Why are some customers more “ROIs” than others?
For the majority of commercial enterprises, the Grail still remains the loyalty of customers. It is therefore surprising that in the data age – more than 50% of them – they have no idea of the identity of the customers who are most loyal to them. Why is it tragic? Simply because although these represent only 20 to 35% of the customer portfolio, 60 to 80% of the total sales volume is generally attributable to them. In addition, winning a new customer costs 7 times more than keeping an existing customer.
Are sustainable customers really profitable?
One of the most important tips is to determine if a customer should be thanked early in the customer relationship to ensure its loyalty. Or if it is better to favor those who already have a long history of transactions with the company.
In fact, not all customers are equal. And some even lose money to the organization. Of course, it is not a question of recommending the “dismissal” of customers, as did Sprint Nextel in a rather astonishing way in 2007. (Indeed, in 2007 the company contacted more than 1000 of its customers whose cost of maintenance was deemed too high to inform them of the “decision to terminate their wireless communication service agreement”.)
But I think, however, that knowing the level of profitability as well as the weight in terms of the influence of each customer is essential. This is the only way to create a smart and sustainable loyalty campaign.
Trying to engage customers by all means
Before, brands were threatened by other brands that offered their customers offers likely to interest them. Today, customers have seized power and are constantly comparing prices and services to find the most advantageous option. Opportunities for infidelity, nowadays, are not lacking. Hence the importance of trying to engage customers by all means.
Competition is also getting tougher: giants, experts in data mining, attack from all sides armed smart loyalty programs and acquisition. And that’s without counting the impact of these fast-growing low-cost disrupters, from the sharing economy – like Airbnb, Uber, and Paypal – on the hotel, banking, and transport sector figures, respectively.
Commitment and loyalty: the main challenges
Engagement and retention are challenges that need to be addressed. I understand perfectly well that some companies, whose product range is limited and therefore whose limited additional sales potential – wireless communication companies such as Sprint Nextel – prefer to focus their marketing initiatives on winning new customers rather than the reward existing. But deep customer knowledge (CRM) is crucial even for these companies. Because the value of a customer is not limited to its (optimal) purchase potential of products and services. It can reside in its degree of popularity and its ability to be a real advocate of the brand and therefore to push for acquisition.
When it comes to customer loyalty, 2 major questions must be asked: who are the customers that I can not afford to lose and how much can I – and should I – invest in them? Companies need to know where their threshold is, at any time. When one of these “too good to be true” offers a significant loss of customer base, they must be able to counterattack immediately. They must already know how much room they have for their own supply. They also need to know whether it is better to let this type of high maintenance customer – usually the most sensitive category for this type of competing for the campaign – because they will, in fact, be better off without them.
So, concretely, how to develop a well-rounded loyalty program?
First, all current and past sales and marketing initiatives must be carefully analyzed. Which campaign impacted which customers? Which actions were the most promising? Which campaigns had the best returns? Who are the customers who buy the most products or services? Who are the customers who buy the most expensive products or services? It is always useful to have a brand, a product or a referral service.
Organizations must, therefore, keep an eye on the performance of competing for leading brand products of similar category “A”. As banks do all the time. Indeed, they make comparisons with the interest rates of the competition in order to be able to react quickly – and know exactly to what extent they can readjust their margins – in a situation of potential danger.
Data: the first step towards customer loyalty
Only organizations with this type of knowledge can make the right decisions. They will know when to avoid a counterproductive action, such as offer a discount online product to a customer who has just bought a high price in the store a few days ago. In addition, they will also know when one of their most loyal customers will be present in their main store. Finally, they will know when to apply a discount: when to wait for a person to spend 150 €, when to wait until she has bought her tenth article and when to reward her because she visits the online store and it’s been a while since she bought anything.
Customer loyalty is not just about engaging and smart marketing campaigns. It all starts with the data. Because although the customer is always king, some of them are obviously more so than others!