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Wednesday, April 23, 2014

SLCP: Getting More Growth and Profits From Your 'Loyal' Customers

Every brand we encounter wants loyalcan be defined in many different ways. Is a loyal customer an exclusive customer?  Does he generate the highest revenue? Does he advocate for your brand or business?  Is she less demanding of exorbitant support and resources?

 

You Need More than Just Loyal Customers!

With 25 years of working in the category we’ve come to understand that loyalty is not the universal panacea it’s often touted to be.  To achieve profitability and growth you not only need a precise understanding of how you're defining loyalty; you need a set of further qualifications by which to evaluate your ‘loyal’ customers.

Unless you have a very unique business model, your primary motivation for identifying loyal customers is probably the belief that the more of them you have, the more likely it is that you can operate at a profit.  We don’t disagree that loyal customers are a desirable asset, but we can offer a new paradigm for managing which of your loyal customers will lead you to greater profitability.  The crux of this identification is data.  And, in recent years, many of us are beginning to acquire more of the right kind of data to help us find the customers who, when properly treated and ‘cultivated’, can lead a business to the ‘promised land’.

Thanks to today’s acceptance of ‘big data’ we are reaching the point where most businesses can meaningfully score and segment their customers on a myriad of criteria.  We’ve developed our SLCPSM Model specifically to accomplish profit-based customer scoring.  It’s composed of four characteristics that can be observed for every customer:


  1. S - Satisfaction – Businesses continue to expand their satisfaction measurement efforts, but rarely, if ever, are the scores applied to individual customers (instead of being ‘rolled’ up to a business average).  With the proper questions, businesses have the opportunity to judge customers’ current satisfaction levels with a business.
  2. L - Loyalty – By overview of a few activities (Facebook likes, Twitter posts, direct correspondence, participation in company-sponsored events, etc.) we can start to create an emotional affiliation or loyalty score for each of our customers.
  3. C - Costs of Servicing – Each of our customers has a different cost associated with him depending upon how demanding he is of special services and considerations.  Or, she may only buy on deal or by demanding a substantial discount.  By tracking these considerations we can calculate a cost of doing business with for each customer.

  4. P - Potential – And by tracking not only what a customer buys from our brand, but the number of purchases she makes in total, we can create a ‘share of wallet’ or spending proportion for each customer.  Selecting customers with less than a 40%, 50% or 60% proportion identifies a segment of customers with upside potential to spend more.

Four Measures Offer a Better View

Through such a multi-criteria segmentation scheme a business would be in the enviable position to better manage loyal customers; allocating attention and rewards in a very strategic manner.  Not only does the scoring promise to identify logical target-customers for ‘development’, it is also capable of identifying current customers whom a business may be over-serving, costing it resources unlikely to produce increasing revenues.

A ‘pipe dream’?  We don’t think so.  It only takes a business willing to make the appropriate commitment to collecting and consolidating the information.  That does mean some additional spending, but more than that, it requires breaking through the ‘silos’ of all too many businesses in which information is hoarded by discrete departments who are loathe to share it with others.   One current initiative, Chief Customer Officer, begins to empower this pursuit.  We embrace it and look forward to seeing successful applications of SLCP!

 

4:39 pm edt          Comments


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Customer Experience Partners, LLC
Measurement, Management, Optimization
Contact us at: 203-655-0090 or
pruden@customerexperiencepartners.com

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