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How to Increase Customer Loyalties in the Technology Sector

Technology companies are well aware of customer loyalty statistics: Most companies lose 50% of their customers (or partners!) in less than 5 years.  While emerging companies have the competitive advantage for customer value management, retaining customers is a universal objective. Here's how technology firms can increase their customer loyalties:

Step One:  Prepare for a Customer Loyalty Program 

  1. Gain the support of senior management to a Customer Loyalty Program, and their commitment to establishing a system that both increases and measures customer retention.  The return (ROI) on a solid Customer Loyalty Program will enable the company to
    1. Better focus and quantify resource deployment,
    2. Watch for customer behavior shifts that could signal dissatisfaction or loss of value, and
    3. Recognize and pursue revenue gaps between current and potential customer value
  2. Profile your target audience, to understand who is best suited for a long-term commitment to your product/services.  Who will benefit from your enhancements?  How will your product/services enable them to achieve their business objectives?

  3. Measure your Ideal Customer Lifetime Value to understand the financial impact of your company's initiatives on your customers.  This exercise will highlight your cost-of-sales, especially as they relate to sales and marketing expenses. 
  4. The general formula is: 

      Present Value             (Initial Revenue - Costs)
      +            Net Present Value             (Loyalty * (Future Revenue - Costs))
      +            Net Present Value             (Loyalty * Influence Value)
                   Customer Lifetime Value 

    As you can see, your customer loyalty value dramatically impacts by your customer lifetime value. 

  5. Profile your customer database to identify customers as Ideal, Uncertain, or Non-Ideal. 

Step Two:  Customer Value Management 

Once you know who their best customers are, the real work begins-convincing them to stay forever.  Here are some marketing program tactics for Customer Value Management that have successfully increased customer retention rates:

  1. Direct market for new Ideal Customers, using appropriate sales and marketing actions as determined by the customer lifetime value exercise. Establish a community within your Ideal Customers, for peer counsel. 
  2. Develop a program and process to convert Uncertain Customers to Ideal Customers.  These medium-value customers are usually converted with fewer resources than a non-ideal customer or prospect.  Set a goal of converting X number or % within a specified time period. 
  3. Develop proactive customer retention activities for Ideal Customers.  Give them a tangible value for being loyal, such as priority service, personalized offers or professional recognition.  Companies with frequent purchase cycles can solidify the buying habit with frequent buying programs.  Those with long-lead or high-priced products can extend other relationship tactics such as customized, secure websites and/or direct support access; frequent customer surveying; elearning opportunities; and product input participation.
  4. Invest in referral programs by giving your customers and partners a solid business reason and personal offer to provide qualified leads. Clearly, the most effective loyalty programs provide incentives both for the company (lower costs or more productive workers or fewer outages) and the employee (gifts, skill certification, memberships, education).
  5. Understand where your Ideal Customers need to go in the next 3-5 years, and exchange information with them regularly in order to lead the way.  Customer loyalty management in B2B is all about showing appreciation to valuable customers as they hit key relationship milestones. 
  6. Periodically rank your Ideal by relative value.  Target those with relatively significant value increases or decreases with special promotions. Early intervention to reward higher value activities or address customer dissatisfaction is often key to maintaining or enhancing customer value.  Some companies use the value gap analysis to compare the current value of a customer with their total budget value, to ensure their "share of wallet".

Long-standing relationships arise from trust gained over many transactions.  Perception is critical. A solid Customer Loyalty Program convinces your customers that you'd rather keep them around than drive them away.  And a Customer Loyalty Program makes good financial sense: A 5 percent increase in customer retention rates will drive a 25 percent profit increase, at the very minimum.   

Are their pitfalls with developing customer loyalty programs? You bet!!!  I've made plenty of "misjudgments" over the last 25 years. Don't suffer from the same errors - hire an experienced marketing program contractor!

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