Getting customers is important, and quite rightly the big focus for most enterprises. But it’s customer loyalty, in the long term, that underpins growth. We know, for example, that a 5% increase in customer retention rates equates to approximately 25% increase in profit (see Bain & Company research). Whilst the value to a business of retaining customers will always be high, it’s never been harder when just 6% of customers under 35 consider themselves ‘brand loyal’.
The simplest way to keep customers has always been to give them what we think they want, for less. This is all the more true when we see our competitors dropping their prices, but does that still work? It depends on the segment you’re targeting. For those aged 18-35 today, millennials, a segment that equates to 1.8 billion globally and is expected to have a lifetime value of £7.6 trillion, price does not have the impact it does for those over 55 (for example). Now of course there’s an argument that you can’t lump together into one segment 35 year old mums with 19 year old young men at university, but it’s really important we notice the big trends, and see this group as representing the ‘consumer market of the future’, who are setting purchasing trends that will ‘influence future generations’.
This younger segment value innovative experience over price, put personalisation on a pedestal and are far quicker to leave their current providers. It’s devotion, not discounts that’s driving customer loyalty. The good news is that enterprise does not need to continue to drop prices to retain customers, the bad news is that getting your customers to be devoted to you requires constant, emotionally intelligent customer engagement. That’s hard work. If you can achieve customer loyalty in this brave new world, there are many benefits, notably loyal millennials will even start to pay more for the same product if the experience ‘feels right’.
So how can today’s businesses unlock customer devotion? Through insight. Through understanding their customer. Through getting a clear picture of what works for them, and what they want. It’s likely your business already has the customer and product data you need to understand exactly how to drive loyalty in this brave new world, the challenge is turning this big data into what we call ‘actionable business insight’ . It all starts with insight, with insight you can start to understand your customer, and then you can gain what you really need - their devotion.
Written by Alison Wright