You don’t know me, but I’m your customer
Your best and most loyal customers are your most valuable asset for many reasons, yet many companies do a lousy job of taking special care of, recognizing, or focusing on these customers. In fact, about 44% of all companies spend more time and money on acquisition than retention.
Let’s look at the main reasons why your best – aka Cult – customers are so valuable:
- Cult customers (the top 20%) typically account for 80% of revenue. This is the Pareto Principle, and in our experience, it holds true for almost all of our clients.
- Cult customers are less price sensitive. Customers that love a certain brand will pay extra to own it.
- Cult customers are early adopters of your new products or services. Loyal customers are 50% more likely to try a new product or service – and spend 31% more than a new customer.
- Cult customers are brand evangelists and spread positive word of mouth which has the highest credibility of any advertising or marketing medium.
- Cult customers cost way less than acquiring new ones. Research indicates that it costs up to 5 times less to retain a customer than to acquire one.
- Cult customers are more likely to buy additional products and go upscale. The probability of selling to an existing customer is 60-70% compared to a 5-20% probability of selling to a prospect.
- Cult customers are long term assets (Customer Life Time Value)
So, if there are so many benefits to enhancing the relationship with your Cult customers, what are the barriers that you must overcome?
Barrier #1: Poor Use of Customer Data
How well do you really know your customer? You probably know some basics like the products they buy, when they buy, where they buy/the channel they use, how often they buy, and amount of money they spend with you, (let’s call this “What, When, Where, How, and How Much”). This is valuable information but most companies squander it by not applying the data to actionable data. Let’s look at a few examples of companies that don’t use their data well:
- A large grocery chain has a customer that uses a loyalty card, so it can track all store purchases. A review of customer receipts would show that the customer is on a restricted diet and only buys low carbohydrate foods. Yet, a weekly coupon goes out to the customer highlighting several food items on sale, noticeably potato chips, candy, soda, and crackers. Clearly, the data is not being analyzed in a meaningful way.
- A bank has a customer with three separate accounts (checking, savings and investment) along with a VISA debit card. In all, a six-figure customer. The customer routinely receives offers for a pre-approved credit card with a $5,000 limit. Is anyone paying attention?
Compare these case studies to the king of data analysis, Amazon. They have mastered the algorithms that yielded outputs like “Based on your recent purchases, you may like this” or “Customers that buy X also buy Y” and the concept of the Dash Button.
Barrier #2: No Preferred Treatment Policy
- An insurance giant had a customer for 32 years that had 5 separate policies and had never missed a payment. The company misapplied a payment that was made. As per the standard protocol, a letter was sent out notifying the customer of a missed payment and that the policy would be suspended after two weeks if payment was not received. The customer – after proving to the insurance company that they had a cancelled check for the transaction – was irate and cancelled all policies. The company had no policy in place to provide special treatment for a very long term customer.
On the other side of the coin is a large airline that has numerous policies and procedures in place to cater to its best customers. Early seating, no luggage fees, upgrades, free trips, club access and so on. And to ramp it up, how about meeting your best customers at the gate if there is a tight connection, driving them in a Porsche to the next gate while alerting the gate agent that you are on the way and to hold the plane.
Barrier #3: Real Customer Intimacy
Most companies do some form of research regarding the market, their customers, industry trends and so forth. Much of this research is quantitatively driven: surveys, Net Promoter Scores, satisfaction studies, etc. However, a common shortcoming is the company’s ability to understand the “Why” factor. The “Why” factor is a deep understanding of the customer’s emotional connections to a brand and its products. This emotional and subliminal part of decision-making is where 90% of decision-making happens. We call this the Iceberg Theory: It’s what is below the surface that’s most important.
The reason for this is simple: most companies don’t know how to get beneath the functional/cognitive level and down into the good stuff. They falsely rely on so-called hard data. Cult Marketing has developed some innovative and breakthrough qualitative techniques that get under the cognitive surface using the techniques of psychology, narratology, and ethnography.
So, if your company would like to put together a comprehensive approach to identifying, understanding, and creating meaningful relationships with its best and most valuable customer, send us a note and we can start a dialog.