Use Data to Build Customer Loyalty

Putting the Data to Use

Segment Your Customers
After compiling and analyzing relevant customer data, segment your customers so you can better understand their future behavior. This will help you develop targeted loyalty programs for one or more groups. You will probably find you have a mix of the following four types of customers:

  • Truly loyal--These customers buy your products or services frequently and highly recommend you to others. This is the customer base you want to maintain and grow the most, as they will be the backbone of your future business. Understand what makes them happy and provide them the most value with your loyalty programs.
  • Accessible--These customers like your products or services, but factors such as a better competitive offer may cause them to stray. Your goal should be to determine what prevents these customers from being completely satisfied and fix the situation before they leave.
  • Trapped--These people remain your customers because of certain product features, but only do so because the cost of switching is too high for their business. These customers aren't happy about doing business with you, and they're likely to jump ship at some point. You can convert them to loyal customers if you make the effort to find out what they need or what you could improve. These customers could easily turn into truly loyal customers with the right attention.
  • High-risk--This is the group that often purchases on price alone. If they find a better price, they'll leave. These customers aren't worth spending your limited marketing dollars on; price-conscious customers rarely turn into loyal customers. In creating loyalty programs, it's important to reward only the customers you want to retain. However, some of these customers are truly dissatisfied for a good reason. In that case, it's best to identify and resolve their issues before it's too late and you lose them for good.

Target Your Loyalty Programs
Once you've segmented your customers, you're ready to develop targeted loyalty programs designed for those segments. Here are some tips to keep in mind:

  • Align benefits with customer needs. To be successful, your loyalty programs should align the benefits they offer with the specific needs of the targeted customer segments. For example, one program's goal may be to reward the truly loyal with exclusive perks. Companies such as Dell, Microsoft and Office Depot are good examples of companies with segment-oriented loyalty programs.
  • Create programs that can evolve. As your business grows and changes, so will your customers. Make sure your loyalty programs can be easily adapted to future needs.
  • Create programs that you can afford. Make sure your loyalty programs don't hurt your bottom line. Rewards don't have to be monetary: They can help your customers save time or help them track their purchases with you. Some loyalty programs provide rewards in the form of peer recognition, information that will help them perform their jobs better, or guidance that leads to better use of your product. The key here is to provide something of value to your customers.
  • Develop programs that can generate more in-depth customer data. You can design your loyalty program in a way that requires participants to provide more data about themselves. That information will help you create better targeted programs for each customer segment.

Think Outside the Box
You don't have to be a large enterprise to offer a compelling loyalty program; you just need to think creatively and offer something your customers will value. Study the loyalty programs other companies offer. Consider collaborating with other small businesses. As always, discuss your ideas and business goals with your IT advisor--whether friend, colleague or consultant. By coordinating technology with your specific business goals, you'll save money and time and get the most out of your investment. Above all, try to design loyalty programs that make your customers feel like they're not just your customers, but valued partners.

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Peter Alexander is vice president of worldwide commercial marketing at Cisco Systems Inc., the leading supplier of networking equipment and network management for the internet.

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