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What's your priority - customer acquisition or customer retention?

January 06, 2011 by Fiona Humberstone

Ok, so that’s a bit of a leading question, but whilst we all know what our answers should be, it’s tempting to focus all of our time and money on acquiring new customers rather than looking after the ones we have. Acquiring new customers satisfies our need to get onto the next thing, it seems exciting and new. But does it make good business sense?

The short answer is no. It can cost you up to six or seven times more to gain business from a new customer than it does from an existing one according to Flowtown. The same blog highlights that you can increase your profits by up to 95 per cent just by improving your customer retention rates by five per cent. That sounds pretty optimistic to me, but even an increase of 20-30 per cent in profits wouldn’t be a bad thing for most businesses.

Your loyal customers will spend more money with you, they cost you less to gain repeat business from, and they’re probably more loyal and less sensitive to price than new customers. So, if retaining the customers you have makes good business sense, then why don’t many businesses put their existing customers at the heart of their marketing strategy?

In the small business world, it’s easy to think that it might be a lack of strategy. Many business owners don’t have a strategy or a marketing plan and will often lurch from advertising to leaflet drops to manic social networking without taking a considered or planned approach. Perhaps that’s a very unfair way of looking at things, but I do believe that without a strategy to retain customers you leave yourself open to losing customers unnecessarily.

That said, big businesses aren’t immune to failing to retain their customers effectively. Talk to anyone renewing their insurance and you’ll wonder whether the insurance companies have even heard of the concept of customer retention. I know that it’s always cheaper for my family to apply to our existing insurance company as a new customer, than it is for us to just renew. How unbelievably inefficient for us all!

Large and small businesses could do well to think more carefully about customer retention. In this age of comprehensive spending reviews and increased efficiency, frankly we could all do with whatever help we can get in leveraging more business from our valuable customer bases. What strategies do you use in your business?

Fiona Humberstone is an expert contributor to Marketing Donut and runs her own creative consultancy.

Loyalty - the festive lunch strategy

December 21, 2010 by Jonathan Clark

I don’t think it takes a huge amount to make us feel valued as consumers. Know my name when you can, talk to me as a human being, I have been loyal to you, please be courteous and considerate and offer me a fair deal. It’s not a big ask and it’s not rocket science either.

Actually it’s just the little things. Perhaps it’s worth making the point that these little things are worth far more than the constant discounts and money-off offers that we are being bombarded with.

I heard a story a while back about a guy who had worked in Las Vegas as a porter for years. He was a master at remembering faces. Importantly he knew if someone had stayed before. So if a guest arrived and indeed they had stayed before he would put the luggage trolley in the hall on the left, meaning they were a previous guest. The receptionist would then greet the guest with a simple “hello Mr Clark, welcome back”. If they had not stayed before then the trolley was left on the right and the welcome here was equally effective — “Good morning Mr Clark, welcome to our resort and thank you for choosing us, can I show you around?” or words to that effect. Nice, very nice.

So how can we reward loyalty?

Here’s a thought. Think of the challenge as a festive lunch. The doorbell goes, you open the door, the house is warm — you greet your guest with a huge smile and a kiss (kissing customers is optional). You chat, feed them, give them gifts — they might not like the gift but they appreciate the gesture – and at the end of the evening you part as friends having had a great time.

So yes, you’ve put a lot of effort into the relationship, but my you are rewarded. Your guest leaves feeling loved, cared for and appreciated, and the Brucey bonus is that they will probably tell their friends that they’ve had a good time as well.

Let’s call this the Festive Lunch strategy. Consider these things:

Who are you inviting?

In analyzing your data have you segmented it accurately? Do you want to invite everyone? Do you invite the ones who you know will never ask you over for lunch? You really should invite the ones who had you over for lunch a year back — they would really appreciate it.

What’s on the menu?

Are you rewarding your loyal valuable customers with appropriate offers or rewards? Are you using the knowledge you have of them in the most appropriate way, showing them you understand them? Defining their traits might lead to some great insights. If you’re a busy working mum you might want to save time rather than money, so offering money off wouldn’t be as effective as offering a means of saving time (priority parking or bag packing).

The key is not to discount current behaviour, but to reward new or valuable behaviours (to us) for a change of habit.

Do you ask for a cover charge?

Well good luck. If they have been loyal this will be unwelcome. Offer them a surprise, an amuse bouche, and they’ll be feeling the love. Use your knowledge of them appropriately, and make sure you offer them an appropriate product and pricing strategy. They will stay a little longer.

China or paper plates?

Are the channels you communicate to them in appropriate? Do you offer choice, and rewards or value back if you have a low cost to serve channel?

How’s the table looking?

We are all hit with a lot of communications these days. Is your message clear and concise? Is it easy to understand and digest (sorry!)? Present the facts and costs clearly, separate the important from the not so.

Who’s paying the bill?

Finally it is vital to avoid the trap of “well my competitor’s got a reward card/scheme, we better get one”. That simply gets you to a me-too place. Drill down the USP – what would drive the competitive advantage you are seeking? And the point here is that if you are simply paying for loyalty with no increase in acquisition or retention rates then what’s the point, especially if you have not set any measurement or tracking metrics. It will cost you dear.

Yes building loyalty can be hard but most of the time a smile and a handshake go a long way. Remember my name and feed me well. I’ll remember you, I’ll remember the care you took to make me feel welcome and valued, and you know what, I will stay a little longer.

How hard can that be?


Jonathan Clark is an expert contributor to Marketing Donut and is the executive chairman of Bright Blue Day.

PRM vs CRM: Which strategy provides the better solution for long-term profit?

November 22, 2010 by Daniel Offer

Customer Relationship Management (CRM) has become increasingly popular in recent years and many businesses funnel large proportions of their expenditure into this discipline. CRM campaigns that specifically focus on customer interaction and consumer confidence have become an integral area of operation for many businesses.

But there is another discipline that many businesses overlook and it is one that can provide improved long-term profits if implemented correctly – Product Relationship Management (PRM).

PRM’s primary focus is the product and how it will provide continuous long-term profit. Yes, a business needs to persuade consumers to make that initial purchase, but once it makes a sale a business should not be chasing customers for further business — it should make the customer do the chasing. This is where PRM has an advantage over CRM.

CRM problems: Maintaining customer contact

CRM promotes the benefit of a healthy customer base and the importance of maintaining contact with these customers. Whether this is by email, post, or phone, the emphasis is on continuous promotion. After all, if a customer bought the last product they may well show interest in other products a business has to offer.

The problem with this system is the unpredictability of human behaviour. People move house, change their email address, and get a different phone number. So as efficient as a business’s CRM may be, there is no factoring for personal detail changes by customers.

So are businesses blowing their budgets hiring CRM experts, when they should be channeling their efforts towards supplying products that offer the potential of a continuous long-term revenue stream? CRM may not be the definitive answer to long-term financial profit, but PRM may well be.

PRM: Increasing a product’s afterlife

One of the biggest advantages with adopting a PRM strategy is that is allows a product to encourage its own future sales. This could be from something as simple as new must-have product accessories. However, the most profitable and successful PRM techniques are based around products that:

  • Include perishable components that will require regular replacement.
  • Have components that are manufacturer-specific.
  • Offer regular upgrades and fixes to keep the product in top condition.
  • Have warranties requiring the use of original manufacturer parts, or the use of approved technicians for any repair work.

If a business implements PRM into its marketing strategy, it should be looking to sell products that fit one or more of the examples above and ensure that it stocks and promotes any related products that consumers will require in the future.

For example, inkjet printers need ink. Many printer models will only accept replacement ink cartridges from their respective manufacturers and this means owners of a particular printer are forced to buy specific ink cartridges. The original printer sale may not have yielded a high profit margin but the continued sale of replacement ink encourages numerous profitable future transactions.

The same applies to replacement parts for products. Many products will use unique parts that can only be supplied via a manufacturer. These will be sold at premium cost. Customers are forced to buy these products when required, especially if they wish to ensure a warranty is not invalidated.

CRM drives businesses to chase customers and keep them informed through interaction and correspondence. PRM can force customers to return to a business because they need it. This is the main difference between PRM and CRM.

Can PRM and CRM co-Exist?

The simple answer is yes. A smart business will integrate the two principles into one plan, increasing efficiency and long-term profit generation.

CRM can be used to attract new customers and keep them satisfied. PRM will supplement this strategy by ensuring those customers keep returning for future purchases and transactions. Every time a customer returns, his or her contact details can be verified and updated.

Businesses may lose contact with customers through CRM alone, but PRM can help drag them back. Lost customers become contactable once again and a new CRM process can begin. It is almost a perpetual cycle: CRM encourages a purchase, PRM encourages continued transactions, customer contact details can be confirmed, and CRM continues unhindered by a loss of contact.


Daniel Offer is a partner in the Facebook messaging application Chit Chat for Facebook

A Truly Remarkable Business - One Worth Talking About

September 10, 2010 by Robert Craven

Where there’s a great experience then there’s probably great care.

Just been to Dans le Noir - a truly remarkable restaurant in London (and Paris).

What makes it so special and worthy of mention?

  1. You eat and drink in the pitch darkness. And it really is dark.
  2. Serving people are blind or partially blind
  3. After the meal they tell you what you actually ate!

Just think about it.

The whole concept challenges how you ‘see’ flavours and textures and how you relate to your food. It is mind-blowing. You have to go. It is like no other restaurant. And the “blinded guides” have to care for you while you are totally outside your comfort zone.

The experience is wild and challenging. Spending a couple of hours without any sight makes you re-evaluate your fortune at being sighted, think about what it must be like to be blind, and messes with your palate. You have little idea what you are eating. Crazy. The experience lingers for days.

My point. Dans le Noir is a true experience. You don’t forget it. You tell everyone about it. Remarkable. A business.  And it increases public awareness about blindness. 

If only more businesses could offer a true experience.

Thank you!

July 06, 2010 by Robert Craven

We do not say “thank you” enough.

Therefore we take people for granted. If people feel taken for granted they become less loyal. Is that what you want?

I don’t know why people don’t say “thank you” so much these days. Maybe it just isn’t cool to be seen to be thankful.

Maybe it shows vulnerability or frailty to acknowledge that you are grateful.

Or maybe the problem is that most words lose their value and their currency with over-use ("nice", "pro-active", "strategy" to name but a few).

Turning the situation around, I am constantly aware of how certain people seem almost incapable of saying "thank you". Why would that be? Maybe they aren’t grateful(?); but their inability to acknowledge my action actually hurts me.

So, when did you last say (and mean) the words “thank you”?

Your kids, partner, staff, customers, suppliers will all appreciate a sincere "thank you".

The cynical may say that I am just trying to put a deposit in the emotional bank account (or some similar weasel words), but actually I think that it is just basic common courtesy to acknowledge when someone does something for you.

Thank you for reading my blog.

Robert Craven of The Directors' Centre

Be different: Put your customer ahead of profits

March 22, 2010 by Robert Craven

OPINION, OR MAYBE EVEN A FACT!: You must be different from the rest.

FACT: We now live in an ‘experience’ economy

In today’s world, the big budget brands are treated with suspicion.  They now need to prove themselves.  Old World marketing tried to give different personalities to what were essentially similar products.  Think of the weak, wet stuff known as lager in the Eighties.  Nowadays, customers are inclined to think that if a product looks, sounds, smells, feels and performs in roughly the same manner, then it probably is roughly the same.  So, somehow you must create that difference that separates you from all the other similar products.

OPINION, OR MAYBE EVEN A FACT!: Brand preference has always been a function of perception, but now you have to try much harder to create (and maintain) the perceived difference.

The customer’s experience should be made to be unique in tangible, physical ways.  A corollary to this is that if your service is intangible then a powerful way of branding yourself is by creating tangible (and ideally memorable) experiences.

HOW DO I DO THAT THEN?: One way to deliver the difference is through the service experience.

‘Doubting Thomas’ consumers demand tangible differences in your product or service. 

OPINION: In a world where everyone copies each other, it takes a lot to keep your experience different. 

In our novelty culture, it takes even more effort to keep the customer’s experience fresh and surprising.  How is this to be done?

Robert Craven of The Directors' Centre

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