Setting Up a System For Getting, Keeping Clients
Jill Griffin – July 6, 2005 – When you look at companies that have consistently built a loyal customer base, one common denominator surfaces time and time again: Each company consciously created a system for getting and keeping customers.
The first step in building a client loyalty system is to get familiar with the terminology and variables that define and drive loyalty:Client base.
This is the total number of active customers and clients.
You can calculate this number by adding your total number of first-time customers, repeat customers and clients. It's crucial that you count only customers and clients who are active and have made purchases or contacts with you recently enough to be considered current. Resist the temptation to include inactive customers and clients on this list. Be hard-nosed and brutally honest, and include only current names.
New customer retention rate.
This represents the percentage of first-time customers who return for a second purchase within a given period. This period is governed by your typical customer's repeat purchase cycle.
Client retention rate.
This is the percentage of customers who have met a specified number of repurchases over a finite period.
Share of customer.
This is the percentage of a customer's total purchases in a particular category of products and services spent with your company. A vendor has captured a 100 percent share of a customer when the customer spends his or her entire budget for the vendor's products or services with that vendor.
Average number of new customers a month.
This is the average number of first-time customers who buy from your company each month. Use a six-month time span to calculate this figure.
This is the average number of times a customer or client buys from you each year.Average purchase amount.
This is the average amount paid for products and services at each purchase.
This is the average annual percentage of customers who are lost or go inactive for any reason, including dissatisfaction or relocation.
As a first step to building your loyalty system, calculate these variables and use them to establish goals and to monitor the progress for your loyalty program.
Your loyalty program should follow these eight steps:
1. Measure and track loyalty using the variables outlined previously.
Depending on your situation, it might be helpful to calculate a variety of retention rates, for example, including a total company retention rate, retention rates for each sales professional and retention rates by account team or other group.
Using these current rates as a base, set your customer retention objectives for the next five years. The same analysis could be done with share of customer, new customer retention and so forth.
2. Introduce all company employees to the importance of client loyalty.
If you have a small staff, you might choose to introduce this information in a meeting attended by all personnel. If you are a larger company, you'll want to consider other tools, such as division meetings, corporate newsletters and training videos, for getting the word out.
A discussion of both current and projected loyalty rates should be an important part of this communication. Begin monthly performance evaluations with employees who have direct customer contact. Use the loyalty measurement factors as a basis for the review.
3. Build customer and client loyalty goals into employee performance and compensation plans.
Reward excellent and improving loyalty rates with employee bonuses and raises.
Address substandard and declining rates promptly. Set time lines for improvement, then train and coach employees accordingly. Release employees who are unable to meet loyalty goals.
4. Evaluate and review loyalty rates each month.
Consider posting rates in employee break rooms and other highly visible places. This can help reinforce the company's commitment to loyalty and help motivate employees to strive for superior retention.
5. Get employees involved in the development and maintenance of the loyalty program.
Staff members' input, recommendations and ideas can play an important role in the program's success. It isn't a secret that employees are more likely to support a program they helped put together. One way to accomplish this is to set up employee teams to perform specific loyalty "duties," such as retention evaluation and first-time customer program reviews.
6. Assemble an assortment of marketing, selling and customer care tools aimed at cultivating loyalty at each customer stage.
Develop at least one key loyalty program for each customer stage. Examples are a new-customer welcome promotion that motivates the first-time customer to buy again and a promotion for repeat customers that cross-sells other products and services.
7. Identify the five biggest customer loyalty breakers in your company.
... Such as the busy signal that callers often get when they call your business or an overly complicated return policy for items purchased, and develop plans for eliminating them. Start carrying out those plans immediately.
8. Continue to modify, fine-tune and correct your loyalty system as you go.
Time and hands-on experience are great teachers.
Jill Griffin is president of the Austin-based Marketing Resource Center Inc., which provides customer loyalty research, strategies and training. She is author of the book "Customer Loyalty: How to Earn It, How to Keep It." She can be reached at 512-469-1757 or firstname.lastname@example.org.
Headquartered in San Ramon, California, Performance Loyalty Group is a leading marketing technology company providing customized loyalty rewards, customer retention, prepaid maintenance and media tracking programs for the automotive industry.
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