Erroneous concepts regarding loyalization

The million dollar question every company should ask itself is not “Should we loyalize?”, but rather “Who should we loyalize?” Werner J. Reinartz, professor at the prestigious INSEAD at Fontainebleau, has developed a meticulous study that throws away the prejudices that have habitually accompanied loyalization, and denies, with a stroke of the pen, numerous erroneous theories associated with this concepti. Some examples:

• Loyal customers cost less. In the study carried out by Reinartz in several large companies, it was shown that it is more profitable to loyalize customers who have been in our portfolio for years, than it is to loyalize recently obtained customers.
  The principal is relatively simple, but absolutely essential: the majority of customers already know their value; they are aware of their importance and influence on the market. Therefore, they expect, from the beginning, to receive treatment, service, rewards, discounts, and prices according to the value they know they possess.
• Loyal customers are ready to generate greater benefits for the company: in many of the companies studied, customers designated as “loyal” had for quite some time been paying prices up to 10% lower than new customers.
• Loyal customers have a great reference power, and they serve as consumer motivators: The report did not detect practically any link between the length of the customer / provider relationship and the “word of mouth” recommendation.

Does the fact that these and other topics frequently associated with loyalization actions are being questioned mean that loyalizing is not profitable? The answer is “no”. Loyalization strategies are useful as long as they are based on a solid knowledge of the customer portfolio