Best Practices in Customer Loyalty

Sandra L. Gudat President and CEO

Customer Communications Group

What Other Industries Have Learned. . .

1.Ensure your organization is ready.

2.Not all customers are created equal.

3.Interact with customers in relevant ways.

4.Create a compelling value proposition.

5.Communicate.

Is Your Organization Ready?

Lack of management focus

Overriding concern for short term profitability

Changes in personnel

“Over-downward-delegation”

Failure to measure

Cultural/political barriers

Lack of resources

Budget cuts

Personnel cuts

1. Is Your Organization Ready?

Holistic CRM

Cultivating customer loyalty consists of two interdependent components that should be developed and executed in harmony

Functional — A company’s collection of marketing, sales, service, organization, and technology initiatives dedicated to a CRM program

Philosophical — Strategy, vision, culture, and commitment to enable effective customer relationship management

1. Is Your Organization Ready?

Is Your Organization Ready?

Recent research by Frederick Reichheld of Bain & Co.:

“Poor understanding of what drives customer loyalty, coupled with a failure to monitor retention rates, is resulting in businesses losing excessive numbers of customers and employees.”

Average company loses 15 - 20% of it’s customers each year.

Retaining 5% of those customers who may have left has significant impact on profits.

1. Is Your Organization Ready?

Is Your Organization Ready?�

“Adopting CRM in one giant leap is like

trying to boil an ocean.”

Don Peppers, Peppers and Rogers Group

1. Is Your Organization Ready?

Learning: Find a Champion

Create an Ad Hoc Customer Committee

Pull from various parts of your organization

Designate a “CCO” or “Chief Customer Officer”

An understandable and shared vision

Actionable strategies and tactics

Quantifiable costs and benefits

Measurable accountability

Justifiable funding

A blueprint for the future

Learning: Build a Business Case

Not All Customers are Created Equal

Grocery Retailer

Top 10% = 53% of Sales

Next 20% = 21% of Sales

Remaining 80% = 26 % of Sales

Combined 20% of

customers account for

74% of sales.

2. Not All Customers are Created Equal

Not All Customers are Created Equal

170% of Profitability!

2. Not All Customers are Created Equal

Who’s a better customer?

LEAGUE BOWLER

Annual Revenue:

$7.50 (3 games) x 35 visits:

$262.50

“Lifetime Value:”

$262.50/year x 4 years:

$1,050.00

SOCIAL BOWLER

Annual Revenue:

$15.00 (3 games)

$10.00 (food)

$ 3.00 (shoe rental)

$2.00 (video games)

$30.00 x 12 visits: $360.00

“Lifetime Value:”

$360.00/year x 4 years: $1,440.00

We’re Trying to Connect - Our Customers Are

“Disconnecting”

14% of consumers believe their personal information is being used to generate relevant communications to them.

9% believe that sharing personal information allows companies to get to know them and provide products that fit their lifestyle.

Source: Yankelovich State of Consumer Trust Report

Golden Rule of Personalization

Relevance changes by customer, avoid “silver bullet” thinking

“Customer Relevance Factors” or CRF’s

Timing

Motivations and attitudes

Life stage

Previous purchases

Determine what are the “Customer

Relevance Factors” for your customers and

work backward.

3. Interact w/ Customers in Relevant Ways

Find the ROI “Sweet Spot”

0

20

40

60

80

100

120

140

Response ($)

Cost

Return on

Investment

3. Interact w/ Customers in Relevant Ways

4. Create a Compelling Value Proposition

Keep your program simple and easy to understand.

Make sure it is enticing enough to motivate your customers to do what you want them to do.

Make sure it rewards to behavior you want to occur.

Learning: Use Research & Analysis to Develop

Incentives

Invest in ongoing customer research and data analysis

Learn important information from your customers about:

• What motivates or would motivate them to purchase more or consolidate their purchases

• What benefits they find relevant to them

• How does the customer’s lifecycle effect benefit preferences

“Longitudinal” research can be particularly valuable in examining behavior changes over time

Share what you learn with the rest of the organization

Kelvin: Upwardly Techie Guys

Young, physically active white-collar men with strong

career drive and upscale interests.

Median age: 36; Median income: $54,000

Case Study:

Rodd & Tammie: Young Families

Up-and-coming young families who like less costly

outdoor activities and working around the house.

Median age: 32; Median income: $61,500

Case Study:

Elwood & Willamae:

Modest-Income Grandparents

Burt & Marylyn:

Mature Couples

Minnie:

Fixed-Income Grandmothers

Hazel:

Home-Owning Grandmothers

Coffee Club with

Store Manager

Discounted

home delivery

Close-in parking

Special recognition

as best customer

at checkout register

IDEA #3: Communicate: Turn Up the Volume

With loyalty initiatives continue to communicate the value proposition of the program in relevant ways to the customer.

Signage and POS Collateral

Ongoing Communications

• Consistent

• Conveys customer’s status within the program

• Reinforces benefits of loyalty

• Value-Added content can sell AND be perceived as a benefit

• Can be used to convey the “sizzle” in your program

5. Communicate

Questions and Answers

Sandra Gudat President/CEO

303.988.7580 ext. 103 sandra@customer.com

Customer Communications

Group, Inc.