“Loyalty programmes are often a better tool than advertising to retain customers”

The customer is king, is an old marketing adage. But how do companies keep the king happy? Through customer retention techniques like customer services, loyalty initiatives, etc., which can make for a long-lasting and beneficial relationship. One reason which makes loyalty programmes effective is that it helps to find new clients and retain the customers.

Pieter C. van den Busken, Advisory Chairman of InterDirect Central (DIREM is part of InterDirect which is an international network of independent Direct Marketing Agencies), stresses on the importance of reaching consumers directly and speaking with them in a more personalised way. “The field and idea of direct marketing is booming and in markets like UK, companies are increasingly spending about 45-55 per cent of their communication costs on direct marketing. And this is indeed an encouraging happening. The growth in this area is tremendous and especially so in young markets like Eastern Europe and to a large extent India too,” says Busken.

Busken holds that more and more classical thinking markets are getting convinced of the effectiveness of this medium: “We are seeing this growth because in some countries there are difficult economic situations and even more critical clients who demand the maximum return out of their marketing spends and ask for effective as well as measurable results. DM in this sense helps them to achieve results in that direction.”

Leena Basrur, Managing Director, DIREM, says, “Customer loyalty programmes emerged purely because of competition ever since the opening up of the markets through liberalisation. Companies look at loyalty programmes as strategic programmes which can be either used strategically or tactically.”

An important tool to maintain relationships with the customer is customer relationship management (CRM). Even though CRM has been around for at least a decade, customer service remains a trouble spot, particularly over the Internet. CRM failures over the past few years have been marked by unrealistic goals and ill-suited functional choices. It is thus logical for companies to look at not just the traditional CRM buckets, but at what makes sense for their businesses.

In a CRM programme, change management is an essential tool because consumers change and so do their behaviour as also the product. Change management essentially implies that a company should be able to upgrade and maintain or exit the process smoothly. Change management is especially important when a company feels that it cannot carry forward the customer loyalty initiatives and CRM activities, aver both Busken and Basrur.

This decision of discontinuation can also be taken if the company does not have margins to sustain a CRM programme. In all these cases it is important to take the customer through the change management and inform them of the decision, as otherwise the CRM initiatives will do more harm than good.

Coming back to DM, Busken says that many do not opt for DM “as many of them are just too lazy to undertake such a lengthy programme.” So, they opt for advertising as a communication medium.

“Advertising is easier to understand, and often the goals are fake. But in direct marketing, one has to define a goal which naturally makes one think hard. In direct marketing, the big idea is not the end goal – it is just one of the tools. A DM programme starts where advertising ends. Going forward, companies in order to communicate with its customers, will have to cross the bridge together with advertising and direct marketing as its communication tools. Even though companies draw the difference saying that advertising is above the line and direct marketing is below the line, in reality, for the customer, there is no line. The only essential here is that companies need to maintain that the brand personality remains consistent,” explains Busken.