Customers for Life

Favorites Oct 26, 2011 1 Comment

Customers for Life

Customers for Life

How to Increase Long-Term Demand

Everybody’s Talking

In this digital age of lightning-fast communication, companies are discovering that today’s consumers are harder to win and keep. So it’s absolutely critical to optimize your customer’s experience through its entire life cycle, from the moment they first hear about you to the moment they passionately tell others how great you are.

One of the most critical measures that companies take to build a formidable life cycle is to offer incentives to their prospects and customers. An incentive is not a price discount; there is a very important distinction between the two.  A simple price discount may increase present or short-term demand only. In contrast, incentives increase demand not only for the present time, but also for the future.

Why Incentives?

Under what conditions will a discount offered in the current period also increase demand in the future? Customers come back in the future because they might find it convenient to buy in the same store, feel more certain about the product they have already tried or find it troublesome to learn a new store layout. The time, effort, money and uncertainty that may be part of the switching process from one company’s products or services to another’s are all switching costs. Without them, a customer’s future purchases will not likely be related to current ones.

This is why a simple price discount, which is a product-centric strategy, only works in the short-term. Incentives, on the other hand, include switching costs, are customer-centric in nature and are designed to build long-term customer relationships.

Maximizing ROI

Studies have shown that travel and lifestyle incentives consistently outperform all others in customer acquisition and retention, and ultimately, Return on Investment (ROI). Why? Because of their low-cost, yet paradoxically, high-perceived value. They have proven to exert a huge impact on consumer behavior throughout the customer life cycle. Regardless of economic conditions, travel and lifestyle incentives remain not only appealing, but also, in demand.

Travel and lifestyle incentives address the 7 determinants of customer retention:

  1. Customer expectations versus the quality of the delivered product or service
  2. Value
  3. Product uniqueness and suitability
  4. Loyalty mechanisms
  5. Ease of purchase
  • Availability
  • Convenience
  1. Customer service
  2. Ease of exit (switching-out cost)

The ability to spend incentive money effectively in order to minimize the cost or maximize the return directly contributes to a company’s bottom line and competitiveness. Incentives build business, enhance image and perpetuate the customer life cycle.

One Response to “Customers for Life”

  1. Reply The ROI of Marketing: Your Investment Guaranteed | Grand Incentives Blog says:

    [...] marketing, a 30% return on your investment is pretty shabby. But that shabby 30% earned on a $500 monthly investment for 20 years yields a [...]

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