TheUC 033: Successfully Build Customer Loyalty

gotloyalty

Successfully building customer loyalty will add significant value to your venture. However, creating and cultivating customer loyalty has become more and more difficult in the digital age. Customers are finicky, and the options to use competitive or substitutive products keep growing. Good enough at the right price will win in today’s marketplace. To be successful, you must convert the right customers to ‘stay and pay.’ Properly investing in long term customer loyalty will build significant value in your company.

  • Value is in the eye of the buyer
  • Your product is worth what someone else is willing to pay for it
  • “Good enough at the right price WINS”
  • How consumers value a product has fundamentally changed in today’s information overload
  • The right customer needs to be identified
  • Solid investment needs to generate customer loyalty

Get customers to try your product, but find the balance

  • Be sure you are getting demonstrable value from your customer when you give away your product for a trial
  • Know what is truly valuable about your core product from your customers

Segment Your Customers

  • Know who in your marketplace is a potentially valuable that become customer loyalty
  • Don’t give away product trials to customers who will never pay
    • Product trials cost money in time, products and customer service
    • High cost in dealing with the wrong customers who will take resources away from investing in customer loyalty
  • Be disciplined to find out what customers actually ‘like’ and how they find your product relevant to their lives.
  • Have the patience to get the right people you want to try your product
  • Remember…you don’t want every customer

Learn from the marketplace

  • Groupon has taught us that just getting a ton of people who like free or deeply discounted products will never contribute to customer loyalty. These are people who generally only want a bargain
  • Companies throw away huge dollars to buy a high number of customers rather than investing in customer loyalty
    • The dot com dot bomb era: a lot of money spent increasing valuation without building real value
  • Asset management firms spend an incredible amount of resources raising as much capital they can, but forget to invest in their core product of portfolio management and thus, customer loyalty is lost.
  • Digital product companies that invest in hundreds of millions of dollars to be able to boast traffic in the tens of millions, but fail to invest in customer loyalty, thus devaluing the company

Understand the useful tactics to convert

  • Give your product away so that your product is valued rather than the experience of getting something for free.
  • Learn from companies who have done it well, e.g. Pez
  • Apply the freemium model appropriately
    • Be clear about what should be ‘free’
    • Don’t give away the essential value of your core product
    • Make sure your customers really understand why they should pay to get something more
  • Remember the goal should be to get your customers to “Stay and Pay”
  • Generating customer loyalty will ultimately build value in your venture