NEVER OVERLOOK IMPORTANCE OF CUSTOMER LOYALTY By John Landsberg, Kansas City Small Business Monthly July 2008 What is a loyal customer worth to your business? In these challenging economic times it is a question that you should really take to heart.Unfortunately many business folks have a tendency to constantly prospect for new customers, while taking for granted the ones they currently have. Many times when I meet with a potential client they want to focus on how to bring more new customers through the front door.They almost have this feeling that existing customers will remain with them no matter what. They are wrong!!Existing customers will bail on your business the very first time they feel they are looked upon as no longer a priority. Businesses always have to walk a fine line when making marketing offers to new customers.Have you ever watched a commercial for a cable company or mobile phone provider and screamed, "I've been with them for years and they are giving a deal to new customers that is half of what I am paying!" Keep in mind the first marketing rule of customers: It is easier and more profitable to market to existing customers than it is to try to garner new customers.Yes. Love the ones you are with before looking for new customers. In the book "The Loyalty Effect" Fred Reichheld says that as little as a 5 percent increase in customer retention can improve a company's bottom-line profitability between 25-85 percent depending on the industry. One of the best ways to keep existing customers is to let them know they are special.One important way to do that is through a loyalty program. Loyalty programs do not have to be on the magnitude of the airlines' frequent flyer programs or even at the level of many supermarkets. One study noted that food retailers will lose up to 40% of their new customers in three months.That's why so many have frequent shopper cards. Even if customers depart they can identify the defectors and try to market to them to come back. Keep in mind that more than 75% of consumers today belong to at least one loyalty program. They are expecting your business to reward them for that loyalty. Here are just a few tips for starting a customer reward program:
The reward has to be easy to attain.Remember Just for Feet stores?The former huge shoe retailer offered a free pair of shoes after you purchased 12 pairs. It was up to customers to try and keep track of the count and it is doubtful many actually attained the free pair.
If you want to require some sort of membership fee, it has better be something that will quickly pay for itself.
Don't add a bunch of limitations on your loyalty program. Savings that expire quickly are a turnoff to consumers.
Dont punish customers if they forget their loyalty card/offer.Nothing is worse than being punished for not being able to prove your loyalty.
It is not unusual for businesses of all sizes to lose up to 10 to 20% of their customers in a typical year. That is a lot of business walking out the back door. Wouldn't it be far wiser than trying to going out and acquiring 10-20% new (and costly) customers to try and develop a loyalty program that keeps your existing customers from leaving?It seems to make good business sense.
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