[LAST UPDATED]:30th October, 2016
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Database Marketing is interesting because it is not the traditional marketing we are familiar with, and it consists of a company database which tracks customer purchase behavior and dollars spent per customer. Also, a database may analyze a company’s best customers to determine each client’s profitability.
Company’s need to understand their customer base on an individual level. Every customer requires something different! The idea is to build long lasting relationships with customers. Managers can create stronger relationships by using bond forming activities. There are three types of bonds:
- Financial bonds
- Social bonds
- Structural bonds
Financial bonds may be payments from the customer to the business. Social bonds may be strong friendships in terms of long lasting relationships. Structural bonds make leaving the company or product difficult because of the hassle of switching to another product or company.
Which bond is the strongest?
Structural bonds are the strongest. Financial bonds are the weakest of the three bonds.
More On Building Relationships
Soft benefits are benefits that cost the firm little, but are valued by the customer and makes them feel special. People love to special! Do whatever you can do to make a customer feel valued. Go out of your way to show your appreciation. Your best customers deserve the most appreciation; not every customer is treated equally.
Involve the customers in the decision making process! Customers love to feel part of the business. Again, customers will feel the need to advocate for the company. A company may want to offer technical support or some other perk to top clients to show loyalty appreciation. Structural bonds make it difficult for a customer to leave the company because they will feel an emotional loss.
Bottomline, Company’s should be retaining current customers! Simply, It is much more costly to find new customers. Further, The average company loses about 10% of its customers per year. Most importantly, A mere 5% reduction in the loss of current customers can increase overall profits by 25% to 75%. In conclusion, The longer you have a customer, the more profitable they will become. Also, resolve complaints fast to improve positive word of mouth!
Manage customer expectations.
Long ago, company’s maintained a product focus; and now, company’s maintain a customer focus. So, Customer Centric firms know which of their customers are the most important to the firm! Customer equity refers to the future value of a company’s customers, and Customer lifetime value is used to measure customer equity.
Lifetime Value of Customers
So, the lifetime value of a customer is important because retaining a customer can create profits long into the future for a company.