What does CRM stand for?
Yeah!
I know what you are thinking…
CRM stands for Customer Relationship Management.
It’s simple, right?
Well,
It’s not that simple.
CRM does lot more than just managing customers.
Okay, now let’s get down to business:
Features of CRM software.
This is one of the most important part of CRM that you must know.
Why?
Because
And
There are 3 KEY reasons behind this failure are –
History of Customer Relationship Management (CRM) Software.
Let me tell you, History is not always a dull, monotonous subject. (Really ?)
However I never understood – what is the point of knowing King X fought with King Y 1000 years ago! 🙁
But guess what?
Here I will talk about History of CRM Software. (I am serious!)
And,
I am telling you, History of CRM is not boring like our History subject.
Over the past few decades, CRM has undergone sea-changes – from old ledger days to today’s Cloud/SaaS based CRM.
So, let’s start the fun!
Ledger is the oldest form of CRM.
Those days paper and pen were enough for businesses to note down basic customer details and sales information.
Remember,
A device with rotating wheel fitted with removable cards –
Yes, that’s a Rolodex – a rotating file device to store contact information.
Rolling + Index = Rolodex
It holds special kind of index cards that can be removed or added to the rotating spindle. Each card contains details about a person or company.
In 1956, Danish engineer Hildaur Neilsen invented Rolodex, an improved version of Wheeldex. (Source: Wikipedia).
It made life bit easier than ledger as business could easily locate customers, update details or add new customers.
Digitization started with Mainframe system.
Mainframe digitized all manual files to save storage space, organize customer data and facilitate quick search.
But,
Mainly large organizations used it for critical applications and bulk data processing such as consumer statistics, enterprise resource planning and transaction processing.
You may wonder,
Why 1970s when Mainframe computers were available from 1950s?
Though mainframe was invented in late 1950s, there was almost no user interface till early 1970s.
In earlier days, data was mainly uploaded in batch mode in Mainframe system using punched cards, paper tape or magnetic tape.
By early 1970s, many mainframes got interactive user interfaces. It helped users to work simultaneously along with batch processing.
IBM played a major role in producing mainframe system.
Since inception, mainframe system has gone through many ups and downs. Modern mainframe can run multiple different instances of operating systems at the same time. This technique of virtual machines enables applications to run as if they were on physically distinct computers.
Mainframe is the most secure system with low single digit vulnerabilities compared to other systems like Windows, Unix, and Linux.
Many organizations, mainly financial and airline sector, still use it for back end transaction processing.
In 2015, IBM launched its most recent generation mainframe – IBM z13.
( Want to know more about Mainframe? I would suggest you to take 2 training courses – The Complete Mainframe Professional Course of TSO/ISPF and JCL. )
Database marketing played a major role in history of CRM software. It was the first big move to integrate customers with sales strategy.
Database marketing was improved form of direct marketing. Organizations started to collect and analyze customer details to gain better insight about customers’ behavior.
Marketing professionals used to communicate directly with customers or prospects for higher conversion. It helped business to send personalized communications to increase sales.
But,
Main drawback of database marketing is that it was more like a one way communication.
There was no way to track customers’ responses.
Mainly Robert D. Bob and Kate Kestnbaum pioneered database marketing. They developed new metrics including customer lifetime value and applying financial modelling to marketing strategies.
In 1967, they founded a consulting firm ‘Kestnbaum & Co‘. This was the training ground for many of database marketing leaders and thinkers like Robert Blattberg, Rick Courtheaux and Robert Shaw.(Source: Wikipedia).
In 1980s, Kestnbaum collaborated with Robert Shaw and developed marketing database for many big organizations like BT (20 million customers), BA (10 million), Barclays (13 million).
Shaw introduced new features into the Kestnbaum approach like
(Source: Wikipedia)
Later these features have been incorporated into CRM.
YES!
– Acronym for ‘Yes, Everybody Sells!’.
In 1986, Mike Muhney and Pat Sullivan founded Conductor Software in Carrollton, Texas. They started a new project named as ‘YES!’. This was later known as ‘ACT!’.
In 1987, Conductor Software lunched first contact management software – ACT!.
Original name was Activity Control Technology and then changed to Automated Contact Tracking.
It was the first contact management software. Later Goldmine and other vendors also released CMS applications.
CMS was nothing but a digital rolodex.
It helped business to store and manage customer data efficiently. It also connected various business units like sales, marketing, service mostly by back end jobs.
To use CMS system, companies had to invest a lot in software and hardware maintenance and dedicated IT employees.
In early 90s, database marketing transformed into Sales Force Automation (SFA).
It enabled companies to track leads, contacts, opportunities, quotes and many other sales related business functionalities efficiently.
Sales Force Automation = Contact Management System + Lead Tracking System
Those days, Siebel was the most popular SFA software in the market. It played an important role in evolution of Customer Relationship Management.
In 1993, Thomas Siebel and Patricia House founded Siebel Inc.
And,
In 1995, Siebel Inc. released first Siebel Sales Enterprise software for sales force automation.
Today SFA is a part of CRM beside marketing and customer service.
In 1995, Customer Relationship Management (CRM) is coined.
Who invented that name?
Well,
That’s a debatable matter.
Mostly credit goes to technology research company Gartner. But some point to Tom Siebel also.
Few other names were also considered like Customer Information Management (CIM), Customer Information System (CIS), Enterprise Customer Management (ECM). But CRM stood out and accepted by majority.
In late 90s, many ERP vendors like Oracle, SAP entered into CRM market via acquisitions or in-house development.
In 1997, Siebel made two acquisitions – InterActive WorkPlace Inc.and Nomadic Systems Inc. It became the fastest growing company in United States.
In 1999, Siebel released first mobile CRM – Siebel Sales handheld.
Oracle, SAP, Peoplesoft also launched mobile version of their CRM applications.
However,
Mobile adoption was not so popular those days due to lack of devices and network connectivity.
In 1999, former Oracle executive Marc Benioff and 3 others (Parker Harris, Dave Moellenhoff, and Frank Dominguez) formed Salesforce.com, a company specialized in software as a service (SaaS). (Source: Wikipedia )
A new era of CRM began…
But
You know about Y2K problem, right?
Like other software applications, CRM was also hit hard by dot-com bubble.
Oracle experienced a loss in licenses of over 25%.
For the first time, Siebel reported decline in quarterly revenue.
Cloud based software industries were hit hardest as companies stopped spending on dot.com technology.
Post Y2K, many new vendors entered into CRM market.
In 2001, Microsoft acquired Navision and released Dynamic CRM in 2003. The main benefit of this CRM is its strong integration with other Microsoft products like Outlook, MS Word.
In 2006, Oracle acquired Siebel in a deal worth $5.8 billion.
In 2007, Salesforce.com launched force.com, cloud based application development environment. This was a major step to push CRM in the cloud – Software As A Service. Force.com is a platform as a service (PaaS) that allows developers to create multi-tenant add-on applications.
And with this a chapter started in history of CRM software.
In 2008, CRM turned into Social CRM. Companies started to track customers’ social behavior more closely to give better customer experience.
Today’s CRM is more social and mobile friendly.
From ledger to SaaS, CRM has already completed a long journey and is still evolving.
Companies have shifted their focus from Transaction to Interaction.
Now a days, increasing customer value is more important than customer acquisition.
Acquiring a new customer is five times costlier than retaining an existing customer. (Source: 29 Customer Loyalty Statistics )
With help of big data, CRM is now more focused on understanding customer data. Plain data has been converted to knowledge and actionable information.
It helps businesses to run targeted campaign, reduce sales time, increase customer experience and loyalty, predict accurate ROI and customer response.
In near future, CRM will be tightly integrated with Internet Of Things (IOT) and Artificial Intelligence (AI).
Before I close this article, a quick look on current CRM market share and revenue.
Today we have more than 100 CRM applications from different vendors.
Though Salesforce, Oracle, SAP and Microsoft collectively hold almost 50% of CRM market share, few other niche players are –
As per Gartner, worldwide CRM revenue will touch $36.5B by 2017, up from $13.9B in 2010.
From the above statistics, it is clear that Salesforce.com has major CRM market share.
But surprisingly Indeed.com job trend report shows that Microsoft Dynamics CRM has more job opportunities than Salesforce.
So it is your choice – you want to go with Salesforce or MS CRM. Both will give you good job opportunities.
You will find many training courses and learning materials on the web for both CRM applications.
But if you ask me to recommend JUST 3 COURSES, here it is –
That’s it!!
Now it is your turn. Please share what do you think about history of CRM software.
Did I miss any?
Where CRM is heading in near future?
And a difficult question – who invented CRM ? 😀
Next article: What does CRM stand for and what is CRM?
Keep in touch, follow TechOneStop on Facebook / Twitter / LinkedIn / Google+.
Future of Siebel CRM – it is still one of the most debatable topics in CRM.
And it is more confusing when you see a small spike in Siebel job trend.
Yes! I am serious.
Source: Indeed.com
But before we dig deep, let me thank you all for your overwhelming responses!
You may wonder why…
Well,
Last year I published an article about ‘Future of Siebel CRM’.
And, believe it nor not,
I have received 79 emails plus good social media responses and few comments as well.
But,
It is the time to rewrite the article with updated data and new statistics.
One question that many readers asked –
‘If there is no future of Siebel, why Oracle is still investing and releasing Innovation Pack every year?’
This is quite a valid question, isn’t it?
If there is no plan, why Oracle is still investing in innovation?
In this article we will go deeper to find answer. Also we will discuss about current CRM market trend, market share and where Siebel stands in 2017.
And yes,
I will answer – Did Oracle stop selling Siebel to new customers?
But now,
Take a look – how CRM market looks now and in near future.
(Source: Statista)
It is expected that by 2020, CRM market will reach 24 billion U.S. dollars globally.
However,
We see different prediction by Gartner.
As per Gartner’s enterprise software forecast, worldwide CRM revenue will touch $36.5B by 2017, up from $13.9B in 2010.
Though we see 2 different predictions from 2 different sources, bottom line is that CRM market is growing day by day.
Okay,
Now question is how CRM vendors are sharing this revenue.
| Company | 2013 Market Share (%) | 2014 Market Share (%) | 2015 Market Share (%) |
| Salesforce | 16.3 | 18.4 | 19.7 |
| SAP | 12.8 | 12.1 | 10.2 |
| Oracle | 10.1 | 9.1 | 7.8 |
| Microsoft | 5.8 | 6.2 | 4.3 |
| IBM | 3.9 | 3.8 | 3.6 |
| Others | 51.1 | 50.4 | 54.4 |
Source: Gartner (May 2016)
As a standalone vendor, Salesforce has maximum market share 19.7% where Oracle has 7.8%.
One thing to remember here,
Oracle has many CRM applications and 7.8% is the total market share.
My point is…
If we take only Siebel market share, it is less than 7.8%.
And here is the actual revenue vendor wise…
| Company | 2013 Revenue* | 2014 Revenue* | 2015 Revenue* |
| Salesforce | 3,330.20 | 4,268.50 | 5,170.90 |
| SAP | 2,621.30 | 2,809.40 | 2,684.40 |
| Oracle | 2,060.80 | 2,115.20 | 2,046.50 |
| Microsoft | 1,181.80 | 1,438.60 | 1,141.50 |
| IBM | 792.1 | 873.1 | 936.8 |
| Others | 10,474.70 | 11,681.90 | 14,307.70 |
| Total | 20,460.90 | 23,186.70 | 26,287.80 |
* Millions of Dollars
Notice,
Except Salesforce, all other 3 big CRM providers have lost their share.
Now,
There are many reasons and I don’t want to go into those details in this article.
But,
From above statistics, we can say that market is more inclined to SaaS based CRM application.
That means…
On premise model is one of many culprits behind Siebel market shrink.
However,
Probably you know that Siebel can be installed in cloud environment also.
To know more about Siebel on Oracle Cloud, read this, published by Oracle. (You can also follow or subscribe in Techonestop newsletter and get update directly in your inbox when I publish next article on Siebel on Cloud)
Not only On Premise architecture,
Here are another 2 statistics that also go against Siebel. (Source: Gartner)
By 2018, 4% — and by 2020, 10% — of $1 billion-plus organizations will run all their CRM applications on SaaS.
By 2018, salesforce.com will have over 15 million end users.
Well,
That is lot about Siebel architecture.
Let’s face real situation that we bother most – Siebel job trends.
This is surprising job trend!! Isn’t it?
Compare to Salesforce, Microsoft Dynamics has smaller market share but job posting is quite high.
And,
Source: Indeed.com
Job opportunity in Siebel is much lesser than Salesforce and Microsoft Dynamics.
(Want to be master in Salesforce or Microsoft Dynamics? See recommendations below)
Also it is not difficult to understand that –
When customer base of any software goes down, job opportunities also go down.
But how far it will go down?
Is Oracle doing enough to improve Siebel customer base?
Answer – Yes / No / May be 🙂
There is no straight forward answer of this question.
But,
I have answer if you ask –
Gartner 2015 Magic Quadrant for Sales Force Automation states that “Oracle will no longer sell Siebel Sales to new customers“.But here is Oracle’s response –
‘The report states that Siebel CRM is no longer sold to new, greenfield customers which is not completely accurate. Certain customer requirements may strongly indicate that an on premise solution is necessary, for many customers, in specific industries or geographies, or with specific functional requirements and specific data regulations. We assess customer requirements to determine suitability of Siebel, along with our Oracle CX suite, to ensure we guide customers to the best fit for their needs: where applicable, this does include Siebel, including for new customers.’
(Source: Oracle’s Siebel CRM and Cloud CX Suite FAQ 2015)
Oracle answered almost similar kind of question in 2016 also.
I would suggest you to go through these FAQs.
So,
It is really a BIG UNKNOWN area.
But,
After so many negative talks, few things still go positive for Siebel –
1. Most importantly Oracle is still investing in Siebel.
Siebel Road Map shows Oracle has plan beyond 2030. This is really good news for all Siebel lovers.
Moreover without any future plan, Oracle would not invest in Siebel innovation.
2. 2016 was a land mark year for big data and Internet of Things (IoT). We will see same trend in 2017 and beyond. More organizations are storing and processing data to empower end users with most valuable data.
By 2020, the number of Internet-connected things will reach or even exceed 50 billion. (Source: Forbes)
Siebel is not far behind…
Roadmap shows that IP2017/18 will focus on Big Data, IoT, real time analytics.
3. Siebel can be installed on Oracle cloud or any other third party cloud like Amazon AWS. It is cost effective, faster and straight forward compare to physical server setup and maintenance. Already many Siebel CRM customers are taking advantage of private cloud hosting solution to reduce total cost of ownership. Oracle Managed Cloud Services provide a solution to manage Siebel as a managed cloud service.
4. Oracle has introduced many new features like IRM (Incremental Repository Merge), Siebel Open UI, Siebel Composer (web tools), Workspace. All these features will make Siebel development faster and easier.
Siebel Composer is the web version of traditional Siebel Tools. It is accessible in any browser using Siebel Open UI client.
Workspace is an alternative of Siebel local database. It gives a sandbox to each developer to configure application and verify changes before delivering to parent or main workspace. It allows multiple developers to work on same repository object in Siebel database simultaneously.
Workspace will be default with IP17 with enhanced features like full multi-level branching, multi-release development.
Siebel Composer and Workspace will bring better agile development in Siebel.
5. Siebel is integrated with many other Oracle applications (Like Eloqua, ATG, Sales cloud, Responsys) to deliver world class customer experience.
(Source: Oracle OpenWorld 2015)
So,
Do we have enough opportunities to build career in Siebel?
This is another difficult question to answer. Probably I would like to hear from you.
But,
I would suggest you to diversify CRM knowledge. Instead of knowing Siebel or any other particular CRM, know how CRM works. It will give you more job opportunities than knowing any particular CRM application.
There are many training courses and learning materials on the web for Salesforce and MS CRM.
But if you ask me to recommend ONLY 3 COURSES, then try these –
Now,
What do you think about future of Siebel CRM?
Please share your thought below.
To download this article ‘Future of Siebel CRM in 2017’, click here.
Keep in touch, follow TechOneStop on Facebook / Twitter / LinkedIn / Google+.
So you want to build an overwhelming customer loyalty for your brand.
That sounds great!
But building customer loyalty is not an easy task.
As a matter of fact,
In the U.S., 78% of customers are not loyal to a particular brand. (Source: Nielsen)
But why?
Because, either the business does not take care its customers properly or does not give enough value to glue customers.
Now,
Question is how to build customer loyalty then.
In this article, we will discuss 15 factors here to improve customer loyalty.
Are you serious about building customer loyalty?
Then, very first step is to improve customer service.
Because,
67% customers stop buying products from a shop/brand just for bad customer experience.
Moreover…
Only 1 out of 26 unhappy customers complain. – (Source: 32 Customer Experience Statistics)
So it is difficult to know how many unhappy customers you really have.
Make sure, customer service team is knowledgeable enough about your products to handle customers’ queries.
Every customer is different. Customer service team must be flexible to handle all kind customers.
Remember,
Customers are the most valuable asset of your company. You must nurture them in proper way.
It may look crazy but matters a lot.
Tell me where you feel good…
– You buy an item from a shop and after billing, shopkeeper thanks you and say ‘Have a nice day!’
– Or you buy any item without any interaction with shopkeeper
Obviously first scenario has a feel good factor, right?
Customers do more business when they are greeted well.
That is the power of a good gesture and greeting. It builds customer loyalty for a brand.
So,
Do you greet your customers properly?
Do you thank them for purchasing products or services from you?
What about a friendly smile?
All these matter….
Remember, every customer is special and they must be treated in special way.
“Hello” with a smile makes your customers comfortable to do business with you.
Also don’t forget to thank your customers for buying products from you.
Do you ask your customers to share feedback about your brand or product?
Your most unhappy customers are your greatest source of learning. – Bill Gates
To build sticky customers, you must listen what customers think about your products or services.
Why customer feedback is important in building customer loyalty?
So get a thick skin and invite criticism from customers.
But
Getting feedback from customers is not an easy task.
Because…
Research says that only 1% of customers leave feedback unless business asks directly. (Source: Feedback and Loyalty)
So, ask for feedback using various channels but remember, it must be customer’s preferred channel.
Few common customer feedback channels are like –
Another important point –
Customers take time out to provide their feedback. You must thank and acknowledge customer’s response. You can give incentives as well for sharing feedback.
(Source: Feedback and Loyalty)
This is an important factor in building customer loyalty.
Because…
Source: Nielsen Global Retail Loyalty-Sentiment Report
You must reward your customers every time they do business with you. This encourages your customers to repeat their business.
For example,
An airline can run a loyalty program that allows customers to collect points or miles every time they buy tickets. After certain points, customers can redeem it to book a FREE flight.
Or
A coffee shop can offer a free drink after buying 10 cups of cappuccino.
Customers buy products to collect points and you reward them for doing so.
It’s a win-win game!
We will discuss more about introducing of loyalty program in a separate article.
But remember,
Before introducing a loyalty program, you must know where you currently stand and your business goal.
Most important rule to make your loyalty program successful – keep it simple and creative.
It is better to give 1% cask back on every purchase than putting some complex rules that customers never understand.
Now ask yourself…
Is your loyalty program/reward same as your competitors?
Introduce a creative way to make your loyalty program different from others. Even an amazing program name could make a difference.
No one likes to do business with a robot, right?
You must build a mutually beneficial relationship with your customers. It helps your customers to trust you more.
You can assign a customer service representative for each individual to build a healthy relationship.
Also personalize all communications like emails, letters – ‘Dear John’ is more attractive to John than just ‘Dear Friend’.
Customers want to feel that you care about them.
This is another important factor to improve customer loyalty.
Do you know your customers well?
Source: IBM
Do you know your customers’ preferred communication channels?
Or their preferred payment options?
Or their involvement in social activities?
Think about it,
If a customer likes email and you send letter to introduce your new product, will it be effective?
Or
If a customer prefers online payment and you do not have this option, will that customer prefer to buy products from you?
To retain existing customers, very first step is to know them well.
You must capture customer details as much as possible.
It helps you to reach out your customers in their preferred way. It also helps you to understand customers’ buying pattern, their behavior.
Knowing your customers well is not enough to make them loyal!
You must know your competitors as well.
Moreover, knowing your competitors is more important than knowing your customers.
Because, if you do not have good knowledge about your competitors, you can not implement a better loyalty program.
Many customers buy products from a single shop because that shop is more convenient for them or they do not find any competitor.
If they find similar product with better value from your competitor, you will lose them.
Lets see how well you know your competitors.
Can you answer these questions –
What your competitors do to retain their customers?
Do your competitors have any kind of loyalty reward program? How successful their loyalty program is?
What is their future product?
You must keep yourself update to date about your competitors.
There are many ways to know your competitors – follow social activities, read company newsletters, join trade show.
You must give something extra to your customers that your competitors do not. It could be discounted price or some extra services or better values.
A recent survey, conducted by Nuance Enterprise, shows huge positive response in self-service.
What customers say about self service?
What is self service?
Self-service is a kind of electronic support that helps end users to gain information and perform tasks without or minimal involvement of live customer service representative.
It includes knowledge base, FAQ, self check out, interactive voice response etc.
Also self-service is the most cost effective and efficient way to address customers’ issues.
Gartner predicts that by 2020, customers will manage 85% of their relationship with the enterprise without interacting with a human.
So, create a FAQ or a knowledge base where customers can clear their doubts easily. This will improve customer satisfaction and loyalty.
Do your customers or prospects know how your product can solve their problems?
If you sit back and wait for an overwhelming response, it is never going to happen. Rather you must educate your customers about your products or services.
There are many ways to educate your customers.
You can write an article that talks about customers’ pain points and show how your product can solve it.
You can prepare an eLearning course so that customers can take it as per their convenient time.
The point is,
You must show case your unique point of view to stand tall among your competitors by educating your customers.
Remember,
No matter how good your customer service is, if you can not meet customers’ needs, you can never build customer loyalty.
If customers feel that you have best product, they are going to buy it again and again.
Customers are ready to pay more if your product has something extra that your competitors don’t. It may be a ‘must have’ feature or quick delivery timing or high accuracy.
You know,
Nowadays social media plays an important role in any business.
Social media gives you an opportunity to interact with customers directly.
Appreciate customers publicly, solve their issues, ask for feedback – all these help you to enjoy higher customer loyalty.
(Source: Convince&Convert)
But question is – why customers should follow you on social media?
Because,
You always give a reason to customers to follow your brand. Reasons could be anything like a contest or reward to follow you or quick solutions of customers’ issues.
More your engage your customers, more you earn customer loyalty.
Do you offer live chat option to your customers?
If not, you must think about it.
Live chat plays as important role in building customer loyalty.
Web chat adoption among customers has increased significantly in the past few years.
Source: Forrester
Not only that,
Customers who choose live chat, are satisfied a higher percentage (92%) than other channels like email, call or letter. (Source: Zendesk)
Business must communicate with customers using their preferred communication channels only.
If the customer prefers emails and business sends letter, it will help neither customer nor business.
Even it could create customer dissatisfaction.
Do you want to know how it matters?
51% of customers are loyal to brands that interact with them through their preferred communication channels. (Source: Accenture)
If you are serious about building customer loyalty, then you must protect customer personal information.
Make your customers confident that their personal details like contact nos, email ids, addresses will not be misused.
Because…
Research says that 85% are loyal to brands that safeguard and protect the privacy of their personal information. (Source: Accenture)
And last but not the least,
Think out of box…
What can make your brand different from competitors?
How to keep customers happy always?
It could be anything like a personalized gift on birth day or a ‘Thank You’ note or just a cup of coffee.
Reward your customers something different, not just loyalty points.
How about this one – a monthly lucky draw to pick ‘Star customer of the month’?
Do the unexpected!
It will make your customer happy and improve customer loyalty.
Well,
Do you know –
41% of U.S. consumers are loyal to brands that offer them the opportunity to personalize products to create something that is bespoke to them. (Source: Accenture)
I didn’t… 😀
Before closing this article ‘Building Customer Loyalty‘, let me share an idea…
Once a customer (say Amelia) enters into a shopping mall, store XXX sends a personalized text to her –
Like: ‘Welcome Amelia! Special offer for your – enjoy 15% off when you shop with XXX brand.’
Do you think – this message will attract Amelia to buy from store XXX? Atleast she will think to visit this store?
Please share your thought below.
Previous article: Importance of Customer Loyalty
Next article: Customer Loyalty Statistics
Keep in touch, follow TechOneStop on Facebook / Twitter / LinkedIn / Google+.
Research, done by PR Newswire, says that the Loyalty Management Market is expected to grow from USD 1.4 Billion in 2015 to USD 4.0 Billion by 2020.
Now question is – why companies are investing more on customer loyalty and retention? What is Customer Loyalty, exactly?
Well,
Before we jump in to customer loyalty definition, let’s take an example.
Suppose…
You want to replace your old iPhone with a new phone. Will you buy only newer version of Apple iPhone when you get other branded phone with same features and lower price?
Do you want to try other Apple products as well like Apple TV or Mac or iPad?
If you buy Apple products or services all the time, you may be a loyal customer of Apple.
Why ‘may be‘? – That we will discuss later.
So,
Customer Loyalty is an emotional bonding between an organization and its customers.
Loyal customers favor one brand or shop or service over all others, buy products frequently, spread good words and generate leads.
Now think about our Apple iPhone example.
You may replace your old iPhone with a brand new iPhone but do you have emotional bonding with Apple brand?
Do you recommend your friends and families to buy Apple products?
Do you frequently download or buy software, apps and songs from Apple’s Store?
All these activities decide that you are loyal customer of Apple or not.
The point is…
A business can not call a customer as loyal customer just because that customer buys products frequently from same store or brand. Customer must be emotionally attached with the brand to be loyal.
Customer loyalty is more about engagement and relationships between a brand and its customers.
Now question is…
Why does a brand or business need customer loyalty?
Because,
There are many benefits of customer loyalty. Let us discuss few here.
Repeat business is when a customer buys products and services from a same store or brand frequently.
It has huge impact in any business because…
80% of a company’s revenue comes from just 20% of its existing customers. (Source: Gartner)
Acquiring a new customer is five times costlier than retaining an existing customer. (Source: Forrester)
Above 2 statistics explain a lot why retaining existing customers matter for a company. To retain existing customers, business needs to build or improve customer loyalty.
Loyal customers are more likely to buy products and services again and again from the same store or brand because it has already won their hearts.
This is another benefit of customer loyalty because…
According to the book Marketing Metrics “Probability of selling to an existing customer is 60 – 70% where probability of selling to a new customer is 5-20%.“
As existing customers trust you more than a new customer, it is easy to cross sell or up sell products or services to them without much effort. It increases sales volume as well as revenue without acquisition of new customers.
Tell us,
What do you trust more – friend’s recommendation or a TV advertisement?
In this digital age, Word of Mouth is still the most effective way to do advertisement.
According to Nielsen’s latest Global Trust in Advertising report, 92% customers trust earned media like recommendations from friends and family more than any other forms of advertising.
Not only that,
Second most trusted source of product or brand information is online consumer reviews.
Loyal customers talk about your products, give real feedback, recommend friends and families. Business can use feedback to improve services, launch new products and get better customer insights.
In this super competitive market, it is really difficult to make your brand separate from others. Only loyal customers can create the difference by doing repetitive business, recommend products and services and share feedback.
(To know more, read this – Importance of Customer Loyalty)
Loyal customers are the real asset of your business.
But the problem is…
78% of customers are not loyal to a particular brand. (Source: Nielsen)
So,
How can a business retain its existing customers?
How to build or increase customer loyalty?
There are 15 factors that can help business to build an amazing customer loyalty.
We have discussed these factors in details in another article. Read this – Building Customer Loyalty.
Now you know what is customer loyalty, its importance and how to improve it.
But, wait!
Here is the most important part…
Types of customer loyalty and customers.
Why it is important?
Because,
Before implementing customer loyalty program, you must know your customers and different types of customer loyalty. Otherwise whole loyalty program will fail DEFINITELY.
We can divide customers and customer loyalty in 5 distinct types.
Few customers purchase goods or services from you whenever they feel to do so but never develop loyalty.
But these customers could be loyal to other brands.
For example, one of your customers goes to any shop to get a haircut where he does not need to wait. But he uses only Apple products and services.
Though that customer is loyal to Apple brand but certainly not to any salon.
It is very unlikely that even the best loyalty program can make these customers loyal to the business.
Frankly speaking, business should not target these customers as they bring very little value for the company.
You will always have few customers who are satisfied and look like loyal to your business.
But in reality they are not loyal. They are satisfied with your products and services but it’s only satisfaction.
While they don’t dislike you, don’t love you either.
They will be with you until your competitors offer better service and customer experience.
However,
You can put extra effort to glue these customers with your business.
First find out this kind of customers and then ask what can make them happier and offer it.
Product or service cost plays an important role in customer loyalty.
Moreover,
61% Americans and 54% Europeans switch brands just because of price. (Source: Nelson)
Few customers are loyal to your business till you offer lowest price. If they find lower price elsewhere, they will leave you.
It also includes those customers who purchase products only when you give discounts.
Remember,
If you are competing in low price arena, then make sure you charge lower than your competitors. Otherwise you will lose these customers.
Few customers buy products from same store just because it is nearby their home / office.
Another reason could be that the customer has good personal relation with one of your business representatives.
It means, these customers are loyal to convenience, not your shop.
If these customers move their home or business representative quits the job, they will stop doing business with you.
You can make these customers loyal to your brand by proving that convenient is not always a reason to do business.
These customers are your real strength.
They do repeat business, recommend your products, give valuable feedback and generate leads.
These customers will never leave your business unless they have very bad experience.
You must show extra care to these customers. You must talk to them regularly, listen their problems, try to fix it and must thank them.
The more you give, the more you receive from these customers.
Before closing this article, let us see couple of successful loyalty programs.
Amazon Prime is one of the most successful loyalty programs.
Just for paying $99/year, prime members gets exclusive access of movies, ad free music, fast and free shipping, unlimited photo storage. It gives enough value to its members to do repeat business.
As a result, prime members spend on average $1500/year, compared to $625/year for non prime members. (Source: Consumer Intelligence Research Partners)
This is another example of best loyalty programs.
Every time you use Starbucks loyalty card to buy something from Starbucks stores, you earn a Star. You can redeem these Stars to get Starbucks rewards like a free drink or card upgrade .
Now,
It is pretty clear – What is Customer Loyalty and why it is important for a brand or store.
Here is an interesting fact:
Research shows that women are 22.19% more likely to buy the same product or services regardless of price, quality, convenience, or brand promise than men. (Source: Crowdtwist)
Want to know more about such interesting facts? Read this: 29 Exciting Customer Loyalty Statistics
And now,
It is your turn…
Let us know what you think about customer loyalty. What are those factors that make you loyal to your favourite brand?
Please share your feedback below.
Keep in touch, follow TechOneStop on Facebook / Twitter / LinkedIn / Google+.
Next article: Importance of Customer Loyalty