Marketing and selling in tough economic conditions :

Building relationships with customers

Series by : Prasanna Perera Marketing and Management Consultant Chartered Marketer, CIM U.K.

Customers are invaluable assets of any organization. It is estimated that it costs seven times more to regain a lost customer, than to retain them.

Prasanna Perera

Hence, it makes sense to build relationships with existing customers to add value and retain them. In this article. I will share with you some insights in this regard.

* Do customers value relationship building initiatives of marketeers?

The answer is broadly yes, provided that the customer sees value in engaging.

Hence, my advice to marketeers would be to find out from customers what they value, and build-in these aspects into their relationship marketing programs.

* Are loyalty programs effective?

Loyalty programs were pioneered by airlines through their frequent flyer programs. Thereafter, many retailers and other establishments have developed loyalty programs.

My belief is that loyalty programs are effective, provided value-is added to customers on a continuous basis. For example, special offers for loyal customers, expanding the network of loyalty partners. Simply offering bonus air miles and points alone, will not be adequate to sustain loyalty programs.

* Aren't you discriminating amongst your customers through loyalty programs?

Definitely not. You are merely providing additional rewards to customers that value the relationship they have with you. This should be motivational to non-loyalty customers, to become loyalty customers.

* Loyalty/Relationship Marketing programs are expensive to execute and sustain. Is this correct?

Yes, a substantial investment is required in IT infrastructure and manpower. The reason is that databases have to be maintained, and data mining needs to be carried out. However, in the long term these investments will definitely payback. My advice is to look at loyalty/relationship marketing as a long term investment.

* Are you not rewarding customers for what they should do anyway?

No, this is not the case. You are rewarding customers for the incremental efforts that they make. For example, demonstrating loyalty for a period of time and additional purchases. As long as it is incremental, then there is no problem in fostering loyalty.

* Should you categorise or segment customers into loyalty levels?

Yes. Certain customers are your crown jewels and demonstrate high levels of loyalty. They also contribute a substantial share of revenue and profits. For example banks have Platinum, Gold and Silver loyalty card customers. By having different categories, you also motivate customers to upgrade to higher levels of loyalty.

* Should you link your loyalty program with other loyalty programs?

The answer is yes. However, it must be done with caution. Check if your brand is compatible with the other brand, in terms of stature, image and customer segments. Further, check if the other loyalty program is carried out effectively and ethically. If not, you run the risk of damaging your brand equity.

* What methods can be adopted to reward customers in relationship programs?

There are many methods available. The most obvious is discount/free points. However, to differentiate from competitors, other creative methods can be adopted. For example, branded merchandise, holiday programs, and knowledge enhancement programs. What to offer depends on your customer's profile and product/service.

* Aren't you intruding the privacy of customers through relationship marketing programs?

A question that I have been asked many a time. My advice is to respect the privacy of customers, at all times. Get their prior permission (preferably in writing) before engaging them in relationship building endeavours. Always provide the option for customers to opt-out at anytime they want. Customers should be willing partners, for relationship programs to work effectively.

* Any examples of world-class relationship marketing programs?

There are many, too numerous to mention in detail. A few that come to mind are "Clubcard" (Tesco) , "Krisflyer" (Singapore Airlines and partners), "Marco Polo" (Cathay Pacific Airlines and partners), "Flysmiles" (Sri Lankan Airlines). In Sri Lanka, "Nexus", "Arpico Privilege Card", "Arapaima" (NOLIMIT).

In this article, my endeavour was to educate readers on the basic principles of relationship marketing, through loyalty programs. There are many other relationship marketing strategies, besides loyalty programs. This must be kept in mind.

"Do not reward any old customer. Reward those who are loyal to your brand."

Anonymous

"The rules of relationship marketing - good servants but poor masters" (Servants - Organizations, Masters - Customers) (Anonymous)