The ideas of customer loyalty are not new. A friend recommended a book published in 2000 – “The Customer Marketing Method” by Jay Curry and Adam Curry. The book discusses the customer pyramid as shown below:
The simple 3-step customer marketing strategy as outlined by the authors is:
- Get new customers into your pyramid.
- Move customers higher in your pyramid.
- Keep customers from leaving the pyramid.
In other words, acquisition, retention and development of customers.
The authors also outline 10 lessons they have learnt from customer pyramids:
- The top 20% of the customers deliver 80% of revenues
- The top 20% of the customers deliver more than 100% of profits.
- Existing customers deliver up to 90% of revenues.
- The bulk of marketing budgets is often spent on noncustomers.
- Between 5% and 30% of all customers have the potential for upgrading in the customer pyramid.
- Customer satisfaction is critical for migration up the pyramid.
- Reasonably satisfied customers often defect to the competition.
- Marketing and sales are responsible for influencing customer behavior.
- Other departments and people also influence customer behavior—for better or worse.
- A 2% upward migration in the customer pyramid can mean 10% more revenues and 50% more profit!
Many of the lessons are timeless. A small fraction of customers account for disproportionate share of revenues and profits – think of these as the Best Customers. To paraphrase George Orwell’s famous quote in Animal Farm, “All customers are equal, but some customers are more equal than others.” Marketing efforts must focus on these customers, even as efforts are made to move some of the others (Rest) up to pyramid.
One can call it customer centricity or customer loyalty or any other term. The key to business success remains in identifying the category’s best customers, attracting and retaining them forever, and then getting them to recommend their family and friends. Data and technology make this easier and more competitive. That is where innovative thinking around customer loyalty as manifested in the ideas of Velvet Rope Marketing can make all the difference.
Tomorrow: Part 4