Customer Loyalty

The essence of marketing isn’t about goods and services. It isn’t about selling. It isn’t even about profits or beating the competition. It’s about developing a relationship with customers so that they will grow loyal to a company’s goods and services. It’s about developing trust between customers and the firms from which they purchase goods and services. Let’s face it, getting and keeping customers is an expensive endeavor. The average U. S. business loses half its customers in five years. Generating a new customer costs five times as much as keeping a current one and firms pay a steep price when customers stray to other brands. In a slow economy, creating unsurpassed value for a customer so that they stay with you is even more important. Contemporary Marketing, Boone & Kurtz, p. 3.

How do we keep our customers? An important trend in marketing planning is relationship marketing. Relationship marketing looks at customers as equal partners in the buyer-seller transaction. When this process works the way that it should, what you see is a motivated customer entering a long term relationship in which they repeat purchases and buy multiple brands from the same firm. This allows marketers to get a more clear understanding of their customer needs. This intern leads to better customer service and improved products. The end result is increased sales with lower marketing costs.

You can develop an intentional approach to retaining customers by cultivating your relationship marketing plan. Your plan can be centered on some straight forward strategies such as routinely offering small, but noticeable, favors for your customers. Fulfilling orders early, upgrading software before it is requested, thank you notes, calling customers when sought after items arrive in the store, answering the phone with a person instead of an automated system, all of these are just a few ideas of an intentional strategy to understand and manage your customer preferences. Don’t stop there. As we have discussed before in this opinion, empower your first line sales people or service representatives to creatively add value, boost referrals, and create retention. Think about how you feel when you go to your favorite restaurant and ask for “YOUR” waiter or waitress; the one that really takes care of you, and makes your visit unique.

An important measure of relationship marketing is the “lifetime value of a customer.” This refers to the revenues and intangible benefits such as referrals and customer feedback that a customer brings to the seller over an average lifetime, less the amount the company must spend to acquire and service the customer. In keeping with our restaurant theme for example, let’s suppose that a customer eats at O’Charleys in Fultondale twice per month and spends $25.00 each time over five years. That business translates this calculation to revenues of $600 per year or $3000 in five years. When the business owner then subtracts out the average cost for labor, food, and overhead, she is left with a per-customer profit. This type of information helps the business owner to focus on drivers to enhance the customer relationship, control marketing costs and ultimately lead to increased sales.

Bottom-line is this: If you have an infinite stream of potential customers you can probably keep them happy only once and perhaps still grow your business just fine. But, if you are like the rest of us, a strategy to include some relationship marketing strategies that will keep your customers coming back could really help to drive your sales, fine tune your customer service, decrease your marketing cost and sell a good bit more.

Remember to take care of your customers or someone else will.