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Monday, November 7, 2011

A Strategic Approach to Sustainable Customer Loyalty





A Strategic Approach to Sustainable Customer Loyalty

Recap: our previous blog laid out the challenge facing business institutions - achieving sustainable customer loyalty is becoming increasingly important in a world of slowing growth, while at the same time it is  becoming increasingly difficult in light of exploding consumer choices.

Tactical vs. Strategic: the approach taken by many companies to increase customer loyalty is to tactically ratchet up the level and frequency of short term financial incentives – however this approach seems to have limited enduring effect. A more strategic approach is needed that tightly integrates what each customer (and potential customer) experiences with the value proposition of and the relationship with the  merchant.
Some of the key elements of this more strategic approach are outlined below:

1. Experience Differentiation: your customers are explicitly making CHOICES between your products and services and those of your competitors. For this reason an essential first component of any successful customer loyalty strategy is to ensure that your offerings and the entire customer lifecycle experience compare favorably with other customer choices – only RELATIVE value counts. This is an iterative process and you may find the need to change your offerings in order to be the best choice of a larger and/or more profitable segment of the population.

2. Understand WHY: understanding and modeling the explicit reasons WHY consumers  choose a particular product or service, brick and mortar merchant or etailer, product brand or financing instrument is absolutely essential in being able to predict how they will respond to your offerings and those of your competitors. It is also absolutely essential in being able to shape your total customer experience over time to reflect and take advantage of what customers really want. Customer loyalty is all about satisfying customers’ desires in a sustainable win-win environment.

3. Personal Value Alignment: your brand and offerings must align with  customers’ VALUES and their personal PREFERENCES about specific products and services. Segmenting your existing and potential customers based on demographics does not achieve the personal value alignment. It is critical to develop a new segmentation strategy based on the importance that your target consumers place on all of the features and aspects that influence their buying decisions across the life cycle of their experiences.

4. Proactive and Preemptive: you must proactively reach out to customers BEFORE they make their purchase decision. Based on their defined preferences and values, you have to RECOMMEND potential next purchases. This is “1 on 1” permission marketing, based on your offerings which match  features and experiences of your customers’ stated preferences. Compare this proactive “1 on 1” approach with a shotgun marketing approach directed at  an entire predefined demographic or psycho-graphic segment.


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