Six key questions to audit a loyalty program

Last Updated: November 12, 2010By Tags: , , ,

These are the six key questions which you would use in an audit of a company’s customer loyalty program:

  1. What virtues of your business have the largest impact on your customers’ satisfaction?
  2. How do you divide and define your customer segments?
  3. Whose responsibility is customer service?
  4. What is your retention rate and what is the trend?
  5. What is the lifetime value of a typical customer?
  6. What percentage of new customers comes from recommendations and how has this changed over time?

    So, why ask these questions? Answering these questions will help you to comprehend where you are at the moment, and will then help to lead you in the right path. I do not believe customer satisfaction is the right measure to evaluate the success of your loyalty program. Loyalty mangers should rather, monitor and assess the source of new customers: is the number of word-of-mouth recommendations increasing, and if not, why not? Retention rate of customers should be evaluated, by defined segments. There are number of businesses where all customers are equally profitable. Customer retention is a focused strategy and you probably do not want to keep all customers; so you should track by segment the retention and, by implication, defection rates of different customer groups. These two measures will tell you whether your customers are satisfied – are they telling other people about your services and are they staying with you?

    Profits are really made when customers spend more or buy more, or when costs are reduced. It is critical to understand that to get customers to brag about your service, you will need to surpass their expectations. If you do not surpass their expectations they will not tell other people about the quality of service or product they have received. But surpassing customers’ expectations does not mean exceeding them on every dimension – you have to be selective about what is important to the customer. In companies I have worked with or looked at, there are three main dimensions on which to exceed expectations. These are value, service, and dealing with complaints.

    Personally, I feel there is a significant difference between making more customers satisfied and making customers more satisfied. The best way of increase profits is in making several customer segments much more than just satisfied. A customer satisfaction rating alone is not the right measure for pointing out customer loyalty towards your business.

    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.

    2 Comments

    1. Chintan Bharwada November 12, 2010 at 4:51 am

      New post: Six key questions to audit a loyalty program http://bit.ly/bazDkY

    2. Chintan Bharwada November 12, 2010 at 4:52 am

      Post Edited: Six key questions to audit a loyalty program http://bit.ly/bazDkY

    Comments are closed.

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