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 How can CRM tools improve customer loyalty and
retention? As more products and services from a host of new vendors and channels become available, it becomes imperative to increase customer loyalty and retention of existing customers before attracting and acquiring new customers. Firms that manage to lower customer turnover and increase customer loyalty typically achieve higher margins and profits since margin increases and service costs decrease the longer a customer is retained. In fact, a recent Bain & Co. Inc. study shows that companies can boost revenues by as much as 85 percent if they can retain only 5 percent more of their best customers. Building loyalty in the customer base and retaining existing customers requires a company to differentiate its offerings, tailor them to individual or segment needs, and provide customers with the expected level of service and support. In order to achieve this the company must gain a greater understanding of its customers and its prospects. This can be accomplished through the following approaches: 1. The Transactional Data Approach. This has been the approach favored by traditional CRM. It consists of examining the customer's transaction history and evaluating that information to predict future behavior. This approach is effective unless there are dramatic changes in the market or the customer is presented with a new or substantially different product or service. 2. The Survey Approach. By proactively soliciting customer feedback you can gain significant insight into what the customer base may want or need. However, this information does not tie back to customers' actions and the difference between what a customer wants and what a customer actually does can be significant. 3. The Hybrid Approach. This approach consists of integrating transactional information detailing what the customer has done with insight into the customer's satisfaction levels, wants and needs. As you gain insight into the wants and needs, you can begin to create products and tailor services for specific groups of customers. Additionally, as you understand customers' satisfaction levels and the importance placed on various features and services, you can address those areas that are most important to them. The hybrid approach to CRM provides the insight required to truly understand what customers value and why they are likely to remain customers or switch to an alternative provider. By joining the quantitative usage data with the qualitative needs and satisfaction data, a company can gain a complete picture of its customer base and address it accordingly. Tailoring products and services to customers and meeting or exceeding their expectations for service builds greater loyalty and retention which in turn will lead to higher margins and increased profitability. About the expert:
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