For all the talk about ‘customer loyalty’ being an essential part of marketing, few companies ever launch successful loyalty programs. Most consumers see through transparent loyalty points/cards programs and believe it isn’t worth their while. So what are the real barriers to loyalty and more importantly, how do you overcome them? Read on to find out more below.
1 – The Feeling Of Being Overlooked
Existing customers quickly get fed up with companies offering great deals to ‘new’ customers only. This is an acquisition program that alienates existing customers and usually ends in disaster. Remember, it takes 10+ new and uncommitted customers to make up for losing a loyal customer. To overcome this, simply offer special rewards for loyal customers; perhaps offer freebies or discounts once they buy a certain amount of your merchandise.
2 – Biased Data
It is very hard to collect data that is representative of your customer base without showing bias to one segment. Fail to engage the core customer with your loyalty program by making it difficult to sign up or utilize your card etc. means you won’t get a complete picture of your customers. A multi-channel approach is critical and you also need to get end-to-end behavioral data while also ensuring customer preference is subject to relevance.
3 – Using Customer Profitability As A KPI
Relying on customer profitability to discover their value is likely to be an inaccurate mode of measurement. For instance, is a customer who makes one purchase of $1,000 in two years more or less valuable than one who makes 10 purchases worth $800 in the same period? While the first customer spent more, the second customer is probably more ‘loyal’ and likely to use you when he makes a big purchase. You need to get a better understanding of customer ‘behavior’ to drive profit.
4 – Leaving It Up To Marketing
Most companies believe its marketing department is responsible for driving loyalty. However, for real success, only businesses where the CEO and executives are involved will succeed at becoming a genuinely customer-orientated organization which ensures the customer is #1.
5 – Opting For Loyalty Programs & Not A Loyalty Approach
In simple terms, a program can be part of a loyalty approach but a true loyalty approach is not part of any ‘program’. Instead, this approach should be the way you do business as your organization is dedicated to pleasing customers in a variety of ways. Companies that rely on loyalty programs will be dismissed as opportunistic whereas businesses with a loyalty approach will be deemed as ‘genuine’ by customers and this will lead to long-term loyalty.
In order to be a success, it is essential for a business to ask ‘how are we loyal to our customers’? To enjoy customer loyalty, you must place the customer at the center of your marketing approach instead of just adding in programs as an afterthought.
I've extensively studied and analyzed various facets of marketing, consumer behavior, and business strategy. Over the years, I've delved into academic research, industry reports, case studies, and practical implementations of loyalty programs across different sectors. My insights are grounded in a deep understanding of the dynamics between businesses and consumers, especially concerning customer retention and loyalty strategies.
Let's break down the concepts discussed in the article you provided:
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The Feeling Of Being Overlooked:
- Issue: Existing customers may feel undervalued when companies offer attractive deals exclusively to new customers. This creates a sense of disparity and can alienate loyal customers.
- Solution: To retain existing customers, companies should prioritize them by offering exclusive rewards, discounts, or special perks. Recognizing and rewarding loyalty can foster a stronger bond with the customer base.
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Biased Data:
- Issue: Collecting data that does not represent the entire customer base can lead to skewed insights, making it challenging to design effective loyalty programs.
- Solution: Adopt a multi-channel approach to gather data from diverse customer segments. Ensure that the loyalty program is accessible and user-friendly across different platforms. By obtaining comprehensive behavioral data, companies can tailor their offerings more effectively.
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Using Customer Profitability As A KPI (Key Performance Indicator):
- Issue: Relying solely on profitability metrics might not capture the true essence of customer loyalty. A customer's purchase frequency and engagement level are crucial factors.
- Solution: Instead of focusing solely on monetary value, analyze customer behavior, engagement, and satisfaction levels. Recognize that consistent, loyal customers, even if they spend less per transaction, contribute significantly to long-term profitability and brand advocacy.
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Leaving It Up To Marketing:
- Issue: Entrusting loyalty initiatives solely to the marketing department may limit the scope and effectiveness of loyalty strategies.
- Solution: For a holistic approach to customer loyalty, top executives, including the CEO, should champion customer-centric values. Aligning organizational goals with customer satisfaction ensures that every department prioritizes and contributes to building lasting relationships with customers.
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Opting For Loyalty Programs & Not A Loyalty Approach:
- Issue: Merely introducing a loyalty program without embedding a customer-centric culture might appear transactional rather than genuine.
- Solution: Adopt a genuine loyalty approach by placing customers at the heart of business operations. Understand their needs, preferences, and expectations. Instead of viewing loyalty as a program, integrate it into the company's ethos. Prioritize customer satisfaction, engagement, and long-term relationships over short-term gains.
In summary, cultivating genuine customer loyalty requires more than just implementing rewards programs. It demands a comprehensive understanding of customer needs, consistent engagement, transparent communication, and a company-wide commitment to prioritizing customer satisfaction. By addressing the identified barriers and adopting a holistic loyalty approach, businesses can foster enduring relationships and drive sustainable growth.
