- Posted by careers 29 Jan
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11. Reduce promotional and advertising costs
When you have a loyalty programme – and the detailed data that comes with it – your advertising can be targeted instead of untargeted, and significant savings can be made. There is no need to send out thousands of flyers that will be thrown away unread, or take pages of newspaper space that is irrelevant to many of the readers. Better still, the response from such targeted advertising can be measured accurately because the audience is known to you, and each offer can carry a unique identifier that ties the offer to both the customer and the moment of redemption. The cost-saving advantage of targeting can be astonishing. In one instance reported by the DMA a few years ago, a company mailed an offer to 450,000 of its ‘better’ customers. The mailing generated US$22 in revenue for each US$1 spent. On analysing the response data, it was found that 97% of sales came from 13% of the ZIP codes. Imagine the difference that that made to the profitability of future mailings.
12. Loyal customers directly impact company profitability
There are many ways in which it pays to earn the true loyalty of customers. For example: Loyal customers buy more, and are often willing to pay more, which means a steadier cash flow; Loyal customers tend to refer others to your business, saving you the marketing and advertising costs of acquiring them as customers; Loyal customers are more forgiving when you make mistakes – even big ones (especially if you have a system in place that empowers employees to correct errors on the spot, in which case even greater loyalty is usually earned); A loyal customer’s endorsement is more powerful to their family and friends than any ad campaign; Thriving companies with high customer and employee loyalty levels are generally seen to outpace their competitors; Loyal customers become familiar with your way of business, and are usually the first to see and report opportunities for improvement; and of course an increase in customer retention can boost bottom line profits significantly.
13. Judging the marketplace’s influence on customer loyalty
The marketplace is a key factor in the development of loyalty. The elements most closely involved are: ease of switching, and inertia. If the number of competing suppliers is high and little effort is required to switch, switching is likely. Conversely, the more time and effort invested in the relationship, the more unlikely switching becomes. The level and quality of competition has a significant effect on how easy it is for a customer to switch from any one particular supplier. When competitors are offering very similar products at similar prices, with similar levels of service, some means of useful differentiation has to be found in order to give customers a reason to be loyal.
14. Using demographic data to predict loyalty
According to Jan Hofmeyr and Butch Rice, developers of ‘The Conversion Model’ (which enables users to segment customers not only by their commitment to staying with a brand but also to segment non-users by their openness to switching to the brand), more affluent and better educated customers are less likely to be committed to a specific brand. They say that the commitment of less affluent consumers to the brands they use is often unusually strong – possibly because they cannot afford to take the risk of trying a brand that might not suit them as well. They also suggest that younger consumers are less committed to brands than older consumers. Interestingly, these differences carry over into cultural groups as well.
15. Increasing share of wallet
Share of wallet expresses how much of a consumer’s total spend in a given category they award to your company. For example, if a household buys N20,000.00 worth of groceries each month, and they buy N2,000.00 of that in your supermarket, your share of wallet for groceries is 10%. As markets become saturated and customers have so much more to choose from, share of wallet becomes increasingly important. It is cheaper and more profitable to increase your share of what the customer spends in your sector, than to acquire new customers. After all, that’s what loyalty is really about. Totally loyal customers would give you a 100% share of their spend in your sector. A loyalty programme that’s working properly provides enough data about consumers and their households to be able to reasonably estimate share of wallet. There are complete formulae and data analysis tool-sets just for the job.
Trust that this tips will help with your companies objectives in the coming weeks, next 5 tips will come next week, please let me know if you missed any of the other tips. Thanks again for reading and sharing,
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