The business reality of today and tomorrow is that customers have many choices and they are exercising their options aggressively. As just one piece of evidence of the dramatic shift in customer loyalty, you would be hard-pressed to find any IT manager at a sizable company in the world today who would brag about his or her fierce loyalty to a single computer manufacturer. There still may be some “IBM shops” or “HP departments,” but now commingled hardware is as common in most IT organizations as coffee and creamer are in the company cafeteria.
That is why one of the fastest growing businesses in the IT industry is systems integration. If anything, hardware and software companies are developing products that work better together with their competitors’ products than ever before. Now, a major computer company’s service organization is often as skilled in servicing its competitors’ products as it is in servicing its own gear.
This is becoming true of many customer-driven businesses. Unfortunately, your customer is just as likely to be your competitor’s customer. Buyers are not exhibiting the kind of loyalty that may have anchored their purchases in the past. Products are more commodified, and choices are vast. Where loyalty does exist, it is frequently connected to the service and support provided by a company rather than to the product itself.
Buying Customer Loyalty with Incentive Programs
In an attempt to increase customer loyalty, marketers now use numerous programmatic techniques. Arguably the best-known customer loyalty program in existence is the frequent traveler program. Pioneered by major airlines, frequent traveler/frequent buyer programs now abound. Hotels and rental car companies have them. Restaurants participate in them. Some credit card companies turn them into “Membership Miles” (American Express) or other kinds of frequent purchase rewards programs.
The recent trend towards Internet-based loyalty programs suggests that the same strategy applies online. This applies to B2B as well as B2C marketers. Loyalty or incentive programs reward the prospect or customer for providing information, taking an action, or making a purchase. Incentive programs include sweepstakes and contests, volume deals and price breaks, as well as online coupons and other forms of “instant payback” programs.
ClickRewards appropriated the frequent traveler miles concept and applied it to the web. It offers “ClickMiles” for shopping at participating web sites. MyPoints offers members “reward points” for taking an action or purchase and offers completely customized private label loyalty rewards programs used by such companies as American Express, GTE, and ZDNet. MyPoints recently acquired CyberGold, another leader in the incentive program category. Flooz uses “online currency” to reward buyers and has recently entered the B2B marketplace.
The incentive programs referenced above are just a few examples of the growing interest in acquiring customers and keeping them loyal. Innovations in the general area of Internet-based customer relationship management (CRM) are coming fast and furious. Witness “ePage,” introduced last week by HomePage.com. ePage is a tool that personalizes customer web pages so they can provide customized information: product warranties, owner manuals, purchase and customer service records, and more. It’s all part of an online effort to keep customers informed and involved.
As an online marketer, you need to create reasons, even opportunities, for customers to gravitate toward your site instead of competitors’ web sites. More to the point, your goal should be to create loyal major customers buyers who continue to do business with you, preferably building a more important mutually beneficial relationship with your company over time.
Using the Internet to Learn What Customers Want
Before you can create loyal customers, however, you need to know what customers want. That means knowing how to (1) maintain ongoing relationships with your most valued customers, and (2) move customers up “the marketing pyramid” so that they can reach most valued customer status.
1. Maintain Ongoing Relationships with Your Most Valued Customers
By combining database marketing technology with the customer-enhancing power of the Internet, it is within your reach to develop a one-to-one relationship with your customer. In fact, it is the Internet that now offers marketers the missing piece of the customer relationship puzzle: real-time interactivity.
You can start at the most basic level of Internet customer marketing by implementing an email customer survey. Collect customers’ email addresses, construct a simple survey that polls them about their needs, and send it out. Make it easy for customers to respond. Tell them to simply put X marks next to multiple choice answers.
Alternatively, invite customers via email to participate in the survey by visiting a special URL. Set up a web page of questions, similar to a web response form. That way, you can employ a user-friendly format to take the answers to survey questions.
Your customers have a vested interest in providing you with feedback. Some companies spend thousands of dollars holding in-person focus group sessions with a small number of customers to learn about their needs. Others invest in telemarketing surveys that never get through to a majority of their customers. A customer email survey offers you the opportunity to inexpensively break through to many customers at once and get useful data quickly. Traditional direct mail customer surveys are known to generate 15 percent, 20 percent, or even higher response rates. You should be able to achieve that kind of response with a customer email survey.
If you are in a position to go beyond the email survey, you should consider building some sort of customer relationship program via the Internet, if only with your most valued customers. Your program could be as simple as a periodic email newsletter delivered to a customer’s email box each month, or as elaborate as a menu of customer-driven information choices, personalized to each individual’s special requirements and needs. Or, it could become the Internet version of a true customer loyalty program, like those cited earlier.
2. Move Your Customers up the “Marketing Pyramid”
The second basic strategy is to move your customers up the “marketing pyramid” until they reach most valued customer status. The marketing pyramid is a visual way of depicting customer value. Draw a pyramid and try to classify your customers into buying classes, from least important at the bottom of the pyramid, to most important at the top of the pyramid. The key concept of the pyramid is that the most valuable customers are at the top.
As customers move up the marketing pyramid, they increase in value to your company. Most companies will find that the number of customers in each successive segment going up the pyramid is smaller. While the number of customers gets smaller as you go up the pyramid, the value of those customers is larger. The customers at the top are the most valuable, because they do the most business with the company.
Some customers may never get there, but cultivating customer relationships will surely move others to that little tip at the top of the pyramid you might call the “Golden Triangle.” The very special customers in the Golden Triangle may only make up 20 percent of your customer base… but they could be responsible for 80 percent of your revenue. (This, by the way, is one example of the “80/20 Rule,” a common marketing paradigm.)
One logical way to move customers along is “upselling.” Upselling is a technique that marketers can use to encourage customers to purchase additional products or services. For example, if someone purchases a computer system directly from a computer manufacturer, they will undoubtedly be a target for upselling. Not only will they receive notification of the availability of other computer systems, perhaps at preferred customer pricing, they will also receive a host of promotions from other company divisions. They may receive a catalog of software marketed by the manufacturer that relates specifically to the system purchased. They may also be notified of supplies or accessories available directly from the manufacturer (sometimes called “aftermarket selling”). They will almost certainly be solicited by the company’s service organization.
The customer upselling practice has been easy to implement through telemarketing, direct mail, and retail outlets. It is now just as easy to implement it online with database-driven web technologies. Marketers can use the information from their customer databases to dynamically generate web pages that are individualized to a customer’s needs. Pages can even be generated on the fly as a customer “walks through” a web site.
The potential for upselling and cross-selling products to customers is sure to increase dramatically as the appropriate Internet tools become increasingly available. In fact, just the very concept of customizing web pages is likely to drive customers higher up the pyramid.
It’s all part of an effort every web marketer should make- treat customers preferentially so that they remain customers for a long, long time.