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Five tips for building customer loyalty

What are the current trends in customer loyalty programs? How can you increase loyalty and retention?

Loyalty 360, in partnership with SAS, set out to answer these questions. In an online survey conducted from November to December 2011, more than 150 customer loyalty and retention executives in both B2B and B2C companies from a cross section of industries shared their insights and experiences.

What the survey revealed
It’s no revelation that most established organizations rely heavily on their current customer base for new sales. According to the survey, an average of 68% of new business comes from current customers. But with customer expectations at all-time highs and brand loyalty at risk from competitive and market pressures, businesses must devise new strategies to keep their valuable customers coming back.

Many companies are now putting increased focus on their loyalty and retention programs. In fact, two-thirds of the survey participants have a department or functional area dedicated to customer loyalty and retention, with an additional 13% planning to add one. Since the cost of acquiring a new customer is estimated at 5 to 10 times what it costs to maintain a current one, the nurturing of loyal customers is not only becoming a high priority, it is quickly becoming a strategic imperative.

From CMO to CLO
Marketing is also playing an increased role in the loyalty equation. CMOs, concerned over diminishing brand loyalty, are adding retention and loyalty strategy to their agenda.

In half of the companies in the survey, the customer loyalty and retention function reports to a marketing executive. Many chief marketing officers are also moving into the role of chief loyalty officer.

Digitizing customer engagement
As customer dynamics change and technology pervades communications, companies are moving away from traditional means of engaging customers and toward digital forms of listening and responding. Not surprisingly, email is the predominant form of communication, both in listening (84%) and responding (88%) to customers, according to survey respondents. And while surveys are still a key method of obtaining customer input, social media has become equally important and is actually the second most frequent method companies use to respond to customers. The traditional call center, though alive and well, is no longer the lifeline to the customer.

Digital media and digital marketing have helped us better understand our customers. Businesses now have access to more information than ever about customer characteristics, behavior and preferences. This information can be used to develop personalized, targeted marketing programs. However, the sheer quantity of information about customers can be daunting. One major challenge in having so much information is reconciling the differences across sources to get an accurate picture of the customer.

The next obstacle is having the tools and skills necessary to make sense of it. Companies need to be able to manage and understand the information they have and use it to create unique, meaningful experiences for their customers.

There’s much more in the full report, but here’s a quick summary of top recommendations:

  1. Take a fresh look at your customer loyalty and retention strategy.
    With the decline in customers’ perceived value of loyalty programs and the new customer sovereignty, make sure your strategy is relevant and meaningful. Differentiate your program by identifying and connecting with the unique characteristics of your customer base.
  2. Align loyalty and retention programs with marketing strategy.
    If marketing is doing its job by effectively segmenting and targeting to attract the right customers for your business, that makes the job of loyalty and retention that much easier.
  3. Build brand evangelists, not bargain shoppers.
    If a loyalty program centers on offering customers special deals, it trains them to wait for the discount. Companies need to shift their loyalty focus to deepening the relationship with the customer and building evangelists. Loyal customers are less price-sensitive and more resistant to competitor overtures. They are also a huge marketing asset.
  4. Release the hostages.
    Many companies view customer defection as a bad thing. They will take drastic measures to keep the relationship together and, in effect, turn some customers into hostages. These reluctant customers are often expensive to keep. Sometimes it’s just not a good match. Know when to let go.
  5. Connect the dots and the data.
    All of the recommendations above require a thorough understanding of the customer. Information about customers is not hard to come by, but it is often difficult to assimilate and analyze. Establish a clear customer information strategy and invest in the tools and talent necessary to execute it.

 Download the full report Facing the Challenges of Building Loyalty and Retention.

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