| Increasing Customer
Loyalty Companies know that increasing customer loyalty can
increase profits significantly. However, many companies are finding that, not only are
they unable to increase customer loyalty, it’s actually eroding.
For years, companies have believed that if they could tailor their offerings to individual
consumers’ needs, customer loyalty – and company profits – would skyrocket.
Customer relationship management (CRM) software was supposed to make this possible. So
what happened?
The answer: it’s not the fault of the data, it’s what
companies do with the data.
For example, a major hotel chain asks guests to complete a multiple-question
satisfaction survey via their room’s TV set during their stay. When one guest
answered "extremely dissatisfied" to all the questions, he was not treated any
differently when he checked out. Why? Because his answers went straight to a central
repository where they were aggregated with other customers’ responses and used to
measure overall market – not individual customer – satisfaction. A more
effective approach would be to feed his answers directly to someone at the front desk who
could respond immediately to his needs and create a better experience for him.
Bottom line: companies need to look at the data both in the
aggregate and at the individual level. The aggregate data, from sources such as
quantitative surveys and CRM systems, can tell you about the overall health of your
relationships with customers, and potentially about problem areas that need to be
addressed. The individual data, which can be from focus groups, as well as from the same
quantitative surveys and CRM systems, can point to ways to address problems and strengthen
customer relationships... and ultimately, increase customer loyalty and profits.
Sources: Harvard
Business School Working Knowledge, July 21, 2003; Bureau West insights
Want to learn more about your customers and increase
customer loyalty? Call Jay Zaltzman at Bureau West Research Group (tel: +1-818-752-7210)
to find out how to optimize the ways you collect and utilize customer information. |
The Mystery of
Starbucks’ Prepaid Card Loyalty cards are great for marketers.
Customers that carry your card are more likely to use your product or service, you get
lots of data about card users so you can learn more about your customers, and you can use
that data to personalize offers to card users, making them even more loyal!
Some cards come with obvious inducements for customers to sign up. If you don’t
carry your supermarket’s card, you won’t be able to take advantage of most of
the store’s special offers. But we’re mystified about why customers sign up for
some other cards. For example, Mobil’s "Speedpass." This card is linked to
one of the customer’s credit cards. So when they use it to pay at the pump, it
charges their credit card – the same as would have happened if they simply paid with
their credit card.
We thought that Starbucks’ prepaid card would
fall into the same category. Customers pay in advance for the privilege of using the card
to pay for their coffee, rather than using cash or a credit card. True, using the prepaid
card is a bit faster than using a credit card. And if customers sign up online and provide
an email address, they receive special offers periodically. But we would not have expected
these advantages to be a great incentive to get the card. Boy, were we wrong! In our
defense, Starbucks chairman Howard Schultz was also surprised by the card’s success.
In the first month of the program, Starbucks customers purchased 2.3 million cards
worth $32 million. Since then they’ve snapped up another 11.3 million cards. Industry
experts rate the Starbucks card as one of the most successful
launches of its kind: It already accounts for 1 of every 10 transactions at
Starbucks stores, and about a third of cardholders are reloading the cards to use again.
That success has emboldened the company to take the concept a step further. This fall,
in partnership with Visa USA and Bank One, Starbucks will launch the first-ever dual-purpose credit card for a retailer – one that
functions both as a prepaid cash card at Starbucks outlets and as a standard credit card
anywhere else. But instead of earning airline miles or periodic cash rebates, users will accrue coffee credits at Starbucks. Because the cost
of a cup of coffee is so small compared with something like a round-trip airline ticket,
even conservative card users won’t have to wait long before their freebies kick in.
Habitual users, the thinking goes, may never again have to pay for their morning coffee.
"Every time they spend money somewhere else," Schultz says, "we’re
going to benefit, and the customers will have an inherent sense of reward."
Sources: Business 2.0, August 2003;
Bureau West insights
Our Research Tidbit readers are all smart marketers, so we’d like to ask you to
weigh in on this one: what do you think is the secret to the success of Starbucks’
prepaid card? Please email your thoughts to me – jay@bureauwest.com
. We’ll include readers’ responses in a future Research Tidbit. |
Bureau West Research
Group can conduct the research you need to better understand your target market, including
focus groups, one-on-one interviews, and data analysis. Give us a
call at (818) 752-7210 if there’s any way we can assist you.
Sincerely,
Jay Zaltzman, President
Bureau West Research Group
Tel: (818) 752-7210
www.bureauwest.com
Email: jay@bureauwest.com
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