Archive for June, 2009

Does “Loyal” Mean The Same Thing As “Profitable”?

When a C-level manager talks to us about “loyalty marketing,” most often he or she is actually talking about how to gain and retain more of the most “valuable” customers in terms of profits.  But is the most loyal customer always the same as the most profitable customer?  And how do customers define loyalty?

Not surprisingly, the way a customer defines loyalty is often completely different from the company’s point of view.  Customers define their own loyalty based on how long they have been buying a particular brand, or their preferences for one particular brand over another.  In short, customers see loyalty as being any factor that makes them stick to a brand despite all the temptations to switch. This causes marketers a problem in that even low profit customers can consider themselves to be among a brand’s most loyal patrons, and they expect the brand to recognize them for having stayed faithful for so long.

So, unless marketers can recognize those customers who not only have been faithful to the brand for a long time, but are also actually profitable, the company may well be incenting the reduction of margins – or even losing money.  They may be even more surprised by the sheer impact that these customers can have, given the age of instant communication.  It takes only the click of a mouse to spread the word, and refermore marginal business your way.

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Posted by John Harden  June 12th, 2009