The perils of focusing on customer acquisition and sales over customer experience and retention can be summed up nicely with this: “As fast as you’re bringing customers in the front door, they’re running out the back door.” Some refer to it as the leaky bucket syndrome.
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If only companies knew what they truly needed to do to keep us coming back, to keep us feeling loyal. If only they would shift the focus of acquisition vs. retention to be more about how to keep the customers they already have than on how to acquire new or more customers. Imagine how many more customers they could acquire via word of mouth from their current customers.
This column was inspired by something recently shared on LinkedIn:
“I’m always looking for great customer experience to emulate. This morning I went to a coffee shop for the first time. I think the server sensed she’d never seen me before, so when I accepted a loyalty card, she smiled and clipped off 4 coffees’ worth ‘to get me started.’ I thought about this on the way to the office: Would a loyalty card with one clip motivate me to return to a coffee shop I’d used as my regular was closed for the holidays? No. But a half-full card will, so they lost nothing, and gained a new customer.”
My immediate reaction after reading that last sentence was: “Yeah, but will they keep you as a customer?” That, my friends, is the $64,000 question.
What’s interesting on the customer’s part is that he wouldn’t go out of his way to go to this coffee shop for just one clip on his card. It doesn’t seem like this coffee shop truly is a viable alternative for him. So, did it really acquire a customer? Well, in the marketing sense of the word, it did. The coffee shop got another one. The problem is, maybe he’ll come back; maybe he won’t. If the shop truly made an impact on him, if it had executed on a great experience for him, he’d come back. For just one clip.
It’s quite the game we play. This is the difference between loyalty programs and customer loyalty and retention.
Loyalty programs are a marketing tactic to acquire new customers and hope they keep coming back as a result of all the perks (e.g., loyalty cards, discounts, coupons, points, miles, and cash back). This is what companies think they need to do to keep customers coming back. What happens when companies take all that away? Do people keep coming back? Ha! Ask Ron Johnson how well that worked for him at JCPenney.
True customer loyalty, and thus retention, is earned. Companies have to work for it. Companies need to spend time, effort, and resources to design and deliver a great customer experience. Then, and only then, will they have acquired a real customer, one who will keep coming back, tell her friends, spend more, become less price sensitive, provide feedback, and want to see the brand succeed and grow.
In the LinkedIn piece, it doesn’t sound like there was anything special about the coffee shop; there were no ravings about a “better than Starbucks” experience. Nope, just four clips on a loyalty card. He’ll go back some day because of the four clips, but he wouldn’t go out of his way for it. Starbucks, for example, only gives one star at a time, and we know people go out of their way to find a Starbucks—one star or none.
You decide. Where’s the real ROI: acquisition or retention; marketing programs or customer experience strategy? Which one brings you real customers? Seems like a no-brainer to me.
“Do what you do so well that they will want to see it again and bring their friends.”
—Walt Disney
Comments
customer retention
At JCP, it wasn't only coupons, discounts, and the like, it was a transformation of the stores and "everyday low prices" that weren't so low that turned customers off. They have gone back to coupons and store arrangement that was more familiar, and the customers are coming back. Kohl's does it similar with occasional Kohl's cash and coupons. That may have been Sears' problem, I don't know For us their biggest problem was doing away with the catalog overstock stores we used to shop them quite a bit.
In other words loyalty programs do work in many cases. The main thing is to have something customers want!
My wife is a Starbucks cutoemr loyalty program member, she get coupons and specials and points that keep her going back. I am not a coffee drinker and I don't go and pay a premium for tea. I would say that loyalty programs do work.
We went to Chili's last night because of a coupon for a free appetizer and a promise of more points to our loyalty program for trying a new dessert. We like their food, of course, but the coupons keep us coming back often. TGIFridays is similar in its approach, but their restaurants are miles further away, we still go, but not nearly as often. Chili's is on her way home from work and I meet her there after work. We go to Louie's because of the food and to be different from always going to Chili's (as I kid--spread our wealth around).
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