Want to Retain Customers? Focus on Value

The following is excerpted from the DMA’s 2005 Customer Prospecting and Retention Report.

The principal drivers of loyalty appear to be value, service, and product quality, while the loyalty program is less important, notes David Shepard, president of Dix Hills, NY-based David Shepard Associates. Looked at another way, a good loyalty program cannot make up for poor service, high prices, or not having a competitive product.

Having a unique product is more critical among consumer-oriented firms, while the depth of the product line matters somewhat more to business-to-business companies.

The loyalty program is a bit less important for companies in the $20 million-$100 million size, while the product quality is of slightly more importance.

In consumer-oriented sectors where product differences play a key role, product quality is more critical than a loyalty program to sustain customer loyalty. It comes as no surprise that in the retail sector, where customers have personal experience with service, service is viewed as important. Intuitively, it makes sense that loyalty is created from a company’s value, service, and product quality, not simply from rewarding its customers for purchasing.

The patterns shown in the b-to-b arena are fairly consistent with those in the consumer area. Within the business industrial services sector, a loyalty reward program is viewed as more important because the services sector has twice as many loyalty programs as the b-to-b norm and thus may at the forefront of using loyalty programs to attract and keep customers.

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