Fast growth firms focus on loyalty and retention

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By: Wise Marketer Staff |

Posted on January 18, 2003

Over the past three years, 81% of the fastest growing companies in the USA have initiated programmes aimed at customer expansion, customer retention, and/or customer profitability in the past three years, according to the latest PricewaterhouseCoopers 'Trendsetter Barometer'.

Moreover, 56% of fast growth companies are planning to either greatly enhance an existing customer initiative or launch a new one over the next 12 months.

Nearly three-quarters of fast growth company CEOs (73%) said that their company understands the evolving needs of buyers in their market either "extremely well" (24%) or "very well" (49%). This may be because 81% of them have initiated customer expansion, retention and profitability programmes, with the typical company being involved in two of the three activities.

Focus on retention
Although more have launched programmes to expand their customer base, retention initiatives are viewed as more effective, with customer profitability programmes lagging behind.

"Often a company begins this process with a loose plan for growing its customer base and subsequently, through trial and error, this initiative evolves, expands, and becomes more comprehensive," said PwC's Paul Gulbin, a director specialising in customer-related issues. "A substantial number of 'Trendsetter' CEOs are suggesting that, compared to customer expansion programmes, a focus on retention initiatives, including loyalty programmes, may be more efficient and effective for developing incremental sales."

But while 58% have recently launched a customer retention initiative, some of these efforts still appear to be 'works in progress'. Only 45% of the companies surveyed said they have a formalised, documented programme to measure how satisfied their customers are with product quality.

Only 40% measure satisfaction with customer service and support, and less than half of those that have formalised programmes for measuring product or service quality actually implement them at least on a quarterly basis.

Loyalty adopters
Additionally, only 22% report that their company has a customer loyalty programme in place - a figure which includes 26% of the product companies and 18% of the service businesses surveyed. A greater proportion of loyalty programmes were found among businesses involved in internet marketing (30%), and particularly those in direct internet sales (38%).

Among those CEOs whose company has a loyalty programme in place, 63% reported being "very" or "extremely" satisfied (including 68% of the service businesses, and 59% of the product companies).

"Gathering and analysing information from - and about - customers enables a business to identify opportunities to improve products and services, meet emerging needs, and develop customer loyalty. That, in turn, helps to bolster retention," added Gulbin. "CEOs capturing that data understand that non-financial metrics like customer satisfaction and product quality can also play a huge role in determining how the marketplace values their company."

Customer expansion
According to the survey, however, companies planning new customer initiatives were 2002's fastest growers. Those planning customer-focused programmes have achieved 46% faster revenue growth than their peers over the past five years, and are projecting 35% higher growth over the coming 12 months.

The Trendsetter Barometer interviewed CEOs of 402 product and service companies identified in the media as the fastest growing US businesses over the past five years. The companies surveyed ranged in size from around US$5 million to US$100 million in annual revenue.

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