Did you lose your customer retention strategy?
With 48% of consumers admitting to having changed providers because of poor customer service, and 55% admitting they would have stayed with a brand if they had been offered preferential treatment and rewards, more brands need to understand the importance of a solid customer retention strategy, according to Ian Horsham, divisional director of promotions and incentives for The Grass Roots Group.
When taking the battle of the supermarkets for example, almost half of UK consumers (48%) feel neither loyal nor disloyal toward their chosen store. So why then - armed with this information and the often-quoted maxim that the cost of customer acquisition is five times greater than keeping an existing customer - are brands not focusing on their customer retention strategy rather than acquisition, and placing the focus back to those loyal to the brand?
Don't forget your followers Brands must take notice of growing competition and how easy it can be now to have a loyal customer one minute and lose them the next. Our own research suggests that customers feel frustrated with their providers, with nine out of ten believing that brands put more effort into attracting new customers than looking after existing ones.
In today's highly competitive market, it is imperative brands do not lose sight of the importance of retaining existing customers, especially when they opt to attract new business with exclusive special offers. More than half of respondents in our survey of over 2,500 UK consumers (55%) cited loyalty rewards as an important factor when staying with a provider, demonstrating it is an area that must not be ignored in keeping customers happy.
Indeed, it's hard to go online or watch TV without being served up special offers for new subscribers or shoppers, making it all too easy for consumers to become fickle when it comes to loyalty to just one brand. Our research has shown that customer loyalty is being compromised and people will switch brands if they feel they are being forgotten or not given the same treatment as new customers.
Brands are becoming complacent when it comes to customer retention. They concentrate too much on securing new customers, leaving others to feel undervalued. A loyalty scheme should go hand in hand with a new customer programme, as a key part of retaining them once they have made the decision to switch.
Who's getting it right? In an attempt to maintain customer's faith and entice new customers, some brands are looking toward incentives to reward loyalty. Insurance provider, Aviva, for example, is rewarding customers not only when their policy is up for renewal but also when they are considering leaving. Combining proactive with reactive tactics contributes to a schemes success. Another example of looking after your customer base is Tesco bank, who has recently launched a new current account, "designed by its customers".
By putting the focus on rewarding its existing customer base, Tesco Bank has proven how much it values them and is not interested in simply attracting new customers. By speaking to 20,000 of its loyal following the company understands exactly what they want, which is one of the most important things when considering new ways of retaining customers. By linking up with its already popular Clubcard to collect points as you spend, among other benefits, Tesco Bank is giving customers a good reason not to develop a wandering eye.
Another organisation that has shown the importance of rewarding customers with incentives they really want is the recently launched 'Club Lloyds' scheme from Lloyds Bank. And with a massive 302,240 of Brits switching banks during the last three months of 2013, it proves just how competitive the market is, with customers being loyal one minute and switching providers the next.
Five steps to success The majority of customer retention strategies are driven by reactionary panic. However, understanding the issues your current customers are facing and going the extra mile to maintain their trust in you is paramount. The following are the key principles in executing an effective customer retention strategy for your organisation and how to foster loyalty and repeat business:
- Ease of redemption Rewards must be quick and easy to redeem, without any high level of effort on behalf of the customer. Vodafone Freebee Rewardz is a prime example. By offering customers lifestyle rewards and point based loyalty schemes, it is making the incentive easy to redeem, with the financial benefits instantly available for customers to see.
- Reward choice There is no optimal number of rewards that should be offered, as this varies on a programme by programme basis and is driven by factors including the spread of customer demographics, budget and programme objectives. New rewards can be trialled on a tactical basis to assess impact on customer behaviour and the most important thing is to remember they must be relevant to the audience and something they really do want.
- Maintain excitement Customers tend to get used to loyalty programmes quickly, so it is important that a reward scheme does not become too familiar. Customers can also, over time, begin to view loyalty rewards as an entitlement rather than a gift. This can be avoided by regularly refreshing or enhancing a programme so that there is always something new to please and engage the customer.
- Surprise and delight Providing a reward that a customer isn't expecting can be a very powerful tool. By giving customers an incentive to win as they spend, the perceived value and memorability of the brand is amplified. With Lloyds Everyday Offers, current account customers have the chance to earn up to 15% cashback from places they already regularly shop at.
- Communication and engagement Effective communication is the key to the success of any loyalty programme. It is important to ensure customers understand the initiative and value of what they are being offered. Points statements, reward reminder emails and programme enhancement updates are simple and effective ways to drive customer engagement and cement the ongoing bond with the brand.
The old saying "the customer is king" still holds true today and, with so many options and offers available for today's consumer, it is often the small things that can make the difference between holding onto your customer base and them switching allegiance. Putting simple steps in place to reward loyalty for frequent shoppers and subscribers, as well as giving them the same or comparable opportunities as new users will ensure they have no reason to go elsewhere.