Customer Retention 
Strategies: How to Get Uncommonly Loyal Customers

A report by Forrester Research titled Customer Experience Boosts Revenue shows a strong correlation between customer experience and three keys to loyal behavior: intent to buy again, reluctance to switch and likelihood to recommend. The fundamental idea here is that as a customer's relationship with a company deepens and extends, profits increase — and not just by a little. Frederick Reichheld, in his oft quoted article from the Harvard Business Review on loyalty marketing, claims "companies can boost profits by almost 100 percent by retaining just 5 percent more of their customers." One can debate the numbers, but good marketers don't need Forrester or Harvard to convince them of this basic premise: customer loyalty is good and customer churn is bad.

But too often marketers hear the word loyalty and think cards, points, rewards and software-based loyalty platforms. Airline miles, frequent hotel guest programs and credit card incentive programs are indeed the most visible customer loyalty marketing programs around. But true loyalty is deeper than any marketing program.

Loyalty Begins at Hello
Targeting the right kind of prospects for your business is critical to achieving a loyal customer base. Too many companies rely on bottom-feeding tactics to acquire customers at a steep discount, during a big promotion, via sweepstakes or based on a low price. Highly price-sensitive shoppers who are always looking for a bargain aren't likely to be your most loyal customers (unless you're Wal-Mart). Comparison shopping engine SHOP.COM recently released survey results that revealed an overwhelming 76 percent of consumers are price-sensitive and shopping for deals, while 24 percent said they're brand-loyal first. Retaining customers more effectively starts with acquiring the right customers first, then treating them well from the beginning of their relationship with you.

To acquire better customers, start by segmenting and profiling your best current customers. What characteristics define them, and which are actionable and targetable? What are your top acquisition sources for best customers, from direct mail lists to referring websites to top search terms? Use profiles of "best" customers to target look-a-likes. Few companies have customer valuation methodologies — e.g., profitability analysis, lifetime value measures, risk profiles, etc. — to segment and treat customers based on their value to the enterprise. Do the analytics and concentrate your resources on high-potential and high-value customers. Job No. 1 is acquiring the right customers.