Loyalty

October 16, 2006

It is often said that it is easier and less costly to keep an existing customer then to get a new customer. So, why then is so much time, money and effort spent on getting new customers? I once chaired a meeting with a group responsible for a large consumer product. I asked two simple questions… first, how much money had the brand spent on broadcast advertising over the past 3 years… second, how had the brand’s unaided awareness performed during that period. Not surprisingly, spending had been up modestly over that time frame and the brand’s unaided awareness had been flat. So, I challenged the group to answer the following question: If the purpose of the advertising was to raise the brand’s awareness, why were they spending the same amount of money without “moving the needle.”

Unfortunately, most brands do not really look at their spending from a zero based budgeting process. Rather, “what did we do last year and how should we modify it” is the standard approach.

I believe finding your loyal customers and doing everything you can to keep them buying your product should represent 75% (or there abouts) of your spending and effort. I recently turned in a leased luxury car (BMW) and switched brands. I had been a “loyal” BMW customer for over 8 years having leased 4 different cars over that time period. Assuming I leased a new BMW every 3 years for the next 20 years, and assuming BMW made a profit of at least $2500 per car, my “lifetime value” to BMW was at least $17,500. Now BMW certainly knew when my lease was coming due…. You would have thought they would do anything they could to get me to stay in a BMW…. Even a phone call from a BMW executive would have seemed to be in order. But, to the contrary… nothing!

Loyalty is critical…. So, why don’t many companies pay attention to current customers?????

Rich

Bizvice:  Strategy, Marketing & Entrepreneurship

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