The Price of LOYALTY

It’s ten times more expensive to attract a new customer than to keep existing customers loyal

By: Justine Castellon / Steve Peregrino

A couple of weeks back, I brought my family in one restaurant in Makati. We were very excited to get together since I had been away recently for some out-of-town business trips.  We live in Quezon City but still decided to take the long Saturday drive to Makati since our kid specifically requested to play kiddie golf after having dinner. In addition, we were actually considering the restaurant as possible venue for other upcoming celebration.

Everything was perfect until we got to waiting on our order. We placed it around 7:30 pm. I was horsing around with my kid so I did not notice the time. I made my first follow-up at 7:50 pm. I was told it was coming in a couple of minutes. My son started to complain already after all the running around. I made my second follow-up after ten minutes. I noticed that some customers who came in later than us were already being served their orders. At 8:10 pm, rice was served plus the soup.  We were hoping to get the full serving in a flurry since we had waited so long already. Five minutes of waiting snapped my patience already so I asked for the manager.  Surprise, surprise! The good manager told me that the rest of our orders were not placed in the kitchen!

THE COST OF LOST CUSTOMERS
As a marketer, I wonder how this business retain a  customer, hence keeping one actually. A good business doesn’t stop at having good products and skills in attracting customers.  You should keep them.  Too many companies suffer from high customer churn – they gain new customers, only to lose them later.  Think of filling water to a leaking pot. Marketers have already learned that it’s ten times more expensive to attract a new customer than to keep existing customers loyal.  So it not a surprise when marketing strategies geared toward managing customer loyalty.  The pitfall however is when you focus too much on rewards, perks or customer incentives and forget about the basic – managing customer relationship. Do customer loyalty programs pay off? Are businesses who offer customers with perks rewarded in turn with higher sales and levels of customer retention? Often, yes. But as these programs proliferate, many marketers are finding that they are expensive to operate, sometimes hard to change, and vulnerable to challengers.

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There is a clutter of jargon all over the marketplace on customer loyalty. We hear of retention, activation, etc. Much ado about customer loyalty programs.  It takes one lousy service to drive either your new customer or loyal customer away from your business. You lose customers not because you don’t have loyalty programs. Customers fall out because of dissatisfaction over the essentials.

THE KEY: CUSTOMER SATISFACTION
A loyalty program can buy you a little time. But you can’t replace excellent service . . . and it is the most important  Why does a customer need a rewards program if he is happy with the treatment and service?

Whether your customer is satisfied after purchase depends on your offer’s performance in relation to his expectations.  Many companies aim for high satisfaction because customers who are satisfied are much less to switch when circumstances arrive.  High satisfaction creates an emotional bond with your brand, not just a rational preference.

Bear in mind: the key is the customer satisfaction. A highly satisfied  customers:

  • Stays loyal longer
  • Buys more as the company introduces new products or upgrades existing products
  • Talk favorably about you and your brand
  • Pay less attention to competing brands and advertising, and is less sensitive to price
  • Offers suggestion or ideas to keep them
  • Cost less to serve than new customers

Why not work on your value/service, rather than struggle to be everything to everyone, isn’t it a better to have customers strive to be whom you want as a customer?

customer-loyalty

 

THE LOW COST CARRIER:  SATISFIED STAFF
By gearing human capital towards a customer-based approach (all divisions devoted to offering the best customer service and support), action can be taken to attain customer loyalty. And on the other, creating and enhancing maximum loyalty among employees, the so-called “internal customers”. This is of key importance. Customers identify with employees. It is of little use to invest huge sums in company improvement if its intellectual capital is not motivated to offer the best possible customer service.

Develop good training program to enhance customer communication. To encourage internal satisfaction, human resource divisions should implement active training, communication and remuneration policies able to create a positive working atmosphere. This environment has a direct impact on the image of the company perceived by customers, which is what attracts their patronage.

Methodology to enhance internal customer loyalty. Any effective loyalty program should comprise three major cycles: employee involvement, customer loyalty and best commercial practice management. This last point consists in analyzing best employee behavior and adapting their working methods to others.  The main objective in these three cycles is to establish loyalty relationships with customers. Success does not depend on the amount of money you invested in launching a promotional war, but in the action undertaken in your  human resources.

Generate the proper employee attitudes to retain customers . First, use specific formulas to make all employees aware that the “customer pays their salaries”. This can be achieved through training courses or personal coaching. Each worker must know each customer’s contribution to company revenues.

Second, it must involve all the members of the organization in the loyalty program and in the respective creation, development and maintenance phases. The key to success lies in creating teams and committees able to suggest customer loyalty objectives and propose measures to reach them. If the initiatives are taken by the workers themselves they acquire a stronger commitment to reaching the aims established.

Companies with the greatest loyalty factor are not always the biggest businesses or market leaders. Those that market with ultimate programs on customer satisfaction generally have the greatest loyalty. Their positioning is not based on giving  discount card or rewards cards, or mailing greeting cards but on the specific characteristics and needs of the customer they serve.

Similar to Organization Development lingo, the essentials are “hygiene” factors. If you have them, they are not necessarily compelling trial-hooks. But lack of these is a sure ticket to customer fallout. And no amount of customer loyalty offer can make up for it.

ADDING THE VALUABLE PERK: EXCELLENT SERVICE
Customers will only start to mind your “point system” loyalty program if you basic deliverables are well in place. I couldn’t care less if I was given a free two-way ticket to the Bahamas if I did not feel safe riding the plane.  How can I enjoy a free night stay in a hotel if the rooms stink? How can a free desert make up for a lousy, delayed meal? And the list goes on….

As I took my family again to Makati, this time around, we intentionally skipped the restaurant. We took a few more minutes drive to get to a much simpler place. Also, my wife decided to book the dedication rites in another venue. The good old restaurant with the lousy service lost easily Php 50,000.  And oh, by the way, the company I work for hosts a lot of training programs and seminars for ground staff. Sessions run for the whole year and should easily be a Php1,000,000 business for the restaurant. All that lost business from just one poor service experience.

A point that I often make is loyalty doesn’t come from a program. At the end of the day, the customer decides based on his preference.  If he doest like you and you product, no amount of loyalty programs can change that.  Regardless of where you are in the life of your business satisfy your customer. That restaurant would have implemented the basic – customer satisfaction.  I may be  just a new conversation to them but you never know when a customer is capable of bringing in new business  . . . unless you keep them, get to know them better, and tailor-fit a program to continue buying from you.

[Reprinted from ADEDGE ]

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