In “Customers for keeps”, David Reed discusses devoting a bigger slice of budget to the retention of customers than to their acquisition, but fails to point out that the main reason why it’s cheaper to retain customers is the supplier has customer information that it can use in a targeted, inexpensive way to sustain loyalty.
For instance, some of the examples cited do not seem relevant, for example, Blockbuster cancelling late fees. This may illustrate that a timely improvement in customer service is a sensible reaction in the face of a customer haemorrhage caused by new competition, but it’s hardly a customer loyalty initiative.
The findings of research by Coad Cole & Burey among 3,000 current account holders, illustrates this point. Respondents gave three main reasons for choosing their bank: 22% did so because of its location; 15% because of internet facilities; and 13% were attracted by the stability of a long-established bank.
However, among the 13% who had switched current account in the past
three years, the main reasons for changing were: internet facilities, 20%; a higher interest rate, 15%; friendly customer service, 15%; and location, 14%. Therefore, a bank wishing to hold on to all those account holders in a cost-effective way would have if it had sought to discover their level of satisfaction and dissatisfaction with all the key selection/switch items.
If, as in the Blockbuster example, a bank made a single overall change, this would only satisfy a maximum of 22% of customers/prospects. Doing enough to keep everyone happy would probably prove unaffordable.
Good loyalty schemes, driven by customer communication and research, allow companies to keep most of their customers happy most of the time without breaking the bank.
The customer database is all-important, because there is no point in asking customers questions if the response is forgotten or ignored. The database is a company’s memory as well as the analytical tool which drives its strategy.
Coad Cole & Burey