Regardless of the global pursuit for innovative products and new markets, the keys to profitability in 2018 seems to rest in retaining customers and addressing issues on time. It seems funny that we spend a lot of money on research just to affirm what we knew in childhood, “meet new friends but keep the old ones, one is silver and the other (is) gold”. Digitalization has introduced new media and analytics, yet we find ourselves re-visiting approaches that worked. We are re-inventing the wheel with new tools and trying to understand the logic behind the numbers.
For instance, while 44% of companies are focused on attracting new customers, only 18% concentrate on retaining existing ones. But here’s the crux of the matter, companies spend five times more on getting a fresh customer, when in fact, the probability of selling to an old customer is 60%-70% versus only 5%-20% of closing a new prospect. Old customers who have developed a trusting relationship with the company are 50% more inclined to buy their new products and spend more money. And we are all getting the big picture, thanks to Big Data.
How does that add up? Increasing customer retention rates by 5% raise profits by a whopping 25%-95%! Studies show that the 4 top marketing tactics to engage old customers effectively are: email marketing, social media marketing, content marketing, and referral marketing. Most of these are used by companies who have developed robust loyalty programs to reward customers. In 2012, Starbucks renewed their image and went on a loyalty program offensive to catch are retain clients – which worked because it was all about the client, not the company.
But loyalty cards deliver more than just goodwill. These cards give companies valuable data about consumer spending. When competing for dwindling markets, this data-driven approach tell companies what tickles the fancy of consumers and in effect, helps charter directions. TESCO used the rewards program back in 2011 to double its market share.
With technology evolving and smartphones making it easier for customers to get engaged, loyalty programs have also changed from information encrypted on cards to simply typing a word. And at the heart of it all, having products and services worthy of customer loyalty.