Posted: 8th June 2010

Are customer loyalty programmes worth it?

The recent spending cuts by the UK Government mirrors exactly what is going on with the general population at the moment; consumers are cutting down on what they spend on utilities (switching providers to get the best deals), food (budget supermarkets are no longer considered uncool) and anything else they can cut back on. So what does this mean for UK businesses trying to increase sales? According to the Pareto Principle 80% of your sales come from 20% of your customers so creating loyal customers is vital for maintaining a successful business. But in hard times, how do businesses increase customer loyalty?

A recent survey conducted by You Gov revealed that loyalty card schemes do not create widespread customer loyalty for retailers, with 93% of consumers stating they would continue to shop somewhere even if the retailer scrapped its loyalty program. This means many loyalty cards fail to radically change customer behaviour over time. They can actually reduce the amount of profit per customer by discounting existing behaviour rather than rewarding increased positive behaviour (e.g. spending more or returning more often).

Encouraging customers to use you as their supplier of preference – even going out of their way to choose you over your competitors – is fundamental to protecting your business. One of the best ways to increase loyalty is to make customers feel valued. Listening to the feedback they give and taking appropriate actions, provide an excellent service and relevant offers in return. This not only encourages customers to remain loyal but gives your margins room for growth.

So, my top tips for increasing customer loyalty through a customer feedback management programme are:

Identify issues – Implement an effective method of obtaining ongoing feedback which will help you to use the feedback to understand what customers are thinking and what they like or don’t like.

Close the loop – Create an action plan to address the issues and let the customers know what you’re doing. Demonstrate that you are acting on their feedback.

Communicate results – Highlight the changes to the customers. Seeing results from their feedback will encourage them to continue engaging with you and build a good, loyal relationship.

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