Loyalty is a state of mind. From a marketing standpoint loyalty helps
us increase market share, increases continued patronage and increases
referrals.
But we need to remember that building loyalty is an emotional
connection characterized by trust, comfort, understanding, forgiveness,
attachment and pride - an emotional bond. Customer loyalty is a function
of the customer's subjective perception of the value you are delivering,
based on what they need and desire at any given point in time. It is a
PERCEPTION, based on experience. We need to create experiences worth
coming back for. And with new customers getting harder and more expensive
to acquire, why not not focus on the three ways to increase your business
through loyalty?
Recency, Frequency and Monetary (The RFM formula)
Increase the number of clients you do business with.
Increase your average dollars per sale.
Increase the frequency you do business with your clients. Increasing
one or two of the areas will yield substantial linear increases in your
gross sales volume. Increasing all three areas will yield exponential
increases in your gross sales volume. To double your sales, it only
requires a 25% increase in all three critical numbers. To more than
triple your sales, it only requires a 50% increase in all three critical
numbers.
There are many benefits when you concentrate on developing a loyalty
based marketing program:
Loyal customers usually spend more. They represent a stream
of earnings over time. And even in tough times, loyal customers still
represent your most profitable category.
Loyal customers cost less to serve. Your staff members are
familiar with them. Long term customers often learn your "routine" and
are willing to help themselves. The more "self service" oriented your
customers become, the lower your costs to serve them.
Loyal customers are less price sensitive - as long as you are
providing other kinds of value for them! Your customers are already
comfortable with you, they like working with you. Price is an important
product consideration, now more than ever, but not the only variable
customers consider when they evaluate your total offering.
Loyal customers are more forgiving. Let's face it, you've
built up an emotional bank account with them over time. Their zone of
tolerance with you is larger than it will be with others. Hopefully you
have proven you are out for their good and you care about their needs.
Loyal customers have greater profit potential. New customers
often have to be brought in with price discounts and incentives. The
"break- even" on these new discount oriented customers might be measured
in years. Loyal customers are more likely to pay full price, and the pay
back is quicker. Acquiring customers without discounting will yield a
more loyal customer. Otherwise you're "training" your customers to
expect discounts.
Loyal customers help us improve. They give us feedback about
things that are not working, they help us improve our processes, and, if
we ask, they will tell us what they might need in the future. They are
the most cost-effective "consultants" you could talk to. This is why
online and offline surveys are so critical to the future success of your
business.
As businesses, we are looking for the most profitable relationships. As
customers we are looking to do business with companies that offer the best
value proposition and delivers the best experience - one that we might
even categorize as CARING.
Allan Katz is a marketing coach, professional speaker,
and author. For more information about his coaching services and books,
visit his web site at
http://www.loyaltycoach.com/ or contact him via email at
info@loyaltycoach.com or
telephone 901-359-8299.
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