WHY CHASE LOYALTY?
Why chase loyalty? What commercial value does it bring?
According to Harvard Business Review, acquiring a new customer can be up to 25 times more expensive than retaining an existing one. Research completed by Fred Reichheld of Bain & Co. (the inventor of the Net Promoter Score) shows that increasing customer retention rates by a mere 5% increases profits by anywhere from 25% to 95%.
It’s clear that it’s expensive to find new customers, and that existing customers have the potential to be far more profitable.
But is it easy to sell to existing customers?
According to a study by Market Metrics, the probability of selling to an existing customer is 60-70%, whilst the probability of selling to a new prospect is as low as 5-20%.
Retaining customers and selling to them again clearly counts. Bain & Co calculated that a 10% increase in customer retention results in a 30% increase in the value of the company.
Marketers have long been sensitive to churn, appreciating that renewals are critical metrics for the business. Customer satisfaction is the key to customer retention.
But retention is not the same as loyalty. And so few marketing plans address the often complex issue of loyalty.
A loyal customer brings added benefits: they act as brand ambassadors and they promote your brand through word of mouth. Research from McKinsey has suggested that the value of a high-impact recommendation (from a known and trusted personal connection) is up to 50 times more likely to trigger a purchase than a low-impact recommendation.
Loyalty is not a new battleground. So why is it that so few companies manage it well?
We think it’s because the metrics to manage loyalty can be complex and the pay off is often unrealised.
Our mission is to bring clarity to the issue of loyalty for brands.
Our loyalty formula is quantitatively proven, and we’d love to share it with you.