Achieving customer loyalty

Sales Pitch

with Herman Alvaranga

Wednesday, October 25, 2017

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Every politician knows that voter loyalty is more important than voter satisfaction, but will our business people ever understand that principle?

A satisfied customer may, in many ways, behave just like the loyal customer, but at times he may engage in variety-seeking behaviour. What's even worse is the satisfied customer who will switch when he finds something else that he thinks will give him greater satisfaction.

For example, I was perfectly happy driving Honda motor cars for many years. They have the sweetest engines and transmission and will live stress-free at 6,000 rpm. But I switched to another brand when circumstances dictated that I move up. I was very satisfied with the brand, but not loyal to it. Honda knows this too, and so they offer the Acura brand with a different positioning strategy. Which takes us to today's subject — customer loyalty.

Creating long-term loyalty relationships with its target market is still one of the primary concerns of most marketers. The reason is simple. By some estimates, it takes up to 20 times as much to create a new customer as it does to retain an existing one. But how do you go about achieving customer loyalty?

Astute marketers know that they must never confuse regular, repeat business with customer loyalty. They also know that loyalty is a process that moves the target customer through seven stages commonly known as the marketing funnel. Further, moving customers through the funnel can be a time-consuming process that requires three carefully considered, deliberate steps for which there is no blueprint, because marketing is an art that is firmly anchored in science.

The marketing funnel

For best results enter the game with a really good product, for without that your probability of success is very low. Been there and done that? Check yourself because the marketing funnel is superficially simple. Now here is the seven-step process for moving through the marketing funnel from target to loyalty:

1. Aware: I have heard of the brand.

2. Open to trial: I am open to trying the brand but have not done so.

3. Trier (non-rejecters): I have tried the brand and would use it again, but have not done so in, say, the past three months.

4. Recent user (for eg, once in past three months): I have used the brand in the past three months but I am not a regular user.

5. Regular user: I have tried the brand and would use again but have not done so in the past three months.

6. Most often used: I use this brand most often even though I do use other brands.

7. Loyal: I always use this brand as long as it is available.

Three critical steps

Having discussed the process that the customer goes through to get to loyalty, let's now turn to what marketers do to facilitate the customer's process. There are three steps in the process, and given space limitations our remarks will be brief, allowing you, the reader, space to develop each of them, and if you will, share them with us.

1. Interact closely with customers

Connecting customers, clients, patients, and others directly with company employees can be highly motivating and informative. End users can offer tangible proof of the positive impact of the company's products and services, express appreciation for employee contributions, and elicit empathy. This requires far and above conventional customer service excellence. It requires what Christopher, Payne and Ballantyne in their marketing classic, Relationship Marketing (1999), describe as customer intimacy.

2. Develop loyalty programmes

Loyalty that is induced by offering a financial benefit is not the same as loyalty to a religion or a fraternal society. Nevertheless, let's consider two of the main loyalty tools — frequency programmes and club memberships.

Frequency programmes (FPs) are designed to reward customers who buy frequently and in substantial amounts. They can help build long-term loyalty with high customer lifetime value, creating cross-selling opportunities in the process. Typically, the first company to introduce an FP in an industry gains the most benefit, especially if competitors are slow to respond. After competitors react, FPs can become a financial burden to all the offering companies, but some companies are more efficient and creative in managing them.

But it must be remembered that financial benefit alone may not always be enough to induce customer loyalty. Let's take a supermarket in Liguanea or Manor Park, both in upper St Andrew, Jamaica. This marketer's observation is that while most shoppers in these supermarkets will happily accept a loyalty card, the price discount of approximately two per cent is, for many, far less important than the atmospherics and range of products offered.

Club membership programmes attract and keep those customers responsible for the largest portion of business. Clubs can be open to everyone who purchases a product or service or limited to an affinity group or those willing to pay a small fee. Although open clubs are good for building a database or snagging customers from competitors, limited membership is a more powerful long-term loyalty builder.

3. Create institutional ties

A long time ago Porter spoke of the importance of entry and exit barriers. Customers are less inclined to switch to another supplier when it means high capital costs, high search costs, or the loss of loyal-customer discounts. But what is even better is when owners or users of your products or services form their own cult-like groups. Classic examples are Apple's MacUser groups or Harley-Davidson's Harley Owners' Group (HOG).

And speaking of Mac users, some of us take pride in describing ourselves as MacAddicts. Can you guess how much money a typical MacUser spends with Apple without even considering lower-priced alternatives? Hey, all those Mac desktops, MacMinis, laptops, iPods, iPhones, iPads, and iTunes music? OMG! But then Apple's iCloud has made the psychological cost of switching to lower-priced Google or Samsung just too high. And that's what all marketers should aim for — genuine brand loyalty that is not induced by a price discount, but rather a love for the product and the pleasure of using or consuming it.

— Herman Alvaranga is a Fellow of the Chartered Institute of Marketing and president of the Caribbean School of Sales & Marketing. For more insights on sales and marketing please go to his blog at




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