Crash Course in ... customer loyalty

Christmas is over, but the bleak economic midwinter isn't. Just as you're wondering where your sales will come from in the next few months, some bright spark mentions that it's time to cash in on customer loyalty. But where do you start?

by Alexander Garrett
Last Updated: 31 Aug 2010

Why loyalty matters. 'The pool of new customers diminishes in a recession, but there are the same number chasing them, so the cost of customer acquisition increases,' explains Richard Mabbott, head of planning at marketing comms agency Gyro International. So it becomes even more cost- effective to look for sales from your existing customers. When tempting offers from competitors abound, the goodwill you've built up can make all the difference.

Collect the data. You need to know who your customers are before you build your relationship with them. 'The first thing we would ask is whether you are collecting customer data, whether you're storing transactional data, and whether you have a transactional website it can be taken from,' says Andy Wood, MD of loyalty marketing specialist GI Insight. 'Trying to influence your customers' behaviour without any data is like driving in the fog without headlights.'

Segment your customers.The old adage is that 10% of your customers account for 60% of your revenue. You need to identify who your most profitable customers are and which ones you're likely to influence through your marketing and communication. 'The objective is to treat different customers differently,' says Wood. 'If regular customers are beneficial to you, you want to identify potential regular customers and target them with relevant offers.'

Use your web presence. 'Loyal and frequent customers will look to your website, so make the most of it,' says Barry Wright of consultancy The Wright Associates. 'Websites and e-mail offer an extremely cheap channel to talk to your customers.'

Reappraise your products. 'Find out which products your most profitable customers are buying,' adds Wood. 'That may lead you to rationalise your product line.'

Treat your customers right. Research carried out by Gyro International identifies key factors that companies must address: delivering on promises; being honest and open with customers; and being relevant to them. Otherwise, your offers will fall on deaf ears.

Make them feel special. 'All loyalty marketing is about recognition through offering some form of privilege valued by the customer,' says Wright. 'That could be points rewards, an invitation to early store openings, or access to a VIP lounge.'

Appeal to thrift. Customers who are struggling to survive won't be lured by discounts on luxury hotels or accessories. So make sure there's an alternative that offers them the chance to really save money.

Do say: 'We value your custom. Here's a thankyou.'

Don't say: 'Sorry, dear, that offer's for new customers only.'

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