Retailers fail to reward long-time customers at their own risk


Mike Giambattista, Editor in Chief
Through a special arrangement, presented here for discussion is a summary of a current article from The Wise Marketer, a website and newsletter serving the global loyalty industry.
With apologies for the broad-brush stroke being applied, tenured professors can see themselves as somewhat untouchable and can have a reputation for smugness and entitlement. That’s the downside of tenure.
The upside of tenure should, in theory, provide a context for a rewarded and mutually beneficial relationship between the tenure dispenser and the recipient. The nature of “rewarding” such long-term behavior may change (it needs to) in order to accommodate changing levels of maturity and expectations. But it’s hard to imagine both sides aren’t seeing some benefits. “Tenure” gets rewarded.
Shouldn’t that be the case in loyalty marketing? With a goal of maximizing the lifetime value of a healthy relationship, shouldn’t longevity be factored into the algorithm?
A recent phone call with my mobile carrier of 12 years tested this theory.
Twelve years is a lifetime in my book. We have come to know each other — our quirks and ticks, preferences and distastes. Certain expectations on both sides, as far as I could tell, were regularly being met — until I asked how I could reduce my bill.
In response to my question, I was told by a very friendly CSR that they valued my relationship but there was no way to make any real reductions and my best bet would be to stay on my plan. “Sorry, not much I can do.”
Doing the napkin math over my 12 years of monthly payments, they had effectively waived close to $30,000 in lifetime value in one call because they were not equipped to maintain and enhance a mature relationship — one showing every sign of long-term profitability.
The organization seems to have gotten stuck at acquisition and never developed segmentation that was rich enough to identify and reward someone like me.
Let’s face it, in the family hierarchy, acquisition always gets the bigger party. Nurturing newly acquired relationships into maturity can be a boring, tedious and relatively thankless process. But done well, it can provide the means — the platform — for growing spend, profits and genuine loyalty.
Postscript: I’m in a new (wireless) relationship now. We’re still in the honeymoon phase, but they seem to get me.
DISCUSSION QUESTIONS: Why do retailers seem to underplay rewards structures that support longer-term loyalty? What advice would you have for retailers and brands looking to retain “tenured” shoppers?
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17 Comments on "Retailers fail to reward long-time customers at their own risk"
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Founder, CEO & Author, HeadCount Corporation
I don’t think retailers are confused about the importance of loyalty, but often the complexity and/or execution of these programs can be problematic for customers. Retaining and maintaining loyal customers should be a top priority for every retailer and brand. And for many it is, though it doesn’t always feel that way. My advice to retailers and brands: keep your loyalty programs simple and meaningful to customers. It’s a simple strategy that can be very difficult to execute effectively.
Founder and CEO, CrunchGrowth Revenue Acceleration Agency
Most retailers have never measured the long-term value of a customer. I would bet they do not understand it. In fact, most retailers do not measure their customer acquisition cost. So they do not do the simple value equation of what it costs to get a new customer, what it costs to keep a customer and what it costs to lose a customer.
E-commerce retailers have always measured these KPIs because they have had to. This is one of the reasons e-commerce has been able to move customers away from traditional retail. This lack of understanding a retailer’s customers has lead to the retail issues we are seeing today with chains closing.
Retailers need to understand their customers to survive and thrive. New customers as well as long-term customers. The longer you retain a customer, the better chance you have of creating an advocate.
Owner - Minerva Insights & Solutions
A retailer loyalty point system is pretty effective for most type of businesses to keep loyal shoppers from defecting. In addition you look to add in these little surprises or unique “thank you” moments or services: E.g. Japanese leading retailer Aeon not only offers a points reward system, it also allows its gold card members (based on spend and frequency) the option to relax inside their in-store lounge area (read newspapers and get free beverages and snacks) — a nice way of saying “thank you, you are special” and having them also try some new product samples.
President, b2b Solutions, LLC
Strategy Architect – Digital Place-based Media
What a frustration when we, as customers, are given the same treatment as last year’s financial statement and the relationship starts from today or something close to it. I fear that brands have bought into the fickle patron theory more than makes sense for some customers, who are fairly easily recognized from their loyalty points level or even their familiarity with the store and staff.
Head of Trends, Insider Trends
Owner, Tony O's Supermarket and Catering
Global Retail & CPG Sales Strategist, IBM
This reminds me of a major airline that lost my $50,000+/year business to their chief competitor for a similar reason. I have had this happen with a major hotel chain for which I handed them my “loyalty” membership card when they refused to find me a room to replace the one they bounced me out of regardless of their “guaranteed” late arrival.
Bottom line, train your customer-facing staff to acknowledge the tenure of the person in question before they immediately default to the “sorry, we cannot help you” approach.
CEO & Co-Founder, Metric Digital
If brands want to retain tenured shoppers, they should incorporate lifetime value into their initial customer acquisition cost. It is common (and tempting) to simply focus on profiting off of their first purchase. But it’s also critical to analyze and identify revenue and profitability from the entire lifetime of a particular customer. You use the inflection points over a lifetime. Let’s say that once your customer makes a third purchase, then they become customer for life. Outstanding. Or perhaps it takes up to five purchases. Cool. Whatever that magic number is, craft your overall strategy around getting your customer to that inflection point as soon as possible. The honeymoon can’t last forever, but ask anyone who’s been married for more than five years. It gets better, but you have to work at it. 😉
President, Circular Logic
Retailers have a tremendous source of insight into customers through their purchase history. In the mobile carrier example, the history can show if the customer has ever received concessions previously or if they have any activities that might make them less profitable. Conversely, the history may show that the customer is wildly profitable with multiple phones on the account, regular upgrades and insurance on all of them. The response should be based not only on tenure, but on value.
Customers appreciate being recognized and respected, even if you might not give them exactly what they are asking for. When they request something, the last thing they want to hear is NO. It would be much better to acknowledge the long-term relationship and thank the customer for their business. Then work hard to give them something to show that you genuinely want to keep their business going forward.
President, The Ian Percy Corporation
Director of Planning & Loyalty, Moosylvania
LoyaltyCIO, Client Service Associates
Telco’s (landline and cellular) have a long history of buying customers in acquisition and then taking loyal customers for granted afterwards. In the long run, constantly refilling a leaky bucket is a losing strategy compared with patching the bucket and focusing on customer retention (loyalty).
Managing Partner Cambridge Retail Advisors
CEO, President- American Retail Consultants
All shoppers are “tenured”. Any new shopper can bring as much money in the future as an existing shopper. The true question here is rewarding and getting shoppers to return on a regular basis so that they become return customers. Most retailers do this, but few do it well. Regular communications, creating a “family” effect, keeping individual values in-line with retailer offerings, highlighting important products or services for your customers, etc. all play an important role in customer loyalty and return customers.
CEO, Boltive
Loyalty is often taken for granted. But it need not be this way. Engaging marketing and customer support can keep long tenured customers from defecting .
1. Engage marketing. Marketing campaigns should target long term customers, not just prospects. Create a premier tier or VIP segment to retain valuable high-spend customers. Provide educational and training materials to make buyers smarter as well as give them new ways to use your products.
2. Engage customer support. Make help channels easy to find and use, especially online. When trying to increase loyalty, use a proactive support strategy. Long term customers are not equal in value. Cater to the customers with higher spending patterns.
Consumer Advocate, finder.com
Retailers must find a balance between bringing in new shoppers while simultaneously retaining current ones. The problem that can occur with loyalty programs is that they lack the ability to meet each shopper’s unique needs. I recommend that retailers and brands develop a program or system that acknowledges and rewards long-term customers’ loyalty in a way that differs from the rewards new customers see as they begin their customer journey.