The Customer Loyalty Conundrum
The ultimate goal of any business is to do more than it did last year. Whether you pile it high and sell it cheap, focus on luxury, offer a service or an experience, the goal is the same. You want to do more and you want to do it in a way that improves the bottom line.
For many firms, the challenge of attracting people to their brand and customer loyalty been exacerbated by the fracturing of the shopping experience. A decade ago, consumers basically had three choices: the high street, mail order or the out of town shopping complex. Shopping online is more than a fourth option however. The phones in our pockets mean that we can check prices and find out about deals wherever we are.
“46% of consumers said they’re more likely to switch providers than they were 10 years ago”*
Price comparison sites and the work of organisations like the Financial Conduct Authority and uSwitch to ensure price transparency have made it easier to check the deals that you are getting. It’s become easier to move to a new provider and customers and staff are far more flexible than they once were.
British Home Stores is simply the latest addition to the list of retailers that failed to respond to the challenges of the modern world, but even above and beyond straight retail, every industry has been disrupted and every company is having to struggle to attract customers and, as importantly, retain customers. Banks, travel agents, bookshops, when you stop to think about it, the world has changed massively over the last ten years.
Improving Customer Acquisition, Retention and Understanding
You can pile your goods higher, open more outlets, employ more staff, drop your prices, advertise… there’s a long list of things that you can do, but one of the most effective ways to do more in a way that bolsters your bottom line is to look at customer loyalty.
Bringing customers back day after day, year after year, having them work as unofficial brand ambassadors has always been key to a successful business. The lower your customer churn, the healthier your balance sheet.
“It costs 5 times more to acquire a new customer than retain an existing one**
Two of the biggest examples of effective customer loyalty schemes are the Tesco Clubcard and Boots Advantage Card. These have helped both retailers dominate their respective markets and given them access to data that has really helped them understand their strengths and where they can look to improve.
At the other end of the scale, most of our wallets are now filled with loyalty cards from our favourite barbers and coffee shops. A decent loyalty scheme has helped many small retailers raise prices without alienating customers.
Strong Customer Loyalty: More Than a Nice To Have?
National retail behemoths, local artisan tea houses, banks and insurance firms, everyone is trying to crack the customer loyalty conundrum. The question is how? For the many companies, launching a national loyalty scheme that adds value to the customer and having the resources to analyse the data that comes back is often seen as something well beyond a pipe dream.
“Just 40% of companies have an equal focus on acquisition and retention”**
But the perceived difficulties in managing an effective loyalty scheme can (and should) be overcome. The time and effort put in up front will pay dividends, but marketers need effective measurement in order to justify investment. So why not start small and work up from there? Brands needn’t try to emulate the likes of Boots in their first 6 months of running a loyalty programme. Simple rewards that encourage incremental step changes in consumer behaviours can have a big impact on retention rates.
Understanding the different types of reward available and what is most likely to appeal to your customer base is a good starting point and likely to help you define an effective strategy.
To find out more, take a look at some of our customer loyalty suggestions here.