The hypercompetitive environment in which we operate has caused companies to put all the emphasis on obtaining new customers. In their frantic race to gain market share, many companies have ignored customer service, thus creating the paradoxical situation of investing efforts in obtainment, while at the same time seeing a growing increase in customer abandonment rates, or “churn”. It is essential for companies to understand that customer Retention and Loyalization Strategies are, at the very least, equally as important as those of obtainment. And most importantly, they are more profitable.

Many companies opt for accepting the growing churn rates as a natural occurrence, while simultaneously redoubling their obtainment efforts. This position is as unacceptable as it is absurd. Unacceptable, because with better competition, it is not possible to assume that a certain percentage of customers will leave annually. Absurd, because it’s no secret that obtaining new customers is much more difficult and, above all, more costly than retaining portfolio customers. Daemon Quest studies show that retaining a customer costs between five and 15 times less than obtaining a new one.

Take, for example, an insurance company with close to two million portfolio customers and an 18% annual churn rate – average figures in the European insurance sector -. This rate means that 1,500 customers leave daily. Can we consider the loss of 1,500 customers every day as just another incidental expense? Does it make sense to redouble obtainment efforts without making the same effort to retain the customers we already have? The answer is a resounding “no”.

Every company aspires to have loyal customers. Why? Because it costs less to attend to them, they are more likely to purchase new products and services –cross-selling, up-selling- , and they have a high referencing level to recommend the company to potential customers. This overwhelming logic has led the majority of companies to launch loyalization actions that, in the majority of cases, take the form of the well-known “points programs and cards” and of “customer clubs”. These strategies are not valid in and of themselves. They may be great successes or resounding failures according to one very specific element: the degree of knowledge that companies have about their customers; about their value and needs; about their relationship and link with the company.

For this reason, every company, as we saw in the previous chapter, must have an appropriate customer portfolio Segmentation Strategy. Only a correct segmentation of the current portfolio allows us to create Retention and Loyalization Plans that are not only successful, but also profitable for the company; a circumstance that does not always happen.

The paradigm of a well-done Loyalization Strategy is that of the famous motorcycle brand, Harley-Davidson. The brand has created such a link with its customers that they are not only staunch defenders, but have made their devotion to the brand a “modus vivendi” (they wear similar clothing, share life philosophies, a passion for trips...). By creating a Customer Club (the Harley Owners Group) that brings together close to one million people worldwide, Harley-Davidson was able to get out of its deep crisis in the 80’s in order to transform itself today into the leading company in its sector.

Is there any more loyal customer than one that is capable of tattooing the brand name onto his or her body? Let’s discover how to achieve that with this selection of articles on loyalization.