Customer Retention, Increase Profits, Increase Revenue, Marketing

Customer Loyalty – What’s that worth to you?


The Ladder of Loyalty

There are two aspects to increase the value of your marketing which in turn creates profits in your business.  What are they?

In short, they are Acquisition Cost and Lifetime Value.

The goal of Marketing in the business should be to reduce the Acquisition Cost and increase the Lifetime Value.  We will reserve Acquisition Cost for another time, for now we’ll focus on how you develop the Lifetime value of your customers.

By lifetime value, we mean the amount of money a customer will spend with you over the time period that they remain a customer.

Think about that. What’s the average lifetime value of your customers? How much could someone spend with you and for how long? What does that make a customer worth to you? You might be surprised.

I know of one supermarket chain that trains it staff to imagine a multi-thousand pound note stuck to the forehead of their customers. To remind them of their value to the business. Do you think that this improves their customer service?

Once you’ve worked out the lifetime value of your customers, you’re probably more likely to look after them better, and you may well be encouraged to invest a little more in your marketing to get them in the door and to keep them, yes?

The Ladder of Loyalty
So, lets introduce this concept, the Ladder of Loyalty.

Based on the knowledge that it is six times more expensive to acquire a new customer than to sell more products and services into your current customer base, we can organise our prospects/customers on what we call “The Ladder of Loyalty”, a system to build customer loyalty.  The idea is to increase lifetime value by using this ladder. It looks like this;

RAVING FAN
ADVOCATE
MEMBER
CUSTOMER
SHOPPER
PROSPECT
SUSPECT

The concept is to categorise each and every name in your prospect and customer database, (you do have one of these, right?),  into levels according to their loyalty to your business.

You start with SUSPECTS, these are people that fit into what you have defined as your target market(s).  Any name that you obtain through marketing efforts that fits your criteria enters the Ladder of Loyalty at the SUSPECT level. i.e. It’s someone who may well be interested in your products or services.

Once the SUSPECT shows an  interest and makes an enquiry, they move up to the PROSPECT level.

Next, a SHOPPER would be someone that buys once from you but isn’t sure yet, that you are a supplier he or she wants to do business with again.

If they buy more than once, then the SHOPPER becomes a CUSTOMER.

Once the CUSTOMER becomes a consistent buyer of your products and services, you may at this point begin offering incentives and privileges to them so that they become MEMBERS. At this point, they are so impressed by you that they no longer look elsewhere for competitive products or services.  MEMBERS do business with you because of the relationship and trust that you have developed with them.

An ADVOCATE is where your MEMBERS begin selling for you through testimonials and referrals.

An ADVOCATE becomes a RAVING FAN when they cannot stop selling for you.  Anytime a RAVING FAN is out in the community they are promoting you to everyone, about how wonderful you are.

Increase Your Profits

Now, here is the question.  How many RAVING FANS do you have in your customer base?  What would happen to your business if you moved everyone in your database up one level?

Massive profits do not necessarily occur by bringing more SUSPECTS or PROSPECTS into your database but rather by moving MEMBERS to ADVOCATES and then to RAVING FANS.

Massive profits occur at the RAVING FAN level.

As a project, go into your prospect and customer database and determine how many you have at each level.  You will create a world of opportunity once you begin to implement strategies for each level on the Ladder of Loyalty.

This entry was posted in Customer Retention, Increase Profits, Increase Revenue, Marketing and tagged , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>