In this challenging retail environment, how can I keep costs down while increasing revenues?
According to a Bain & Company report, many merchants are finding that building loyal customer relationships is their biggest opportunity to lower costs. How do loyal relationships translate into cost savings? Consider the cost of serving a long-standing customer versus the cost of marketing to acquire a new one.
Across a wide range of businesses, customers generate increasing profits each year they stay with a company. In financial services, for example, a 5% increase in customer retention produces more than a 25% increase in profit. Why? Return customers tend to buy more from a company over time. As they do, your operating costs to serve them decline. What’s more, return customers refer others to your company. And they’ll often pay a premium to continue to do business with you rather than switch to a competitor with whom they’re neither familiar nor comfortable. Of course, not every customer has potential to be profitable and long-standing. Cost-effectiveness dictates that you segment clients to identify the subset that holds this potential, so you can target your investment in relationship-building.
Consider Chick-fil-A, a chain of quick-service restaurants that has so effectively mastered the economics of loyalty that it can afford to let store operators earn compensation that’s double or triple industry averages, while generating enough cash to grow the chain and give about 10% of profits to charity. Those compensation standards help grow loyal employees who nurture attractive client relationships.
Reallocate marketing investments
Systematically rank all of your customer acquisition campaigns on the basis of their yield of loyal customers. Shift resources towards programs that attract the richest mix of loyal customers. (Many firms today are wasting half their marketing expenses on disloyal customers who will never stick around long enough to pay back the acquisition investment.)
Customer retention depends on offering a customizable loyalty reward program
Why? Customization is your best the path to building lasting customer relationships – which is the ultimate goal of any customer loyalty program. A customizable loyalty rewards program allows merchants to identify and tailor incentive to their high value repeat customers. The best performing programs offer instantly redeemable in store credits (vs. complicated points-based systems) to motivate return visits and higher customer spending.
Customer Loyalty Accelerator is available for download
on the Shopify App Store at https://apps.shopify.com/encorecla
Also on the Clover App Market at
https://www.clover.com/appmarket/apps/ZYTJYBWRK2W4A
Source: “Prescription for Cutting Costs”, by Fred Reicheld, Bain & Company
