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Go-to-Market Strategies: Customer Retention - Loyalty is More Than Points

How do you convince browsers to take action?

How do you turn one-time visitors to loyal, regular customers?

Conversion rates, ROI, lifetime value-these are not new ideas, however, in the past few years, much of the focus has been on content marketing and acquisition. According to Marketing Week, a survey by the CMO Club with IBM, published in August 2015, found that CMOs are moving from focus on acquisition exclusively, towards strategies using content, promotions, and interaction to get buys, engagement, advocacy, and retention. Over 49% of their budgets are shifting to these stages of the customer journey with 21% at "Buy", 14% at "Advocate" and 13% at the "Use" stage.

Marketers need to focus on what many companies already know: acquiring new customers can be five to twelve times more expensive than retaining current customers.

But How Exactly Do We Build Retention and Loyalty?

First of all, we need to understand who our best customers are and how much to spend on converting and retaining them. Next, we must look at our businesses and understand what it takes to make loyal customers.

Companies need to track the lifetime value of their customers, how much is spent on acquisition of new customers and how much is spent on retention. To get the lifetime value, businesses need to understand the lifespan of a customer and the average purchase size. Companies use the measurement of acquisition costs of a new customer compared to the lifetime value of customers to determine the best segments of customers to acquire and retain.

In order to build customer retention and loyalty, marketing activities must be analyzed for their return on investment and focus on building interaction with prospects and customers. Profitability comes from focusing on both acquisition and retention of current customers, as well as refining the business in order to make sure every activity contributes to drive business.

Brand awareness will always be part of your mix of marketing activities, but brand loyalty needs to take at least 40-50 percent of your time, effort and budget.

So How Do We Make This Paradigm Shift, and How Do We Do It Intelligently?

We need to move from just awareness and demand to engagement campaigns, from eyeballs to interaction, from customer collection to customer retention. We need to make sure we continue to speak to our customers and understand their needs, staying ahead of our competition.

Loyalty is more than a points and rewards program. Loyalty and retention have more to do with building ongoing relationships with customers, understanding their needs, and listening and communicating with them consistently over time. Customer service as well as product selection and price plays into retention. Airline points make little difference if the schedule is inconvenient, service is poor and reward seats are impossible to get. Loyalty points can certainly be one dimension of building loyalty, but there are many other important elements involved.

We need to focus on getting our customers to interact with us, and on generating customer response rather than just awareness. The more we get customers to interact with us on our sites and in social media, the more we learn about their needs, buying habits, perceptions of our sites and our product's strengths and weaknesses. By understanding our customers, and delivering differentiated product and services, we can better develop the content and programs which meet their needs and build loyalty.

Loyalty created online needs to mimic physical retail store experiences. Retail businesses work to assure customers have a positive experience and will return again. Online e-commerce or online web experiences can use technology to provide the same experience.

In a retail store, the entire focus is on turning every visitor into a customer. People greet customers as they come through the door (personalization). The store has been designed to make it easy to find items (web site design and navigation) and to ask for help (FAQs, instant chat, social media channels). The sales person identifies unique customer needs (personalization). They present appropriate merchandise (product selection, digital ads, emails with targeted offers). The store may have in-store offers and salespeople focused on cross-selling and upselling (online promotions). Purchasing is effortless (shopping cart, order fulfillment). Stores often gather customer names and information through sweepstakes, surveys or mailing lists and use the data to understand their customers better (online surveys, promotional offers, sweepstakes, data mining). The store may reward frequent customers or large purchasers with discounts or rewards (rewards programs, special pricing in emails). Retail establishments focus on presenting the right merchandise to the right target at the right price with the right service. Many companies differentiate on product selection, service, or uniqueness rather than price and build loyalty on those components.

So, to review:

  • Loyalty is as important as acquisition as the costs of purchase from loyal customers are less.
  • Understand the costs to acquire customers, focus on the most valuable segments (those with greater lifetime value/customer acquisition costs are the best).
  • Build loyalty into your online and offline experiences with customers by assuring your products, service, marketing campaigns are focused on what the customers desire.
  • Look at your interactions with customers online. Do your customers have a good online experience? Are you easy to work with? Are the products the right selection for your target audience. Can you provide a more personalized experience? *Loyalty is built from customer engagement and experiences with you as well as service or products.
  • Interact with your customers. Encourage your customers to act with offers such as reduced shipping or added value items. Collect emails to start conversations. Offer the best service and information possible. Reward frequent customers with information, early deals, tips and promotions.

Loyalty and retention comes from understanding your customers. By understanding that loyalty is a result of improving many aspects of customer experience, and is not just a rewards program, you will start to move visitors through the customer lifecycle from awareness to interest, preference to purchase, and last but not least, to continued retention of customers.

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