Bingo! Loyalty can be a BAD thing

This article in Harvard Business online nails it. The gist: focusing your loyalty efforts on retaining ALL customers can be counterproductive, since only 20% of your base are truly valueable / profitable.

Profitable loyal customers on the other hand are almost always driven by differentiating aspects of our product or service offering. The key to a successful loyalty strategy is to become crystal clear as to what these are, and to focus on tangibly improving these elements. It is also imperative that we actively let customers and prospective customers know that these are the things the company stands for and that the firm is committed to being best at. By doing this, our best customers will have the necessary information to clearly articulate why our organizations deserve their loyalty in good times and in bad.

If you have a loyalty program, don’t always assume that price is driving behavior in your best customers. It’s fine to use NPS as the basic framework for your loyalty program, but dont forget to segment using the customer value metrics you have on hand… be they as sophisticated as NPS, or simpler data such as profitability or revenue growth.

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