Customer loyalty is a wonderful thing
- Fran Molloy
- 29 July 2009
But how do you tap into those loyal customers? And is there anything you can do to build a relationship with your existing customers to bond them more closely to you?
"There is no guarantee that building a relationship with your customers will keep them coming back," says management consultant David Noble. "But if you don't, the likelihood that you will lose them increases."
Noble has specialised in customer relationship management for decades, after managing sports club memberships in the UK before completing an MBA and moving to Australia. He now advises businesses on how to set up customer databases, and installs and provides training for various software packages.
Relationship building is good for business
There are plenty of vendors offering loyalty software; however, Noble says just buying a software package isn't the solution.
"The key to making it work is looking at your business model and working out what you want to do and what information you might already have about your customers that you can use, that ties into your existing business functions," he says
What relationship do customers want?
Stewart Adams is associate professor in electronic marketing at Deakin University. He has done research with Google and other international organisations involving digital marketing tools and technologies in direct and online marketing.
He believes customer loyalty is intangible, and the relationship that customers want varies greatly depending on the product - and the customer.
For example, he says, few customers want a relationship with the suppliers of commodity products, things they buy in the supermarket; but for a high-end product like a luxury car, they expect a level of contact.
"There is no guarantee that building a relationship with your customers will keep them coming back"
"Different people have different needs with regard to interaction, some people like to be contacted all the time and others do not, even with high end brands," he says.
Adams points out that many marketing managers think that customer relationship management is a piece of software, but that's the wrong way to view it; more important is effectively using the information that you possibly already have.
"Every aspect of marketing today has a database at the heart of it," he says. "Managing your customer relationships usually starts with a database; but, generally speaking, most companies in Australia haven't woken up to the fact that there is a need to maintain and to monitor all the touch points they have with customers and make sure they are consistent."
The upside of customer loyalty programs
The greatest advantage of a customer loyalty program is that it provides behavioural data on your customers, says Sharp.
"But most businesses have failed to use the data they collect, because they just don't know how to.
A loyalty program tells you what and when they buy and how much they spend."
Sharp believes that email marketing has strong parallels with direct mail and has a very low response rate. But because email marketing must be opt-in, it is more likely that it will be read if it is relevant to the person who has elected to receive it.
"Be very careful of over-investing in your already loyal existing customers," he says. "They are the easiest people for you to reach and least likely to change their behaviour."
Using the data to connect with your customers
David Noble says there are three key pieces of customer information that form the basis of most customer information systems, often abbreviated to RFM: recency, frequency and monetary.
"Recency is the last time they bought from you, frequency is how often they buy from you and monetary refers to their average spend," he says.
Customers who make small but regular purchases are usually worth more to a business over time than a one-off big spender.
"A business that can identify their most valuable customers can concentrate their marketing spend on that element of their market that gives them the best return," says Noble.
From customer information to sales
One of Noble's clients, Mark Ovens, heads specialist wine wholesaler Kiwinz, which imports boutique New Zealand wines.
Ovens says the more information he has about his customers' preferences, their buying history and what interests them, the more likely it is that the contact he has with his customers is welcomed by them - and will generate sales.
His newsletters include a short introductory paragraph that links to the rest of the story online - and the system then records which customer has clicked on which link.
He invests a lot of time and energy in gathering information, writing the articles and even taking his own photographs - but it has paid off in spades, he says.
"It's been a very effective sales tool for us," he says, adding that his customers have been forwarding the email to friends and helping to grow his business.
"I don't think my business would have grown to this size without it." #
