CRM Solutions Increase Loyalty

Loyalty – Delivering Retention Strategies through CRM Solutions

  • Acquiring new customers can cost up to five times more than satisfying and retaining current customers
  • A 2% increase in customer retention has the same effect as decreasing costs by 10%
  • Depending on the industry, reducing your customer defection rate by 5% can increase your profitability by 25% to 125%
  • Customer profitability tends to increase over the life of a retained customer
  • A 5% increase in customer retention translates as an increase of net present value per customer of between 25% and 95%

The core elements of a retention strategy

Establishing a dialogue and a relationship is at the core of Customer Relationship Management and Marketing (CRM). In that context post sale Retention and Loyalty Management is a similar relationship building exercise but based on much more detailed information and experience.

 As customer tenure lengthens, the volumes purchased grow and customer referrals increase. Simultaneously, relationship maintenance costs fall as both customer and supplier learn more about each other. Because fewer customers churn, customer replacement costs fall. These conditions combine to increase the net present value of retained customers.

At the point where a relationship becomes mutually valuable, the main aim is to generate and reward Loyalty. The form this process takes depends on the reasons a customer exhibits loyalty. These include emotional reasons, rational assessment or simple inertia.

Capitalizing on the existence of ‘Loyalty’ – Cards, Clubs, Points etc- is the more explicit part of the retention cycle. Traditionally these have been easier to make the business case for and easier to set up. Interpreting results has also been more straightforward as there is a direct and measurable link to the Loyalty Scheme. Nevertheless there are lessons to be learnt for core ‘retention’ by the application of structure and process.

The key: automation tools make it possible

Until recently, measuring revenue cycle performance was difficult, requiring a data warehouse to use complicated analytical tools to generate meaningful metrics. Marketing automation software like MarketDeveloper have simplified with process with recently added capabilities.

Organisational processes necessary for a retention strategy to be implemented

Quality Assurance should be used to drive further customer segmentation, looking specifically to interpret customers into criteria based on value and potential risk.

However, remember that Customer Satisfaction does not measure a Customer’s loyalty. It is the entry point for a good business and does not automatically earn loyalty.

The key is to predict and avert attrition of the ‘right customers’. The ‘right customers’ are those that contribute most significantly to the achievement of the company’s objectives. Research and instinct suggest that the right customers are those with the highest residual lifetime value.

Using crm software packages to implement and manage your retention strategy

MarketDeveloper has all the functionality required to manage a retention strategy; whether it is collecting and analysing points for a loyalty scheme, allowing the user to assess RFV or calculating the lifetime value of a client. All required data – value transactions, booking information etc – can be loaded automatically against individual customers and allow dynamic reporting and segmentation. Once the analysis is complete, MarketDeveloper is again the ideal tool to manage customer contact through different media, as well as building a single contact history per customer across all media.

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About Market Developer

MarketDeveloper is a CRM and Marketing Automation supplier based in Egham. The company was formed from the merging of two marketing solutions in 2009 and has been committed to creating and updating a highly powerful, flexible and intuitive Database Marketing solution. Since launching v5 of its system MarketDeveloper has seen 99.999% deliverability rate and includes The Mail, VisitWales, ScotRail and Cosmos amongst its clients.