This is a guest post by Sandra Faleris of SmBizSuccessTeam. To read more from Sandra, visit her blog.
Customer retention is tricky during unstable economic times. Value has replaced loyalty in most non-luxury categories, which means customers want to know they are getting the most out of their money.
Do you realize that it costs five times more to attract a new, buying customer than it takes to get an existing customer to come back and buy from you again? That’s five times more you have to spend to get a customer who may be in it for just one purchase. That’s a lot of extra money that could be used to keep your current clients buying again and again.
Research conducted across industries by Bain & Co. indicates that increasing your customer retention by as little as 5% can increase the average net customer value by a whopping 30-95%.
It’s simple to implement a customer loyalty program that works but not all loyalty programs are successful. Some programs simply aren’t enough to engage a customer again and again.
If you want to create a successful program, here’s how to get started:
1. Identify your best customers by profit (not volume or frequency, but profit). Identify the actual customers, if possible. Remember, the customers who generate the highest profit may be those you only hear from one-two times per year, so don’t go by familiarity. While you’re at it, you may as well pull out a lead list – customers to target for additional sales. Knowing your customers will continue to have growing importance.
2. Discover what they like about your products. Find out what offers or improvements the different groups would find appealing. Since the “highest profit group” is likely to be your smallest group of buyers, it shouldn’t be that difficult to gather this information, depending on how your customers generally contact you. Phone, mail, in-person or online surveys are all easy and inexpensive methods. Make sure you have a decent-sized sample of responses before going to the next step.
3. Define the most enticing offers isolated by your top spenders and subgroups. If you find they prefer to get something for free, then develop a frequency program that rewards based on dollars spent or a buy-one-get-one-free deal.
However, two things to remember:
1) If your biggest spenders comprise a fairly small group, then start small. Send a holiday or birthday gift; a thank-you note along with a coupon, a phone call that announces a private pre-sale for best customers. There are plenty of methods that shows them you have noticed.
2) Be imaginative and try a few different offers to see what works best. Review what works for other companies. Review what works for you, as a buyer. Review your customer feedback. Then develop a retention program that is a win-win for everyone.
Make no mistake, staying ahead of the game means rewarding the people who are putting money in your bank. Do it with insight and foresight and they will keep coming back for more.