Customer loyalty can be defined as the inclination of the customer to engage repeatedly in business with a particular company, shop, or outlet. A business that is successful in forging a long-term relationship with customers stands to reap rich rewards in the form of increased sales, revenue generation, and subsequent profits. Superior customer service helps in customer retention.
In addition to good customer service, customer loyalty can be promoted, provided the business bears in mind the following points:
- Customer loyalty concepts should not be restricted only to customers who shop regularly, rather, they should encompass all customers who value the products or services provided by the business entity.
- The business should strive to understand the consumers' psyche, and engage them emotionally so that they eventually develop the desire to return to the place of business
Exploring Customer Loyalty Concepts
Customer Relationship Marketing (CRM)
CRM is guaranteed to increase the return on investment (ROI) for businesses by helping business entities identify and target valuable customers, manage marketing campaigns with clear goals and objectives, and generate quality leads for the sales personnel. Customer relationship management has made it possible for businesses to maintain an individualized relationship with people who have been identified as revenue generating customers.
CRM also assists in marketing by optimizing the information that is shared across the company. All this has been made possible by advances in the realm of technology that has made it feasible for organizations to create and maintain a huge database of customers and their preferences.
Traditional Loyalty Programs
Traditional loyalty programs are still offered by a number of credit card companies that give customers the right to redeem points at home improvement stores, departmental stores, restaurants, pet stores, etc. The program has been expanded to provide students with cash rebates on educational payments.
Frequency Marketing Program
This program involves giving customers discounts and coupons for making a number of purchases. For a long time, supermarkets thrived by providing discounts to customers who used their store card at the register. A recent study has shown that most customers are willing to participate in loyalty programs if it means getting cash back rather than a discount on future purchases. Airlines encourage customers to fly frequently and use their frequent flier miles to purchase cheap airline tickets. This frequent flier program is based on traditional loyalty concepts, and is gradually losing ground to programs that are geared towards understanding consumer preferences and marketing products accordingly.
Customer Retention Strategies
Customer retention strategies have assumed a great deal of significance in the modern world. Based on the modus operandi, they may be classified as positive or negative. A positive strategy focuses on retaining customers by rewarding them for their business, while a negative strategy penalizes them for defection. Rewarding the consumers by giving them discounts and cash rebates is an example of a positive retention strategy. Credit card companies often lure applicants with low introductory APR (annual prepayment rate).
At the end of the introductory period, the APR usually increases, and the credit card holder finds it impossible to cope with the payments. However, the card holder cannot cancel the card while it still has a balance, else the credit card company exercises the right to increase the interest rate on the card to the maximum possible level. Moreover, canceling a line of credit impacts the credit score negatively, and the card holder is forced to face the repercussions of bad credit. Such negative techniques are undesirable yet effective.
Hopefully, the above article would have provided one with useful customer retention tips. In addition to the aforementioned customer loyalty concepts, a few other concepts like enforced customer loyalty and transactional marketing may also be used by a business occasionally. However, these do not have the desired effect on the consumer and are thus best avoided.