Customer loyalty – managing, understanding and profitability

Last Updated: August 19, 2010By Tags: , ,
Know your customers

Know your customers

It is of vital importance that organisations understand what drives both value and delight for their customers. Adopting a customer centric vision enables an organisation understand their customers, deliver customer delight and drive for loyalty.

One fundamental issue we forget is that different customers have different requirements and will be delighted in different ways. Segmentation and data analysis are critical if an organisation is to generate loyalty from different customer segments.

Positive switching barriers should be implemented to increase the likelihood of customer retention.
Customer segmentation based on profit is imperative. Operating costs for customer segments should be monitored to ensure they are not disproportionate to the profit the organisation receives from these customers.

By profiling current profitable customers a customer acquisition strategy can be produced and implemented.

Appropriate monitoring of customers is important to ensure that customer defections are not masked by customer acquisitions. This is essential for the sustainable growth of an organisation.

A win-back strategy is recommended as previous customers are less costly to win-back compared to the costs of acquiring of new customers.

Analysis of defecting customers allows an organisation to profile at risk customers. Where appropriate preventative measures can be put in place to reduce customer defection.

By considering these ideas, managers should be better informed to manage loyalty in a profitable manner within their organisation.

Chintan Bharwada

Chintan is the Founder and Editor of Loyalty & Customers.

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To achieve better sales and profits, most companies could be doing more to cultivate business from their existing customers. However, enthusiasm for customer-retaining strategies must not endanger sound customer-getting efforts. How companies balance the two is the big question. To intensify reaching old customers while still seeking new ones, for many firms, will mean changes in market analysis, planning systems, management incentives, and marketing and/or operations organization. In the rush toward growth, consumer marketers have tended to regard success as stemming from obtaining new customers while unwittingly minimizing the importance of satisfying old ones. It is time for more companies to distinguish between their getting and retaining functions, to assess the balance between them, and to remedy any deficiencies in customer retention. This process requires management to value the potential of current customers and to treat them in special ways to get them to keep coming back. Several major elements should be part of the new marketing mix for customer retention: Product extras Keeping customers frequently requires giving them more than the basic product that initially attracted them. Product extras for individual customers over time can play a sales-expansive role. Reinforcing promotions Product promotion works better when aimed at existing customers. If a marketer knows who these customers are, benefits can be obtained by giving them reinforcing communications. Sales force connections The sales force can play a decisive role in the customer-retention function. At a retail or service counter the salesperson is the focal point of the company's strategy and is the firm to the customer. Post-purchase communication A company must anticipate that some customers will encounter either minor or serious problems after purchasing. If the firm is not ready to hear and correct these difficulties, the customer may not repurchase  or may cancel the the relationship. Whether company or customer is at fault, standby post-purchase activities can be instrumental in saving these customers.

4 Comments

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