marketing from the current mantra of 'profitable relationships', which might imply an unequal relationship. Today a win:win relationship proposition ensures Profit for the Organization as well as enhanced Value for the Customer.

Relationship or loyalty marketing, in one form or another, is a mandatory for any customer-focused strategy.

These relationship programs can be aimed at fulfilling a variety of objectives including:

Acquisition : Targeting the right audience to increase the number of customers.

Activation : Enticing dormant customers into making the first and subsequent transactions.

Retention : Retaining valuable customers and deriving maximum value over their  life-cycles.

Enhancement : Increasing the depth and breath of products and services purchased by customers.

Customer Loyalty Program

A Customer loyalty program is based on a simple premise ... as you develop stronger relationships with your best customers, they stay with you longer... and become more profitable.

From driving repeat purchases to getting customers to become ardent brand promoters, a company can create a customer loyalty program that is aligned with your objectives & capable of tackling the unique challenges of your market.

Our focus & proficiency in the work we do is reflected in very strong intellectual properties that are applied in most engagements that we take on.

The following models describe in relating customer's needs with customized solution by identifying customer profile, desired behavior and the history of purchase behavior.

Given Below is a model of Customer relation ship programme of a private Airlines selling air tickets :

The key behind a successful customer loyalty program is knowing who (Profile of Customer) purchases what, where, when, how much (History of Transaction), and using this magical insight to drive (Desired Behavior).

360o Benefits

It allows you to link Customer Profile and [Transaction] History data in return for benefits. A powerful customer loyalty program delivers desired results when it uses a judicious mix of Economic, Ego & Emotional benefits.

The best way to achieve customer loyalty is by managing the customer loyalty process. Measure customer loyalty and improve the factors that customers will appreciate most. To accomplish this one needs to upgrade traditional customer satisfaction surveys so that they measure customer loyalty. Then this data must be made actionable by frequent and clear reporting of customer driven priorities. Finally, teams must be drawn up to make improvements in customer facing processes, which is very important.

One may ask, "We already measure customer satisfaction, will that data work for loyalty?" Not necessarily. Research says satisfied customers are up to six times more likely to defect than very satisfied customers. Customers defect for two types of reasons:

Problems : Something goes wrong and it isn't fixed quickly or properly.

Apathy: The brand fails to provide a good reason for customers to remain loyal, so many of them switch.

The satisfaction measurement program would need to capture information that relates to these reasons for defection, as well as demographics that describe loyal customers.

Rajib Roy
NSHM Knowledge Campus

Dr. Partha Pratim Sengupta
Department of Mangement Studies

Source: E-mail September 07, 2007


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