Sunday, January 2, 2011

Promotional Deals And Customer Loyalty

Most companies, it seems, offer promotions of some kind or another throughout the year to draw interest from buyers and bring in new business. The right deal can get an otherwise uninterested consumer in the door and persuade them to try a product or service. Why? Because the level of risk is lowered, and the switching costs then appear more acceptable.

Partner an attractive deal with a customer who is already less than satisfied with their current provider (assuming they have one) and the choice is almost made for them. Additionally, all other factors being equal, a brand new buyer will also seek out the best deal and go with the company offering more for the money, or the same for less.

But, what happens when a promotion expires? Have you, as a company, created a loyal customer during that time? Who's to say that this customer that has come to you when you offer them a deal won't turn and go the other way the second you ask for the regular fee for the service you are providing? After all, the competition is surely offering something to grab your customers' attention the same as you did.

Some businesses that provide a continual service to customers bypass the loyalty question - at least for a while - by forcing customers into an agreement for some specified amount of time longer than the time the promotion lasts. Usually, this time frame allows the business to make back the money lost from the promotion. So, customers are stuck for the moment (and may be getting unhappier with you by the day). If this contract is the only thing keeping customers loyal, then they really have no loyalty at all. And a business that gains and loses customers constantly due to the beginning and ending of promotions will have a difficult time staying competitive in the long run.

Creating high switching costs are part of a good overall strategy, but real consumer loyalty is paramount. Customers have to want to be your customer. They have to feel that being your customer is better than being a customer of the competition, even at a higher price. The question is how to achieve this. A lot of businesses compete on price alone, and when this is the case they tend to trade customers every so often. To create and maintain loyalty a business should distinguish themselves as the leader in their industry. This comes from marketing techniques in advertising, of course. But, an even larger amount (especially after the initial sale) comes from touch points with individual customers.

When a customer reaches out to your staff on the phone, web, or in person are they reaching a knowledgeable, caring, and empowered employee? Is their issue being resolved? Is the customer given additional information during this interaction which will result in them spending more money with you? Are long-time customers offered some deals not offered to newcomers? Are the only touch points with existing customers stemming from an issue with your service?

Answers to these questions can be a good indicator of whether or not a business is creating loyalty among their customer base, rather than rotating them in and out with their competition. Most are familiar with the figures concerning keeping an existing customer versus bringing in a new one. Buyers should see a positive difference in more than just price when comparing your business to another. If they do, most not only stick with you, they promote your business - for free. And everyone likes the word free.