Customers are, without doubt, essential for any successful business. Without customers, where would your business be? That’s right, nowhere. What you may or may not know is that the majority of your business’s income will be generated by repeat customers; research has shown that it costs between 2 and 10 times more to gain a new customer than to retain an old customer. For this reason alone it is prudent to try to improve customer loyalty to your firm.
Creating customer loyalty may not seem like a difficult task, and it isn’t, if you follow the correct procedure. Many companies have now set up loyalty schemes in which repeat custom is rewarded in the form of product or service discounts or points systems. One very common form of loyalty program is customer loyalty cards. A loyalty card is essentially a piece of paper or plastic card that is given to the customer which can be used to either store data from previous purchases, or simply to advertise a discount for that customer for future purchases.
One thing that puts off many businesses from introducing a loyalty card is the initial and ongoing costs involved; and coupled with that is the very protracted period until a return on that initial outlay is seen. However, although there could be some financial risks involved, the benefits are extremely rewarding; one particular loyalty guru, Fred Reichheld is adamant that if your business can manage to retain just 5% of customers, then you can expect to see an increase in profits by up to 50% within two years.
Coupled with the ability to retain customers, a loyalty program can ultimately help to improve the effectiveness of marketing campaigns. When a customer signs up to a company loyalty scheme, they typically fill out an application form asking for information on their names, ages, addresses, annual household incomes, annual or monthly expenditures on certain products, what products they like to buy, what they don’t like to buy and also feedback on your company’s current range of products or services.
With this information you can create a detailed outline of your customer base, the most and least popular products, and what they would likely purchase if the item was available. This means that you can market your products directly at your current and ideal potential customers, increasing marketing efficiency and reducing costs.
Ultimately, a business must be prepared for the long terms benefits that a customer loyalty program can bring. A loyalty program can cost you as much as 5% of your revenue, but if you are willing to put that much into the task of retaining customers then the likelihood is that you will see a much larger return on your investment within 2 years. Just make sure that the customer can get something out of it; nobody likes being taken for a fool and your customers are certainly not fools, so make it beneficial for them as well as you.
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