In the nineties, we were often surprised by the sale of millions of businesses that in one way or another kept -maintain- captive their customers. Such as the case of the changes of hands –always in the direction of concentration- of the cable television businesses or the transfers of credit card wallets.

The voluminous figures that were handled at that time were not capricious, but respond to a rational and meticulous calculation: we proceeded to estimate the value of the client and his ability to generate profitability for the organization over time.

A customer in a purchase can leave me only 10 pesos of greed, but what is the greed total if you make the same purchase in my business every month for 20 years?

Large organizations know precisely how much a customer is worth by calculating the present value of future purchases they make, and they know how to estimate the cost of a lost customer.

El trade and small and medium-sized service companies require a similar approach to professionalize management with customers and thereby increase their turnover, improve profitability and generate loyalty in users / customers.

Customer service is a key element in positioning and obtaining public preference.

Today, free competition, the availability of information and new consumption habits make customers more selective regarding the conditions of the product or service they seek and more demanding regarding the way they expect to be served.

El also information It is he who can assess whether or not the quality of business care is satisfactory and therefore should be the main objective of the service activity.

We propose with this article the following:

  • Raise awareness about the value of the customer and the valuable information that it brings with it to exploit new business opportunities
  • Show the effective benefits of implementing systematic and simple customer relationship activities.
  • Provide information on how to practically implement a model tailored to the organization
  • Show the importance of designing associative actions between companies, in the form of a business network, to achieve synergistic results in business development

The use of loyalty and customer relationship systems has expanded. Resorting to raffles or prizes, while remaining a valid alternative in certain circumstances, has been displaced, as a stimulus to consumption, by other systems that seek to chain customer purchases. These mechanisms, which leave as an additional utility –in some cases higher than the value of the increase in sales- the customer databases for further development, are usually called CRM –Customer Relationship Management- or administration the relationship –link- with consumers –clients-.

These systems explain why it costs 5 times more to obtain a new client than to maintain an existing one, and emphasize the determination of the cost of acquiring a client, known by the acronym CPGA (Cost per Gross Addition). It is clear that they emphasize that the quality of customer service It is an essential complement since customer loyalty is only achieved through full satisfaction.

Let's go on to analyze some simple Bases for creating a customer loyalty system:

  • Creation of a database, which implies that the company must analyze the information to be collected, analyzed and kept - for its proper use - by each client.

The basic information refers to the data necessary to communicate with the client –address, telephone, email-, their socio-demographic and economic characterization –age, sex, purchasing power, educational level; among others-, consumption habits and preferences.

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This first step that is completed by applying a brief questionnaire to each client, allows us the following:

  • Identify and locate clients, know who they are? where are they? How are they ?, from current and potential customers.

In order to reach potential clients, it is necessary to offer an incentive for them to “raise their hands”, such as a raffle or the request for information against gifts.

Identifying and characterizing clients allows us to carry out a differential treatment for them because not all clients are the same for the firm: there are clearly some better than others due to the volume or frequency of purchases or the margin of the items that consume.

The selection of the best clients is based on these premises:

  • It is much more expensive to get a new client than to keep the ones we already have.
  • It is a mistake to focus on acquiring new customers without first doing everything you can to keep existing ones.
  • The more we know what makes our clients happy, the more successful we will be in acquiring new clients.

Having a database of our clients we can perform an RFM analysis, which is nothing more than classifying clients as recent, frequent and valuable. That is, having a table where we can distinguish:

  • Customer A: Those who have recently made purchases.
  • Client F: According to the number of purchases made in a period.
  • Client M: According to the economic value of their purchases.

Our best client is RFM, he buys frequently, he has done it recently and for high economic value.

  • The next step is defining the types of benefits to be provided. In this regard we can comment that there are two types of benefits: soft and hard.

The first ones point to the emotional component of the client, they seek to transmit a perception of appreciation and unique status through differential treatment, special access and exclusive offers.

This type of benefits is what characterizes certain service organizations such as hotels, restaurants, jewelry stores, etc.

Hard profits exploit the rational component of the customer. Tangible prizes are offered in exchange for recordable and discretionary purchasing behavior. For hard benefits to be appreciated they must offer something of relevant value to the customer and require a high communication component.

The offer of benefits is valued, it must be structured according to the client and through an analysis of their preferences and behaviors. Thus, there will be customers who will feel comfortable and enjoy early admission to a hotel - "early check in" -, the preferential table in a trendy restaurant or not waiting in line to receive or buy a product or service - special lines in certain banks. All of the above are typical of the soft benefits that point to recognition and a special relationship with the client.

The hard benefits are more linked to the consumption of massive products where loyalty is not as clear and the behavior is based on a benefit-cost analysis, as is the case of the purchase decision in a supermarket with preferential prices or those already famous swaps for points.

Loyalty Program Conditions

  • Simplicity: Any program that encourages the loyalty of our clients must be easy to understand and demand an acceptable level of participation.
  • The customer database must be adequately segmented and updated.
  • The rewards - benefits must be perceived as of value and be achievable through the participation of the client, that is, they cannot be linked to the unpredictable behavior of third parties - those benefits linked to the fact that a friend whom we present, in turn, performs something for the signature.
  • Constant communication and information must be maintained with clients.
  • The loyalty program must set - for the organization - goals or objectives that can be measured and analyzed in terms of its evolution and the degree of customer participation.
  • Finally, any Program must be profitable, in the short or medium term, so the resources invested must generate benefits that exceed those costs.
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In the previous pages we pointed out that the true value of a business is given by its customer portfolio and the potential that they have for the organization to generate profitability over time through their purchases of goods or services. Sometimes this "wealth" of a company - perhaps the most important - is defined as relational.

In relation to this point, I recall the case of a rural spraying contractor who, years ago, requested financing for the modernization of his equipment. Talking about this topic and in an attempt to analyze his repayment capacity of the loan, we asked him to obtain a written commitment from his clients that, having the new equipment, they would order the fumigation of his crops, both in the fine season and in the thick.

The man was enthusiastic and not only requested the commitment from his current clients as well as other potential ones that he considered could adequately provide the service.

The result of this exercise It was that analyzing future income and costs and considering profitability margins, updating future net flows - over ten years - profitability was equivalent to the present value of a field of a thousand - yes, you read well - 1.000 hectares in convertibility times values.

This finding - the man was requesting a loan of $ 30.000 - surprised the entire group that participated in the training process prior to granting the loan. Someone even commented ... "If I had imagined something like this ten years ago, my current reality would be totally different" ...

We also comment that large corporations know precisely how much a customer is worth and know how to estimate the cost of a lost customer. Trade and small and medium-sized service companies require a similar approach to professionalize management with customers and thereby increase their turnover, improve profitability and generate loyalty in users / customers.

Thus, we comply with the objective of raising awareness about the value of the client and the valuable information that it brings, as well as showing the effective benefits of implementing systematic and simple activities related to the client.

In terms of providing information on how to practically implement a model tailored to the organization, the steps necessary to implement a basic system of administration of bond with customers.

It all starts with the development of a database, which involves designing and applying a questionnaire to gather the necessary information to communicate with the client -address, telephone, email-, and know their socio-demographic and economic profile -age, sex , purchasing power, educational level; among others-, as well as their consumption habits and preferences.

The available information will allow us to identify and locate our consumers, to know where they are? What are they like? What do they like ?, from current and potential customers.

Identifying and characterizing clients allows us to carry out a differential treatment for them because not all clients are the same for the firm: there are clearly some better than others due to the volume or frequency of purchases or the margin of the items that consume.

The next step is defining the types of benefits to be provided. In this regard, it was commented that there are two types of benefits: soft and hard, the former pointing to the emotional component and the hard benefits exploiting the rational component of the client.

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In order for the offer of benefits to be interesting for the client, it must be structured to suit them and by analyzing their preferences and behaviors; Potential plan beneficiaries must perceive value, get involved, and feel adequately communicated with the program issuer.

The benefit plan must take into account the following elements:

  • Loyalty should focus on recognizing and rewarding the best customers.
  • The company must seek the loyalty of profitable customers and improve the behavior of those who are not.
  • In principle, only the best clients deserve advantages, but everyone can improve.

Associative developments between companies to implement a benefits program usually use the point card as a loyalty element. The card is a “distinctive” element of the competition that increases the image of the associated businesses. The card is printed with the logo and address of the premises, enhancing the sense of belonging.

Let's consider the following project: increase sales of a group of shops and service companies, under associative forms and using a benefit card.

What does the system consist of?

It consists of a group of retailers and service companies that develop, under associative forms, joint activities to increase sales.

What are the pillars?

  • Homogeneous quality of service.
  • Centralized management of the database.
  • Increased traffic in business.
  • Reward card for points based on purchases.
  • Taking advantage of customer contact.

How does the system work?

  • A group of businesses establishes a common marketing strategy
  • They capture the information that the client brings, which is incorporated into a database
  • Identify the customer with an award and mileage card
  • They establish a point system for purchases made in the network of shops
  • The system centrally manages the accumulated points
  • The client exchanges the points for network products, according to a table designed for this purpose
  • The database exploits customer information for loyalty actions
  • The customer who buys repetitively the most benefits from the system

What benefits are obtained?

  • Increased customer traffic in affiliated businesses
  • Increased sales
  • Loyal and loyal customers
  • Updated database for specific marketing actions
  • Potential escalation to purchase card

What does it take to get it started?

  • Constitute the critical mass of business to build the network.
  • Have a database administrator
  • Design the mileage and award plan
  • Train in quality of service to differentiate yourself
  • Design the loyalty plan

The results of programs of this type have been clearly efficient and of high impact, in terms of benefit-cost ratio.

Source: Lic. Oscar Yciz / November 2006

I am a dreamer and in my dreams I believe that a better world is possible, that no one knows more than anyone, we all learn from everyone. I love gastronomy, numbers, teaching and sharing all the little I know, because by sharing I also learn. "Let's all go together from foundation to success"
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