Customer loyalty matters. We all know it.
Existing customers know your brand, they buy it, and are much more likely to come back again
Studies of the economic benefits abound. It cost 5-7 times more to acquire a new customer than retain an existing one. A 2% increase in customer retention has the same effect as decreasing costs by 10%.
However, judging by my inbox, all this has resulted in, is a deluge of discounts, promotions and incentives, all in the name of increasing loyalty.
Ironically, the need for this has become ever more pressing, for 3 reasons:
1. The amount of choice customers now have available.
I always find banks illustrates this well. Not long ago, I used to have all my accounts at one bank, not because I felt particularly loyal, but because it was so difficult to change.
Yet today, the internet has opened up many more choices. There are internet only as well physical banks. There are services that make it easy to move your account, or move money around. And there are non-traditional players, such as brokerages or retailers, also offering banking services.
In market after market, the barriers to switching have come down. A brand has to earn their customers' loyalty, by creating value for them, each and every day.
2. The rise of social media.
While undoubtedly the subject of hype, this has put a premium on the old adage of Word of Mouth. As the reach of traditional forms of advertising wanes, brands today need passionate customers to promote them, to their friends, and through their own social networks.
Apple are the obvious example, but I was also very taken by how Trader Joe's ended up with a strong presence on Facebook, entirely driven by their own customers setting up fan pages.
A brand has to earn that passion, by standing for something their customers can believe in, and living it, each and every day.
3. The rise of social activism.
Again enabled by technology, activism is on the rise, not just in the political or social arena, but also in the world of commerce itself. Whether through disgruntled customers, as happened with the Bank of America $5 monthly debit fee campaign, or through interest groups, such as the recent Shell Oil hoax funded by Greenpeace, challenges to brands are increasing.
Passionate, loyal customers can help, by jumping to a brand's defence. I saw this first hand at fresh&easy. When negative articles were placed on newspaper sites, a storm of comments would soon follow from their customers, nearly all extolling fresh&easy's virtues.
In today's ever more connected world, earning the passion and loyalty of customers should be left, right, and center-stage for any brand.
And rather than just a program of discounts, incentives and promotions, it goes right to the heart of what a brand stands for, and what value it creates for customers.
Such loyalty has to be earned, not bought.
Such are loyal brands...