Loyalty Tales Chapter 6
Chapter Six: Penny the CFO’s Tale
I think it fitting that my tales are the stories we enjoy as we come to the end of our journey and approach home, where the money lives. Loyalty and Profitability must go together if we are to thrive”, she commented and smiled.
“On my desk is a quotation from Peter Drucker that I invite you all to consider; ‘Inside an organisation, there are only cost centres. The only profit centre is a customer whose check has not bounced."
“I have two short tales to share; one encourages us to measure and track the value of customers the same way we account for our other long-term assets. Customers are more valuable because we can increase not just depreciate their value. The second tale is a simple study that looks at the financial performance of companies before and after they invest in a loyalty program. Customer Loyalty makes money; it is official.” “Let’s get started!” she encouraged.
Story 1: One Cadillac or Six
Which customers are truly ‘high value’?
The starting point is to ask, ‘Which customers should I focus on satisfying?’ and in most businesses, the answer is ‘those that deliver the greatest value to the business’. So, we look at last year’s sales, segment customers by value and try to work out how to best meet the needs of the supposed ‘High Value’ (HV) customers since they, as a segment, are disproportionally valuable to us.
But is this always where the most valuable customers reside; in last year’s HV segment?
One of the Acme subsidiaries agreed to examine customer value over a longer period, including the investment made to reward them with privileges typically directed to HV customers.
It turns out that the most valuable customers (in profit terms) were, in fact, customers who had remained loyal, continuing to buy widgets over more than 5 years, never once achieving the volume in a single year that would mark them for special attention. If the (practical) goal is to align marketing investment with potential customer value, the temporary highfliers were not it!
Download to read Chapter 6, we hope you enjoy our story. We are Ellipsis, the Loyalty Experts. We help you find, measure, manage and grow customer loyalty.
