Marketing's dirty little loyalty secret
“It costs 5 times as much to acquire a new customer as it costs to retain an existing one” is a regularly stated, although now debunked marketing idiom. In a 2005 book called Loyalty Myths, the writers suggested it costs a business no more for a new customer to buy a plane ticket or computer than an existing one, and in fact they could actually be more profitable, as they had no expectation of a discount for loyalty.
Perhaps the benefit of focusing on existing customers comes from a reduced cost to influence?
Well, it’s true that existing relationships make us more open to messages and offers, while having access to contact details like an email address or Facebook account provides a low cost, east way to contact and engage. But a lot of marketing spend is defensive – intended to maintain awareness and brand loyalty to a customer base that competitors are also keen to attract.
And if we’re honest, our dirty little secret is that in fact we don’t actually want to keep every customer we have.
There are always a few that cost much more to service or we don’t make as much profit from. The flipside, the ones that we do want? Yeah, everyone else wants them too, and you have to work much harder to retain them and keep them satisfied.
So how can you keep customers coming back through better service without splashing the cash?
Rewards have to be worth earning
4 cents a litre off petrol? Saving $100 a year or more sounds a bargain for doing nothing, and yet I regularly find myself driving into the most convenient service station rather than battling traffic to find the nearest Caltex - and I’m sure I’m not alone. $100 is just not worth the weekly inconvenience.
Does that mean I love Woolies any less? I’d probably shop there even if I didn’t get a discount simply because I like the brand. But I particularly choose them because of another reward they gave me. It’s a little $2 sized-disc that sits on my keychain and saves me having to fish for a coin each time I want to use a trolley. I’m reminded of how thoughtfully they have considered my customer journey each time I use it, and I value that far more than any discount they could offer.
We all like gold stars
Secretly we’re all 4 year olds at heart, and love getting gold stars. The global news phenomenon The Huffington Post knows this, and rewards commenters on their site with virtual badges in order to keep them engaged. You can be a Networker, a Moderator (oh, who doesn’t like a bit of junior modding) or a Political Pundit. These are use it or lose it rewards, which encourage daily involvement in the site and, to quote Jane Austin, “throws the girls into the paths of other rich men” – I mean other potential readers.
Mi casa es su casa
(My home is your home - check me out, I know some Spanish!)
If you like coffee you probably have a favourite coffee place, and chances are they offer a coffee loyalty card. I’ve collected many in my time, and regularly lose them in a wallet clear out. But the cafes which offer a little box of cards which customers are welcome to leave their card in? They offer a very tangible sense of belonging and ownership, which I suspect brings more customers back than a free coffee now and then.
So while it isn’t necessarily better value to try to retain all customers, it’s worth thinking about the needs of those you do value and want to keep, and how you can influence their loyalty in small ways, to conserve your marketing budget for acquiring more of the same.
Nerissa Atkinson is co-director of The Revery, a marketing consultancy for growing businesses wanting to remain lean. Curious about everything, her personal ethos is to have nothing in her house that is not useful or beautiful. With two small children life is weighted towards the first, but she spends plenty of time on Pinterest and other social media platforms planning for the future.
Image via Flickr CC/duncan c