A majority of marketing efforts aims to drive traffic and increase market share. While getting more customers is an obvious must, it's important to increase the share of customers as well. Building loyal relationships with existing customers and growing revenue through up-selling and striving towards brand advocacy is a proven way to success. Different channels and tactics can be combined to move loyal customers to the next level. Segmentation helps to achieve it.
Providing great customer experiences across all channels is the basis of customer retention and a must to if you want to be credible and perceived as trustworthy and valuable. In these connected times, there is an increasing focus on customer loyalty and the next stage, advocacy or evangelism. They are drivers of social proof, recommendations, word-of-mouth and thus new business. Developing and strengthening personal relationships and having a human and transparent approach are determining factors to achieve this. A personal approach and one-to-one dialogues require you to integrate around your customers.
Customer loyalty was traditionally defined from the perspective of purchasing intensity and the 'rate' of usage'. It segments loyal customers as heavy, medium or light users.
The Pareto rule, a.k.a. 80-20 rule, says 20% of customers are responsible for 80% of profit. In practice, the real percentage depends on many parameters and typically varies between 20 and 40%. However, it's clear loyalty in the sense of buying behavior and usage intensity is important.
The emotional attachment dimension of loyalty
There is also a very strong emotional aspect regarding customer loyalty. Opinion Research calculated that 90% of customers wholovea company will repeat but only 30% of customers wholikeit will do the same.
While you can segment your customers according to repeat buys and customer satisfaction levels, it can be worthwhile to also segment your satisfied and loyal customers from this emotional perspective to identify potential brand 'lovers' and advocates.
On top of that the 'probability' someone will share positive experiences can be gauged and combined with other models regarding customer satisfaction such as the NPS methodology Kinepolis uses.
When doing so, different multi-channel loyalty and influencer programs can be developed in order to tap into the power of the existing customer and of loyalty, the fastest route to credibility, trust and word-of-mouth. This way, very loyal customers bring new customers to the company.
The business impact is obvious as well: Reichheld and Sasser calculated that a reduction of 5% of defective customers may result in 80% increase in profitability. Furthermore, an augmentation of loyalty levels and brand advocates leads to undeniable scale effects. Finally, true brand loyalty can lead to average higher revenues through up-selling but also the willingness to pay more for higher levels of service.
Planning a loyalty program
On the emotional level, loyalty is related to trust, perceived value, feeling of status, satisfaction, degree of personal attention, sense of exclusivity and credibility, to name just a few. These same emotional dimensions play a key role in word-of-mouth.
When planning loyalty programs following steps are necessary:
- Identify what leads to higher loyalty by tracking customer behavior, conducting surveys and having personal interactions.
- Define the different segments of loyal customers and analyze their specific needs and ways to take them to the next level.
- Detect segments that might be undetected potential loyal customers, passing under the radar of your teams. Build more personal programs to identify untapped potential.
- Analyze media consumption and content/information needs of all segments.
- Plan for loyalty. List what you need to be able to build a relationship culture across your organization and within the departments that come into contact with loyals. Make sure your collaborators understand the importance, train, develop different strategies per segment and prepare.
- Define the right mix per segment and identify potential sub-segments based on behavioral analysis and other patterns such as which channels are preferred. This mix can consist of tactics such as community marketing, email marketing, tailor-made content programs, etc.
Loyal customers: a general segmentation
When taking both purchase behavior and emotional attachment factors into account, we can identify different general segments of loyal customers.
- The high or hard-core loyals: they purchase regularly and feel a strong emotional bond and sense of value. This is the 20% of customers responsible for 80% of the business (again, this percentage can vary). They can easily be turned into advocates and evangelists and are your closest circle of influence and trust. Your goal is strengthening relationships by making them feel more part of the 'family' and involving them in your business and marketing, while finding new ways to offer value.
- The spurious loyals: they are loyal but often because they have no choice, for instance when you are alone in a specific market or the obvious leader. Emotional bonds tend to be low. Removing the sense of 'must' and working towards closer emotional connections and personal relationships is your goal.
- The undetected loyals: these are satisfied and even loyal customers, but you don't really know why and haven't identified latent opportunities yet. Identify their needs and work towards more personal relationships to make them high hard-core loyals.
- The split loyals: they have a multiple vendor or brand approach. This can be for strategic, personal or historical reasons. Identify these reasons and help them see the benefits of single supplier sourcing. Educate them, identify why they are split and discover what you need to turn them into real loyals.
- The low loyals: try to analyze whether they are undetected loyals. If they are not, focus on customer satisfaction and providing valuable customer experiences as is the case with all customers.
Finally, remember this: 60% to 80% of the customers you have lost were once satisfied. Don't let go of the opportunity to keep them satisfied and make them more satisfied, turning them into loyal customers and eventually advocates.
Want to build more personal relationships with your customers and increase loyalty through segmentation and personalization? Discover how Selligent enables it.
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