Bob's Blog

Customer Loyalty

Rant alert. Far be it from us to lavish praise on Tesco; they were regularly up in front of the Beak having their knuckles rapped for screwing supplier margins into the ground, but they didn’t get as big as they are by accident. One suspects that in no small part is because they encouraged customer loyalty, even giving their shoppers a nice little card to carry around, make them feel good and get a little knocked off their fuel bills. Clever. Many other organisations now do the same, but Tesco, if not one of the first, certainly were very successful with it.

Trying to develop customer loyalty is no more than common sense. A few years back, the RAC had a membership structure that reduced the annual costs, provided of course you didn’t need to call them out, so that the longer you stayed with them, the more effectively you saved, on what should be called breakdown insurance, until you reached the lowest annual ‘tariff’. Even the pubs a while ago were trialling a beer incentive of getting your seventh pint free. No, as far as I know the offer wasn’t restricted to any given night, rather as an ongoing, stamp your card promotion. We’d all be able to recall many other such schemes.

There are, of course, very good reasons for doing this. In order to attract new customers, marketing, sales and patience are all deployed, and they all have associated costs, and therefore the cost of acquisition is factored into business planning. All organisations with customers budget for cost of acquisition. Here comes the rant. So why do utilities and telecoms companies offer ‘sweeteners’ to new customers and ignore the loyalty of their faithful existing clients? Of course, they’re after the ‘switchers’. But surely, by incentivising the switcher rather than the existing, all that can happen is more existing customers will morph into switchers. This, in turn, leads to a fluid and unreliable client base which as anyone in business will tell you, is to be avoided at all costs.

If we were to come into your organisation with a marketing plan that would transform what was a great, steady and collaborative client base into a quivering mass of uncertainty and would quadruple your marketing spend, we would expect to be shown the door pretty sharpish. Yet some bright sparks seem to have thought that was a good idea. So, all utilities and telcos, best not talk to us, eh? We think our clients do like stability and customer loyalty, and they don’t like spending four times than they need to on marketing. Come on chaps, figure it out.