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Ramp Up Loyalty for Bigger Profit
Posted on February 19th 2013
It’s been proven: A 5% lift in customer retention can boost profits by at least 25%.
- Raving fans promote your products for free.
- It’s much, much cheaper to keep existing customers than to find and convert new customers.
Of course, improving customer retention’s easier said than done. But we’ve put together a research-backed plan that’ll help. It’ll show you how to improve performance in the three main areas that are tied directly to your company’s retention rate:
- Loyalty programs
- Customer service
- Employee rewards for driving retention
Here’s how to approach each one:
Programs: Give ’em a head start
Consumer researchers recently conducted a customer loyalty program experiment at a car wash. Different loyalty cards were given to two groups of 150 people each:
- Group No. 1 was required to purchase eight car washes to earn one for free.
- Group No. 2 had to purchase 10 but were given a two-wash head start.
So while the requirements were the same – pay for eight washes and get one free – the perception was totally different. Group No. 2 felt like they were already 20% there. Result: Over the next nine months, 28 of the 150 people in group No. 1 earned a free wash, while 51 of those in group No. 2 earned a free wash – that’s 82% more!
Bottom line: Creating a sense of progress increases repeat business.
Service: Connect to sales
Nearly half the customers who left a company say it was due to poor service, according to a recent survey. Marketers can stop those losses by fusing service and sales together. One way: When a customer calls with a concern, make sure Customer Service forwards the caller to the salesperson responsible for the account.
Proven benefits of this approach:
- The customer feels assured the problem will be fixed promptly.
- The customer is dealing with a person he or she already knows.
- The salesperson is more inclined to take ownership of the issue, make sure it’s resolved and follow up.
- The salesperson will do his or her best to make sure the same problem doesn’t happen again.
Rewards: Partner with finance
More than 60% of companies considered best-in-class when it comes to customer retention work with their Finance folks to create incentives for marketing and sales reps to lift loyalty. “Loyalty bonuses” give reps extra motivation to spend more time with existing buyers to help them:
- Make efficient use of the company’s online resources.
- Stay on top of discounts and limited-time offers they may not know about otherwise.
- Avoid lengthy order forms no longer necessary for returning buyers.
- Make sure they’re satisfied with the way the buying process works.
Your company will pay out a bit more in the short term, but see tremendous ROI long term.