What Ever Happened to Customer Loyalty?
In the good old days, if you gave good service and provided a good quality product or service, you could rely on your customers to be loyal couldn’t you. But that’s all gone now hasn’t it?
If you sell physical products you are competing against crazily cheap imports from China. For service providers, then you face outsourcing to India. Retailers battle against Internet businesses who don’t have the overheads and staff you have to work with.
The odds get tougher and tougher each year. The competition gets cheaper and there are more of them springing up all over the place. Customers pump you for information and then go off to a cheaper supplier. They have no loyalty to you for giving all that service, do they?
So what happened?
Good question. What happened to customer loyalty?
Get ready for a dose of the unpalatable truth.
Ask that question again but instead of it all being about "you", look at it from the customer’s point of view. What happened to customer loyalty?
How much of your marketing budget did you allocate to looking for new customers? You know what I mean. New ad campaigns, ads in newspaper. Radio slots? The thousands of dollars you spent on mailers or letter-box drops? You can be honest because no-one else is looking so close your office door and look at your expenses reports.
Let me guess. 50%? 75%? Ok, be honest. It was over 95% wasn’t it? Spooky isn’t it how I know and yet I’ve never met you. But guess what? Almost every business is the same. They spend their marketing on looking for new customers because that’s the way to grow your business right?
- It’s what the books say.
- It’s what your bank’s handy New Business Starter Pack tells you to do.
- It’s what your competitors do.
- It’s what your fellow business owners do.
So it must be right.
Well, sort of but it’s the long, slow and expensive way of growing.
Do you recognise this ad campaign?
A company runs an ad; they think it really stands out because it’s got their logo on the top. It says something like, "50% off our quality widgets." Do you know anyone who’s ever run an ad like that? If a reader sees it and they really do think that the ad is targeted at them and,
- They think it really is a fantastically different offer from all the other 50% off deals in the paper that edition and,
- They might get around to making a phone call even though there was no call-to-action, well done to that advertiser.
You’ve just found the one customer in town who is so bored and leads such a dull life that they decided to kill time by randomly calling advertisers in the paper.
Hmmm, not a very strong candidate for spending money.
Have you had this type of service?
So, what next?
They get on the phone and make their way through the ever-so-helpful phone system,
"Press
- 2 for your call is important to us,
- 3 for support will be with you soon,
- 4 for we really don’t care ‘cos otherwise we would have employed more people to answer the phone."
So this customer, who defied all the odds and hurdles that were put in their way, finally manages to persuade you to take some of their cash and then what did you do? Let me guess again. You ran another ad and put some other poor sap through the same set of hoops.
Now, where’s that customer loyalty thang?
Are you one of the 7% who get it right?
Everyone talks about it being five, seven or nine times more expensive to get a new customer than trading with an existing one so why do 93% of companies spend their marketing budgets on doing that very thing?
It’s because that’s what most business development programmes talk about. It’s because it’s what marketing consultants and ad agencies know. It’s because it’s macho. "We grew our customer base by 75% last year." Sorry folks, I’ve got some harsh reality for you. Take a look at your sales and profit growth figures and your marketing spend (it’s not called spend for no reason).
IT DOESN"T WORK!
Here’s an old adage for you. "50% of my advertising is wasted but I don’t know which half." Well, you remember that ad campaign you ran and your agency told you a 2% response was a great result (it is by the way with the usual tactics) so that means that in fact 98% of your marketing is wasted! No wonder marketing is an expense.
But it doesn’t have to be that way.
What’s the answer?
There are two other ways to grow your business and they cost much less and involve customer loyalty …….. on your part.
Here’s the deal. Most businesses deserve disloyal customers because they are instantly disloyal to them. But if you are loyal to your customers, look after them, treat them like you want them to be loyal, guess what, they’ll be loyal to you. Use relationship marketing. It can be as simple as a loyalty program but it can so much more.
But as soon as you show your expensively-won customer that you really don’t give a monkey’s about them, they will go off bargain hunting from some other company willing to give them 50% off their next purchase.
BTW what is a discount? It’s you giving money to a stranger.
Hey, let’s meet and you only need give me 25% - see you are better off already.
The bottom-line is simple. If you increase your customer retention, your profits will grow.
Look after your customers, they will look after you.
Slash your marketing expenses by over 75%
Start to do some customer segmentation, customer analysis and assess the lifetime value of your customer. Develop a simple customer loyalty scheme and make sure you know manage your relationship with your customers.
If you want to cut your costs AND make more profit, end me an email at Andrew@gigmarketing.biz and I can show you how to research your customers to develop not just one, but multiple, easy-to-use loyalty schemes for different customer value groups.
