Customer loyalty: how we can have our cake and eat it

alexaThe question “customer loyalty, is it worth it?” seems often a binary choice between spending marketing money on increasing market share through penetration or growing sales through increasing frequency of purchase among existing customers.
In the blue corner we have Ehrenberg Bass Institute with its evidence-based marketing approach. They argue, powerfully, that the ROI for growing market share delivers an higher return on investment than spending money of delivering an higher frequency of purchase from existing customers (CRM).
The red corner has heavy hitter, inventor of the Net Promoter Score, Frederick Reichheld of Bain & Co. He shows, compellingly, that increasing customer retention by just 5% will sees a profit return between 25% and 95%
Can they both be right? Well, yes they can.
Data brings transparency to what people think and how that affects their choices. From Unilever to the Labour Party, we have seen how using social networks drive behaviour. Influencer marketing relies on galvanising a brand’s loyal core. It works because that core has an influence in their social (media) circle – it’s invariably a passion point that their milieu know they know about so respect their opinion, and, crucially, act upon it.
In fact, we’ve only scratched the surface here. Machine learning, AI is beginning to change the way we use data to drive customer behaviour. Repeat purchasing in FMCG is driven by habit. Habit is the result of lack of consideration.
Futurologists, such as Tom Cheesewright, anticipate that people will soon be out-sourcing everyday purchase decisions to their own personal AI. In this world of locked down consideration, the battle for the customer becomes ever more important – and possession is nine tenths of the law. If you think this outsourcing is too far away to matter, consider Amazon’s investment in Dash Buttons, Alexa and its recent purchase of Whole Foods.
ben-portraitThe barriers – cost, platforms and build capability – to digital experimentation are ever lower and will become lower still. That means more brands will customise the customer experience. They will be quicker, better and smarter at finding out a person’s preferences.
That means they’ll up their ability to be right first time with their purchase recommendations. In others words, it is becoming easy to make more money from existing customers in a way that customers value more. It’s a win, win.
Tech advancement means customer loyalty is worth it for customer and company.

Ben Rachel is founding partner and planning director of Soul

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