A good marketing strategy generates revenues from both new and existing customers. New customers provide the necessary injection of fresh blood for a healthy, growing company. However, it is the existing customers that provide a solid foundation.
Nearly all businesses have the opportunity for a continuing relationship with their customers and, over the years, the revenue generated becomes a “customer lifetime value (CLV)”.
The lifetime value of a customer depends very much on what is being sold. People do not move house often and so an estate agent could believe that the lifetime value of customers is low. However, the word-of-mouth associated with the move could be significant. In a completely different line of business, a baker sells a loaf for very little but repeated sales over 20 years could run to a cumulative value of many thousands of dollars from a single customer.
A focus on CLV is vital in order to increase satisfaction and instill loyalty. Good relationships developed with sales and technical teams are the strongest drivers of customer loyalty in business-to-business markets.
Lifetime value
Customers can be divided into three groups:
- Those who stay loyal and are unlikely to shop anywhere else
- Those who have moved on and will never come back
- And those who regularly shop around and may well return in the future.
Our concern is particularly to keep the loyal customers loyal and to stop other customers defecting.
How Ace Research help you in assessing your Customer Loyalty?
Loyalty can be assessed by asking people how likely they are to recommend a company, using a scale from 0 to 10. It has been determined that there is a strong correlation between people giving a score of 9 or 10 out of 10 on this scale and their likelihood of becoming loyal customers. It is quite exceptional to have more than 30-40% of customers give a score of 9 or 10.
The problem for most companies is not the number of customers that give a low score of 6 or below but those who simply believe the company is satisfactory, scoring 7 or 8 out of 10. The group giving a “middling” score often makes up the bulk of the customer base. It is this group who award mediocre scores that are of greatest concern as their heads could easily be turned if some other supplier arrives on the scene with what seems like an attractive offer.
Ace Research offers specialies consumer surveys and research activities to assess the level of customer loyalty, across all industries.
How to build customer lifetime value (CLV)
Loyalty is hard earned. It does not come from a bunch of flowers or a nice smile, though this can help. It is earned in small servings, over time, and can so easily be lost by one false move.
True loyalty often arises when a company does something extra ordinary to get a customer out of trouble. There will be times when a customer requires an urgent delivery or a machine stops working and a supplier who solves the problem will be remembered.
Loyalty – How To Win Devotion from Your Customers
Everybody is talking about loyalty nowadays. It is not that customer satisfaction has fallen by the wayside; rather businesses recognize that, a satisfied customer isn’t necessarily a loyal one.
Why Customer Loyalty Is So Important
Let’s think about that for a minute. Why may a satisfied customer not be loyal? There could be a number of reasons. Firstly they may not be that satisfied. Ace research measure satisfaction on scales and, on a scale from 1 to 10, most companies achieve a score of around 8. This is right in the middle of what we call a “corridor of average satisfaction” which spans from 7 to 9. In other words, 8 out of 10 might sound good, but it is only OK. If you want your customers to stay loyal, you have to have scores of 9 out of 10 on the things that really matter.
The Zones of Customer Satisfaction:
We should also recognize that for some customers, it is not that difficult to switch suppliers. A tempting offer from a competitor could easily turn the head of a non-committed customer. There may of course be shortfalls in your own supply that encourage people to seek another supplier.
How to inculcate Customer Loyalty?
Past history of our research assessment indicates that, customers defect for two primary reasons: their need for a product or service has ceased, or the product/service they are buying has failed to satisfy their needs in some way. And, when we say that the offering has failed in some way, it means that they were let down or their expectations were not met. Being simply OK is good, but not good enough in this highly competitive world, when others are prepared to do anything to win and keep the business.
It is important to emphasize that one of the most important factors that builds loyalty is the high quality of the product and service that is being offered. There is absolutely no substitute for this. Any compromise on quality carries a huge risk.
Examples of Causal Models of Drivers and Customer Loyalty
Customer loyalty is driven by small things, the softer things that are harder to measure, and the little things which in isolation seem inconsequential.
Three important steps to achieving devotion from your customers
In conclusion, there are three steps to ensure loyalty from our customers:
Step 1 – Make Sure That the Basics Are Right
It is no good thinking that you can build customer loyalty if there are any failings at all in the basics of your offer. The quality of your product and service in particular has to be unquestioned. Deliveries must be on time, in full, every time. The price of your offer must be good value but it is not necessary that it is the cheapest. Indeed, we know that low prices do not engender loyalty because in general low prices mean low service and this in turn means low loyalty.
Step 2 – Work on the Softer Issues
Loyalty is based on the strength of the relationships that are built up with the sales and service teams. It is the result of many little things that often go beyond the expectations of the customer. It is the accumulation of these little things that create trust that will not be jeopardized by a move to a new supplier. Recognize that from time to time things will go wrong and when they do, fix them quickly and where possible, give something extra to make up for the failing.
Step 3 – Measure and Control
Finally, measure everything. Measure customer churn, measure complaints, measure customer satisfaction, measure the frequency of introducing new suppliers, and measure the likelihood of recommending. Through measurement will come an understanding of the degree of loyalty of your customers and the tools to ensure that it is driven to the highest possible levels.
Ace Research with years of experience and research insight has catered many projects involving customer retention and loyalty track. Consumer surveys, mystery shopping’s, churn rate assessment, etc. to name few are the research models we employ to identify, measure and propose areas for enhancing customer lifetime value.