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10 Ways To Increase Customer Loyalty

by Jay Bower

Acquiring new customers is the "show biz" side of direct marketing: The budgets are much larger, and you get to be more creative and perhaps use a broader variety of media. There's this problem, though: It costs five times as much to find a new customer as it does to keep an existing one.

That's why smart organizations are focusing more of their resources on keeping and growing current customers. The key is to exceed customers' expectations. Here are 10 ways to accomplish that:

1. Say thank you. You'll be surprised how much this matters. Say "thank you" to new customers within days (or if it's online, within hours) of receiving your first order. If it doesn't make sense to offer thanks for every order, make sure you do it at least once a year.

2. Make it easy to be a customer. Remove some of the necessary barriers you set up for suspects and prospects (e.g., automated email and voice response, long login forms). Think about a dedicated phone line for repeat customers. Some companies have different websites for customers (easy re-order) than for prospects.

3. Reward and recognize longevity. You can afford to give long-time customers discounts, special services and red carpet treatment. Don't think so? Do the math. In many cases, it's not even necessary to invest in a formal "loyalty" program. Recognition can go as far in exceeding customers' expectations as rewards. Stage and invite best customers to "inner circle" events, even if the customer has to pay for the trip. Example: For its Select Banking customers, Chase arranges for a weeklong golfing trip to Scotland. Even having a dedicated phone line for long-term customers can help them understand how much they're appreciated.

4. Personalize and customize. Think about how good it feels when the waiter at your favorite restaurant greets you by name and knows exactly where you want to sit. You return again and again and always tip more than usual. The same thing works even with hardened enterprise IT buyers. Give them advice, counsel and content specific to their needs. Most direct marketers have the content and technology to deliver one-to-one experiences.

5. Ask them what they want. Most people want their opinions heard. And they'll like being asked for their point of view. The act of surveying your customers communicates the meta-message that you care what they think and what they want. When you report the results of the survey back to them, that's a double confirmation of your concern. While you don't want to do format surveys too often, you can get feedback after particular transactions, which can inform your more expensive customer acquisition efforts.

6. Divide and conquer. Score your customers as you would prospects and leads. You can do this in many ways—everything from the old standard RFM (recency, frequency, monetary value) to share-of-wallet. Once your customer files are scored, break customers up into distinct groups and build mini-marketing plans based on the segments' unique needs, previous behaviors, established predispositions and potential to grow. Be sure to establish control groups within each segment so you can see the incremental value of your new marketing efforts.

7. Market to the lifecycle stage. New customers have different needs and expectations from those you've had for years. What's even trickier is that new customers acquired today will probably have different needs from those of the new customers you acquired three, five or 10 years ago. Do the research (see reason #5) to understand and respond to these differences.

8. Friends and family (and colleagues too). Happy customers will, for the most part, be more than happy to refer you to people like themselves. Identify "apostles" among your customers and empower them to crusade for your product or service.

9. Turn customers into stakeholders. Build a customer panel or an advisory board, and invite customers to join. You'll be surprised by how many will join, share, refer and buy more as a result of their participation. If you listen and act on what they have to say, that not only builds their loyalty but also makes them more willing to reach out to prospects.

10. Manage the relationship enterprise-wide. Make sure everyone knows how important the customer is, and develop foolproof communications that reflect the knowledge. You don't want to have one of your representatives thanking a customer one day, and then having the customer being treated like a prospect the next day.

It's de rigueur these days to complain about needy customers and clients. The only thing worse, though, is not having needy customers and clients. So refocus your energy, and budgets, on keeping the people who keep the lights on happy: a direct approach that works.

Jay Bower is president of the Crossbow Group, headquartered in Westport, Connecticut.

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