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Customer Retention. Is it important?? 2013 August
 

Click to Enlarge Customer Retention???

Darryl Joubert August 2013

CEO, Intimate Data (Pty) Ltd

Direct Marketing and Data Quality Specialists

Article Published Nex Media Vol. 1 Issue 3

High customer churn rates is often a result of NEGLECT by a company of its existing customers. In to-days tough economic and competitive climate it’s even more important to retain existing customers in order to ensure long-term profitability.

Why keep existing customers:

• Reduced acquisition costs, compared to acquiring new customers.

• Keeping your customers as they become more affluent and spend more increases your revenues.

• You can target them for up- selling and cross-selling other products,

• Loyal happy customers recommend your company and products to their friends,

• Referred customers tend to be more profitable and stay with your business longer than those who respond to price promotions.

Retaining and extending a customer into year 2 could increase revenues by up to 40% and by up by 100% in year 3.

Customer Retention programs should have realistic evolving goals and objectives. Goals are used to determine the communications used, marketing approach, the value of incentives, overall program viability, are regularly evaluated against measurable objectives, and changes need to be made when necessary.

Retaining customers through Loyalty is more than just a rewards program, as the best loyalty initiatives should be sustainable, reward giving, and brand related. They are personal, communicative, and geared toward establishing a genuine dialogue for common learning and sharing. These elements, when implemented correctly, give the consumer a strong incentive to purchase frequently, as each transaction is increasingly personal, rich, and rewarding. Ie: the customer perceives a real value in the program. Building relationships with customers must become part of your company’s culture and employees’ way of life. It’s no good incentivising customers, when you serve up mediocre product quality, indifferent service, or poorly perceived value.

It’s hard work retaining customers and no program will work if the fundamentals are not there. Beware that customer value can be subjective, as a customer perceives the value of a benefit differently from another customer. Don’t be prescriptive, as the more we get customers to interact with us, the more we learn about their needs, buying habits, perceptions of our product, and service.

Loyalty and retention have more to do with building ongoing relationships with customers, understanding their needs, listening and communicating with them consistently over time. The enormous amounts of customer data generated by this program are used to drive planning, design and to manage the customer relationship. With this data, individual offerings can be tailored to the needs of specific customer segments. Every transaction can be analysed to predict future spending behavior. When the results of such analysis are linked to customer care touch-points, it has a positive impact on the delivery of exceptional customer service. Your company has the opportunity to target personalised appropriate benefits to different customer segments to achieve greater customer value and drive them toward their next purchase with you. Segmenting your customers that have similar characteristics, needs, behaviors, attitudes, and spending patterns form the basis of an effective strategy. Customised marketing strategies are then introduced to suit targeted customer segments, rather than adopting a single strategy for all. Segmentation is designed to enhance the efficiency and effectiveness of your program. Be aware that if you do not know who the 20 percent of your customers are, that are generating 80 percent of your revenue, you may have a problem as you will not be able to target the appropriate segments with benefits, and messages, to meet the needs of your profitable customers. You may find that a focused program concentrating on your company’s most valuable customers may create more value at a lower overall cost than a larger program that does not discriminate amongst customer segments.

Your program should offer increasing levels of rewards that reflect the customer's prior purchases, preferences and interests. Hence a well planned and executed customer retention program targeted at the appropriate customer segment is able to maximise customer retention and value, and ultimately improve the performance of your business.

Remember that when you give value to your customer, they will stay with you and in turn increase their value to you. This creates a circle of prosperity for all. Unfortunately no company will win if the data, especially the contact data, they have for their customers is of poor quality or out of date.

 
 
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