Customer Loyalty And Continuity: The acquisition, development and retention of profitable customers
An action plan for managing loyalty
The way forward
In summary, we suggest the following approach to managing customer loyalty:
1 Analyse your market to determine whether it can be broadly segmented using a few simple criteria that enable you to predict likely loyalty. The aim is to answer the question: "which kinds of customer are most likely to be loyal if I get my product and service right and if I handle these customers properly?"
2 Research customer needs and attitudes -- in particular, what do they expect during and after transactions with the supplier, what makes them satisfied with or have a positive brand image of a supplier, what makes them feel they are optimising their use of the product or service? For small businesses, the best approach is to:
Brief a professional researcher to run one or two focus groups of the most important types of customer.
3 Develop a strategy to determine which customers need to be managed better -- who, how, how much and when. This means translating business objectives and strategies into market targeting. Small businesses, being generally "closer to customers", should have less difficulty in working out which customers they need to succeed with -- and how much -- in order to sell target volumes at budgeted prices. Too often, however, they rely on rather general approaches to markets and are surprised when customers do not beat a path to their door.
4 Install a measurement mechanism -- such as a simple telephone questionnaire, a customer attitude and satisfaction card, or information analysis which identifies repurchasing rates -- which enables you to track performance qualitatively and quantitatively. Just a few questions will identify clearly whether a customer is likely to stay loyal or needs attention.
5 Design a customer management business process -- including staff, systems and organisation -- which is in line with customer requirements. This may sound complicated, but it is simply a question of understanding what customers need and how they buy, and then working out how the company is going to structure its relationships with customers so as to help them buy -- and buy more. Too often, a small business which begins to invest in marketing and customer service sees it as a functional process such as telemarketing, advertising or field service. Today, they could learn from the success of larger businesses that have redefined the way they structure and manage the customer interface in areas such as customer recruitment, welcoming and customer management.
6 Evaluate the performance of current IT systems to support the customer management process and modify them if necessary. Many small businesses have no systems for customer management. The best have invested in specialised systems for customer management such as practice management for professionals. But these systems often focus on processing issues -- such as tax or legal cases -- rather than managing customers. Today, good customer management systems -- at least for smaller businesses -- can be built around a PC database package at low cost.
7 Develop customer management action plans -- including information management, systems support, marketing and service -- which have clear objectives for improving customer management and loyalty. Ensure the success of these plans is trackable using the measurement mechanism. Built into customer management plans should be tracking of individual sales levels and requests for information, pro-active efforts to identify what customers are thinking and how they feel about the company, and incentives and rewards for remaining loyal.
8 Pilot systems, marketing and service, with the key objective of identifying the customers' response. There is no doubt that a degree of formalisation allows a business to say: "I tried a particular approach with some of my customers, it worked, and now I can repeat it with all of them". So much learning takes place the first time a new approach is tried, it is a pity not to do the learning and modify the approach before applying it to the whole market.
9 Roll-out, monitoring performance carefully, using internal quality and cost-effectiveness measures and customer management measures to ensure that costs are matched by benefits. A classic failure is not to measure what works, but rather to do things on a "suck it and see" basis, so that in the end it is never clear what worked. In managing customers, the consequences of not knowing what works means loss of customers and lower loyalty.
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