Here's a true story: A national retailer tested a multicity loyalty program aimed at some of its most valuable customers. For hitting specific spending thresholds, buyers were rewarded with a mix of soft and hard benefits. A steady diet of personalized communications told these individuals where they stood in the program, keeping them motivated to pursue bigger and better rewards. The result? The test was a huge success, helping to retain customers and generating a 20% lift in incremental customer spending.
So you might think that once the retailer saw this, it rolled the program out to additional cities, followed by a national launch. A no-brainer, right? Not so fast. It seems the loyalty effort was a mere blip on the radar screen of the company's chief marketing officer, who oversaw a $300 million-plus advertising budget. Once the test ended, the program was allowed to suffer a quiet and untimely death.
If this were an isolated case, it might not be worth writing about. But at major companies in a variety of vertical markets, loyalty marketing still is relegated to a sliver of the overall marketing budget — if in fact it's allocated anything at all. And that's puzzling considering the near-universal agreement among marketers that it's more expensive to acquire new customers than it is to retain current ones.
Where are all these advertising and marketing dollars going? For many companies, it's sadly the same old story: In spite of a decade's worth of evidence proving the viability of loyalty marketing in both retaining and developing customers, most of this money is still funneled into the great black hole of mass-market advertising — even though the relevance of general advertising continues to diminish.
According to a recent study by Yankelovich, 59% of the consumers polled indicated that most marketing and advertising has little relevance to them. Just 14% say that advertisements address their wants and needs. And when it comes to building customer trust, only 7% believe it comes from regularly seeing or hearing a company's commercials.
The bad news for general advertising continued in a September 2004 report from Forrester Research, which states that “consumers are shunning ads because volume and intrusiveness is too high and their relevance is too low.” Seventy-nine percent of those surveyed said there are too many ads. Sixty-nine percent said ads are “too interruptive.” Another 63% reported that most ads aren't relevant, 60% found ads to be misleading and 54% said they manipulated consumers.
There are still too many companies out there that only pay lip service to the idea of building customer relationships.
Signing up customers for an opt-in e-mail program that delivers the same heaping load of meaningless information they get from your other advertising efforts doesn't qualify as customer relationship management. It won't do a thing to enhance your customers' loyalty (although it does qualify as a waste of your customer's time and your company's marketing dollars).
The solution? Drop the monologue and start a dialogue.
To truly break the mold, you need to slice through the dense cloud of marketing messages that separates you from your customers. That means dropping or at least curtailing the one-way conversation that is general advertising and talking to your customers not as a market segment, but as the individuals they are.
An example: Opt in for e-mail at the Scotts lawn care company site and you'll immediately be engaged in a dialogue. For starters, you'll be asked where you live and what kind of grass you have on your property. After all, there's no sense in giving you the same information for your centipede grass in New Jersey as your father's Bermuda grass in Florida. So information is targeted to both your lawn type and geographic region. Don't know what kind of grass you have? No problem. Pictures are provided.
Scotts also sells a line of products loosely referred to as “All Things Garden.” Should you choose to complete a few additional survey questions, you'll be sent detailed information on roses, shrubs, annuals, perennials, you name it. Importantly, the information you get in return is educational, so it teaches as well as sells. The bottom line: When an e-mail from Scotts is waiting in your inbox, you know it's relevant to you. And when it's relevant to you, you're more likely to read it and make a purchase.
Your customers will thank you — with their business.
Your customers' lives are much like your own — hectic, cluttered and filled with interruptions. So instead of making life even more difficult by joining the chorus of mass marketers yelling at them for attention, simplify things. Replace just one of the many impertinent pieces of communications you currently lob at your customers with something they'll find engaging.
Of course, if you're a big-time CMO sitting on a pile of marketing dollars, having a dialogue with customers may seem inconsequential to you. Why appeal to individuals when you can use a 30-second commercial to reach hordes of prospects?
Simple: As the numbers prove, the old ways of doing business just aren't working anymore. They're not listening to you. And it's time for a change.
For the money you might spend on the production and airtime for a single 30-second television commercial, you can implement a loyalty marketing test program and start a real dialogue with your customers. You'll find this dialogue can lead to greater customer loyalty and — if it's kept up — a lifelong customer-company relationship.
You'll also soon discover what Scotts and a growing number of other companies have found: By putting meaningful, personalized communications into customers' hands, they'll actually pay attention to you. And once you have their attention, you'll not only gain their trust — you'll be well on your way to increased customer retention and incremental sales.
Tom Rapsas (tom.rapsas@frequencymarketing.com) is a creative consultant for Frequency Marketing Inc., Cincinnati.
