DRIVING CUSTOMER LOYALTY
Conventional wisdom dictates that the best way to enhance
customer loyalty is to implement a loyalty (i.e., a
frequency, relationship or membership marketing) program.
Critics of loyalty programs maintain that they are just
bribes for purchases or that they are attempts at miraculous
quick fixes to boost sales. But loyalty can't be bought - it
is earned and developed over time. The most damning
criticism of loyalty programs is that most are not
integrated with other service offerings or benefits.
Another problem is that many loyalty programs are reactive
rather than proactive and fail to capitalize on customer
intelligence-gathering opportunities. Ideally, loyalty
programs should actively solicit relevant and appropriate
information from a customer at every possible opportunity.
Each interaction with customers should become a
loyalty-building occasion. Furthermore, relevant and
appropriate customer intelligence should be gathered at each
interaction across all points of contact between a company
and the customer. This intelligence should be leveraged to
optimize or enhance a customer's experience. If the program
only rewards customers for business that they would already
have given to the company, the program has failed before it
has begun.
Some key considerations for loyalty programs include the
following:
§
Ask customers what they want or like - poll the customer on
preferences for rewards, service levels, variety,
convenience, price, frequency of contact, permission to use
various channels such as e-mail, etc.
§
The program should not be the centerpiece of a marketing
plan, but it should be closely aligned with the overall
marketing objectives.
§
Good programs award for interaction, not just purchases.
Show that you know the customer and refer to their past
interactions.
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Establish appropriate intervals for relevant communications
such as e-mail, newsletters and offers.
§
Recognize that rewards may not be the incentive of choice
for your best customers; these customers are often more
influenced by exclusive service or access to special events
or programs, or special gold-members-only service that
provides added convenience.
Loyalty Programs Are Not Enough
Although a customer loyalty program may enhance customer
relationship management (CRM), it does not replace CRM as an
integrated effort across marketing, sales and service
organizations. Many of these programs are icing on the cake
- they're not the primary drivers of retention,
profitability or satisfaction. In fact, most customers rate
customer service, variety of selection and ease of returns
higher than loyalty programs.
As mentioned, customer knowledge should be used to enhance
or optimize the customer's experience at every touchpoint;
but what aspects of the customer's experience should be
optimized? How should such aspects be optimized? The first
step is to understand the negative and positive drivers of
customer loyalty. How important are these drivers? How does
the company perform on them versus its competitors? Further,
how does a company translate this information into an
enhanced customer experience? How does a firm assess whether
this enhancement is cost-effective?
Step
1: Ask Customers What's Important to Them
Begin by using qualitative research to get inside customers'
heads, listening for your customers' moments of truth - the
touchpoints of interaction between them and the company's
products, services and communications. Understand their
values and use this understanding to design products,
services and communications, as well as to provide the kind
of customer service they want. At this point, it would be
useful to conduct separate focus groups of key customer
segments such as active customers, inactive customers and
lost customers (or whichever segments are most meaningful to
your business).
Information gained in these groups will aid tremendously in
developing a survey questionnaire for quantitative research
that uses these moments of truth to measure the degree of
customers' loyalty to the company, the brand, services and
products. Of course, such a survey should be administered to
the key segments used in your qualitative research.
Step
2: Build the Vision
Insights from the quantitative research can be leveraged to
identify opportunities for enhancing customer experiences at
every touchpoint across the organization. Present key
learnings to the most creative internal people from all
areas of the company. Hold a brainstorming session to
identify opportunities to customize products or customer
service in ways that will influence customer loyalty. Then,
pinpoint the most practical, quick-to- implement solutions
and prioritize them. For example, Virgin Megastores
proactively distributed
vPDAs were specially configured to log on to the Virgin Web
site automatically whenever the user was checking e-mail.
This type of personalized service encourages interaction and
also creates added convenience for best customers. At this
point, you're well on your way to creating a true customer
differential that will distinguish your products, services
and communications from those of your competitors.
Step
3: Execute
Implement initiatives, offers, communications and programs
(even beyond marketing, sales and customer service) that
will enhance customers' value perceptions, build loyalty
and, most importantly, be cost-justifiable. To ensure
financial accountability, develop sound business cases with
appropriate return on investment (ROI) and net present value
(NPV) metrics.
Step
4: Track and Measure
Collect information on the performance of the new
initiatives, offers, communications and programs. Through
empirical evaluation, you'll be able to understand which of
these components work best with which customers.
Working through this four-phase process will build loyalty
by differentiating offerings in a relevant way to key
customer segments. Doing so will provide value to customers
who will, in turn, maximize their value to the corporation.
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