A funny thing happened when researchers asked consumers and marketers associated with the travel industry how they viewed the industry’s well-known loyalty programs. Both camps gave the concept a thumbs up, to be sure. But that doesn’t mean they saw eye to eye. Far from it. Still, it turns out that there’s an important lesson to be learned from what proved to be the sharply diverging perceptions of the buyers and the sellers.
For the marketers – 66 percent of them – the programs were seen as a good way for customers to show loyalty to the brand. Seventy-three percent of the consumers, however, flipped the perception, looking at the programs as a great way for companies to show loyalty to customers.
The study, reported in the Harvard Business Review, says a lot about how customer retention strategies can go awry when customer-centric principles get turned inside out.
How to retain these customers? Look at the brand through the consumers’ eyes
That’s not to say that loyalty programs are not an important element in the retention strategies toolkit. They are. The trick, though, is keeping the focus on the customer through proven customer retention strategies such as these:
- Yes, consider a customer loyalty program. Just keep in mind that loyalty is a two-way street, and the way to actually engender loyalty is to make an emotional connection with a person. Today’s analytics and CRM solutions make it easy to truly get to know your customers and leverage that technology to reach out proactively to demonstrate your loyalty to your customer, with a reward, a special offer, a personally tailored email, or a follow-up to a transaction.
- Appreciate the value of regular newsletters. They not only put your brand in front of your customers consistently, but they are still at least twice as likely to convert as social media traffic (2.5% vs. 1.3%), according to a report from Monetate.
- Don’t put all of your energy – and marketing budget – into chasing after elusive new customers when your best prospects may be right before your eyes. A large portion of your inactive customers may be responsive to your targeted outreach to bring them back into the fold. Comprehensive customer retention strategies should recognize that lapsed customers are potential returning customers, with the right approach at the right time. Offer them an incentive to return.
- Your customers are likely to be active on social media, and that means you should be, too. Chances are good that the people who “like” or “follow” your brand feel an attachment to it. That gives you a golden opportunity to further build the relationship, and perhaps build a committed brand ambassador along the way. Perhaps unexpectedly, one company that is showing the way on social media has its roots in the nineteenth century. General Electric has established an award-winning presence on Vine, Instagram, and Twitter, turning its tech products into compelling human stories.
- Get in touch and keep in touch, with the help of scheduled and automated emails, social media and blog posts, newsletters, coupons, and personal outreach like a birthday greeting or a thank you email. Remember, too, that all contact from a customer is good contact – even the complaints. Be glad they are telling you what went wrong, because that gives you the opportunity to make it right, turning a bad situation into one that actually increases trust and loyalty.
- Provide exceptional customer experiences. No matter how many special programs and personal touches you include in your customer retention strategies – that is the one factor that will always be at the heart of customer satisfaction and loyalty. Take care to monitor customer experience at every touchpoint on the customer journey, and to make improvement an ongoing process rather than a one-time fix.
Why customer retention strategies are key to growing a business
Just do the math. For one thing, it costs a lot more to acquire a new customer than to keep an existing one – the actual number varies by industry, of course, but a good rule of thumb is that a acquiring a new customer costs five times as much as making a new sale to an existing one. And that’s not all. Famously, Bain & Co. calculated that just a five percent increase in a business’s customer retention rate results in increased profits of between 25 percent, nothing to sneeze at, to as much as a whopping 95 percent.
Add to that the fact that a company that retains about 80 percent of its customers over the course of the year, and manages to acquire about 20 percent new customers (both figures are in the average range) is just treading water. On the other hand, if that company can increase its customer retention rate to 90 percent, the same 20 percent acquisition rate will result in a doubling of the customer base in seven years.
The very best way to develop and retain a loyal customer base
It wouldn’t be an exaggeration to say that the best customers you’ll ever have are the ones you have today. Yet businesses commonly pour their marketing resources into courting new prospects who are far less likely to make a purchase than existing customers, or even lapsed ones – and far less likely to become the loyal customers every company hopes for.
Maybe the psychology behind it is as simple as familiarity breeds contempt. Once we have acquired a customer we begin to take them for granted. We forget, as those travel industry marketers did, that the brand needs to be loyal to them if we want them to be loyal to the brand.