'Millions' are wasted by blind loyalty

For all the talk about customer loyalty and relationship marketing, business is missing a trick. Millions of pounds are being squandered through lack of investment in effective customer retention and a misunderstanding of the true value of different customers, according to a report to be published this week by Abram Hawkes, the marketing consultancy.

Most companies in the business-to-business sector (some 90 per cent of 262 surveyed) claim to recognise the value of customer retention. And 61 per cent of these say they have evidence that proves a link between customer loyalty activity and the length of a customer's commercial lifetime. Forty five per cent of respondents in companies operating loyalty schemes even consider loyalty activities yield greater returns than above-the- line advertising.

Yet just 55 per cent have some sort of customer charter and only 44 per cent operate a care programme to nurture their most valuable asset, the report claims. Only 52 per cent claim to know their customers' lifetime value. And 56 per cent of organisations operating loyalty schemes offer them to all customers instead of segmenting their customer base to ensure the most effective use of resources.

The findings follow an earlier survey conducted by Abram Hawkes that analysed customer loyalty programmes for consumers. They reveal that a number of lessons are not being learnt, says Michael Brewer, a director at Abram Hawkes. "Although there is a commonly accepted line between consumer and business-to-business activities, increasingly this distinction is blurring. Is a self-employed customer a consumer or a business client? Distinct differences in consumer patterns are not always clear."

Customer loyalty schemes are increasingly becoming acknowledged as a relevant tool for the traditional business-to-business sector. Yet their effectiveness is often limited, either by over-enthusiasm or by ignorance. "The high number believing customer loyalty is a more effective use of money than advertising is surprising," he says. "But it reflects a sector where much marketing remains unsophisticated, as does evaluation of campaigns." While the situation is improving, all too often marketers follow the lead of competitors rather than assessing which approach is the best for them.

"Business-to-business cannot necessarily follow the accepted route of clubs, cards and points," he explains. "Yet many immediately think 'let's follow Tesco's example and launch a loyalty card'. A wiser approach is to understand the buyer's psychology and motivation. In many cases, a more appropriate step is to focus on improving service or providing a more tangible reward."

Mr Brewer said loyalty schemes were often no more than promotions leading to short-term adjustments in spending patterns. Few genuinely singled out customerneeds and only a small number of businesses surveyed could actually define their customers' worth. "This potentially means that the same amount of money will be spent holding on to a customer with a lifetime value of pounds l,000 as a customer worth pounds 1m." Mr Brewer said that those working in the motor industry, capital equipment and media have the best understanding of the lifetime value of clients. And telecoms and banking are the most likely sectors to operate a customer charter - both already invest heavily in consumer loyalty schemes.

Where a business has thousands of clients it can more easily adopt tactics such as cards, catalogues and points to boost customer loyalty. "With larger companies, the mechanics cannot be implemented in the same way. It's more an attitudinal shift which is required." Similar principles should be applied to companies' consumer loyalty schemes, too, Mr Brewer believes. "In all areas of business, there are two key requirements: contact management and effective tracking and the ability to collect sufficient information to analyse impact."

Effective customer loyalty programmes do not come cheap, he added. Nor does success come quickly. And once implemented, they can be difficult to withdraw from. "Unless no one has shown any interest in your scheme, how do you explain to those that have that you won't be doing it any more?"

Start your day with The Independent, sign up for daily news emails
Voices
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm today
News
File: James Woods attends the 52nd New York Film Festival at Walter Reade Theater on September 27, 2014
peopleActor was tweeting in wake of NYPD police shooting
Sport
Martin Skrtel heads in the dramatic equaliser
SPORTLiverpool vs Arsenal match report: Bandaged Martin Skrtel heads home in the 97th-minute
News
Billie Whitelaw was best known for her close collaboration with playwright Samuel Beckett, here performing in a Beckett Trilogy at The Riverside Studios, Hammersmith
people'Omen' star was best known for stage work with Samuel Beckett
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'