Loyalty as a phenomenon is widespread, but how many retailers comprehend its potential and appreciate its power? Price Waterhouse Cooper (PWC)’s report on “The best business allies: Retaining Customers” focuses on what retailers can do. STOrai highlights:
As the global economy slows down, retailers want to ensure that customers remain loyal. Acquiring a new customer costs 5 times more than the cost of deepening an existing customer relationship.
Consumer churn has led to a rise in marketing & consumer acquisition costs – and retailers are using loyalty programs as a way to retain consumers. Retailers with mature loyalty programs have realized that 20% of loyal customers can account for as much as 80% of sales.
According to PwC’s 13th Annual Global CEO Survey, 60% of CEOs expect customers to play a more active role in product development. In addition, 90% consumers trust peer recommendations but only 14% trust advertisements. Thus, an optimal loyalty programme should have a perfect balance of the right customer, the right message and the right channel leading to higher referrals and repeat purchases.
- Interaction covers all touch points that convey the program tenets and offerings to the customer i.e. channels and services.
- Incentives involve management of marketing initiatives, including the design of loyalty programmes, and the overall economics of these and related initiatives.
- Intelligence covers data collection and transformation activities to generate insights about program initiatives and customers.
- Large number of programmes run on inefficient legacy systems
- Undifferentiated programmes lead to customer indifference
- Organizations haven’t been able to successfully tap into the potential of emerging technologies like social media and digital media in the context of loyalty initiatives.
- Challenges in estimating the customer lifecycle and on investment returns of loyalty initiatives
- Five practices that drive profits from any loyalty management initiative:
- Understanding program costs & Drivers
- Developing profile of customer profitability & segments
- Proactively manage levers to engage members up the profitability chain
- Monitoring competitors
- Continually updating the model, ideally twice a year, to reflect emerging trends.
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