Building Loyalty
Companies should strive to build loyalty for strong, enduring connections with customers. One set of researchers sees retention-building activities as adding financial benefits, social benefits, or structural ties.
Next we describe four marketing activities that improve loyalty and retention.
1 Interact Closely with Customers
Listening to customers is crucial to customer relationship management. Some companies have created an ongoing mechanism that keeps their marketers permanently plugged in to frontline customer feedback.
Build-A-Bear Workshop uses a “Cub Advisory Board” as a feedback and decision-input body. The board is made up of 5- to 16-year-olds who review new-product ideas.
It is also important to be a customer advocate and, as much as possible, take the customers’ side and understand their point of view.
2 Develop Loyalty Programs
Frequency programs (FPs) are designed to reward customers who buy frequently and in substantial amounts. They can help build long-term loyalty with high CLV customers, creating cross-selling opportunities in the process.
Pioneered by the airlines, hotels, and credit card companies, FPs now exist in many other industries. Typically, the first company to introduce an FP in an industry gains the most benefit, especially if competitors are slow to respond. After competitors react, FPs can become a financial burden to all the offering companies, but some companies are more efficient and creative in managing them. FPs can also produce a psychological boost and a feeling of being special and elite that customers value.
Club membership programs attract and keep those customers responsible for the largest portion of business. Clubs can be open to everyone who purchases a product or service or limited to an affinity group or those willing to pay a small fee. Although open clubs are good for building a database or snagging customers from competitors, limited membership is a more powerful long-term loyalty builder. Fees and membership conditions prevent those with only a fleeting interest in a company’s products from joining.
3 Create Institutional Ties. The company may supply business customers with special equipment or services that help them manage orders, payroll, and inventory. Customers are less inclined to switch to another supplier when it means high capital costs, high search costs, or the loss of loyal-customer discounts.
A good example is Milliken & Company, a business-to-business flooring company, which provides proprietary software, marketing research, sales training, and sales leads to loyal retailers.
4 Create Value With Brand Communities
Thanks in part to the Internet, companies are collaborating with consumers to create value through communities built around brands. A brand community is a specialized community of consumers and employees whose identification and activities focus around the brand.
A strong brand community results in a more loyal, committed customer base and can be a constant source of inspiration and feedback for product improvements or innovations.
Three characteristics identify brand communities:
- a sense of connection to the brand, company, product, or community members;
- shared rituals, stories, and traditions that help convey meaning; and
- shared responsibility or duty to the community and individual members.
Brand communities come in many different forms. Some arise organically from brand users, such as the Atlanta MGB riders club, while others are company-sponsored and facilitated, such as the Harley Owners Group (H.O.G.).
Online, marketers can tap into social media such as Facebook, Twitter, and blogs or create their own online community.
Members can recommend products, share reviews, create lists of recommendations and favorites, or socialize together online.
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