The importance of customer loyalty


Reading Time: 5 mins. 22/09/2017

A good loyalty strategy can help companies build and maintain strong relations with customers and potential customers with the subsequent increase on profitability. Discover here why is important to retain your customers based on data like the acquisition cost, customer expenses and conversion probability.

CRM means much more than Customer Relationship Management. It’s a term that covers a methodology that helps the company create and organize links with its network.

Defining a Customer Relationship Management strategy is key to build and maintain strong and loyal relations with customers and prospects.

The three main benefits of a loyalty strategy that helps the company’s success are:

  • Profitability increase.
  • Productivity increase.
  • Customer service improvement.

A CRM can help companies build and maintain strong relations with customers and potential customers with the subsequent increase on profitability. By retaining customers, the cost of attracting new customers will be reduced.

Therefore, it’s important for a company to retain and promote customers because it will allow the reduction of the expenses in marketing and sales, what will mean an increase in profitability.

Based on a Forbes case study, it is 6 to 7 times more expensive to acquire a new customer that retaining an existing one. That’s the reason why maintaining existing customer should be one of the company’s main objectives.

CRM tools allow companies to communicate with customers and get to know what they want and when they want it. Through the information from customers and the data from the web browsers we can set up a sales strategy for certain products with certain customers based on their interests.

Consequently, selecting the right products and services for current customers or prospects will drive to a potential increase in sales and, as a result, an increase in benefits. However, we cannot avoid the importance of creating new relations with potential customers in order to get new incomes. A CRM strategy can help in both scenarios, working with existing customers and acquire and build new ones.

Another case study from Deloitte said that an existing customer would spend in our hotel a 67% more than a new customer.

In the end, a better knowledge on our customer’s needs is the key to give them interesting and tailored content constantly.

It’s really important that, along with the CRM strategy, we create a loyalty program that include attractive rewards for customers and potential customers in order to capture their attention and increase the brand awareness.

Based on the case study from Deloitte mentioned before, the 80% of customers state that an attractive loyalty program has a direct impact on their purchase decision, and for the 84% of them the chances of selecting a certain hotel are higher based on their loyalty program.

A good loyalty program can bring the company three important benefits:

  • Increase the average purchase: Encouraging customers for additional purchase effort through rewards.
  • Reduce the customer leak risk: Offering rewards and attractive incentives over the competitors.
  • Gain new customers: New customers that feel attracted by rewards and incentives that loyalty programs offers compared to other alternatives.

Another important benefit for the hotels is the probability to convert a sale to an existing customer or to a potential customer. While this probability is between a 5% and a 20% to new customers, with users that has already booked at the hotels, the probability to convert a sale increases to 60% - 70%.

In order to develop a good loyalty strategy, we must begin with a company’s vision that states the customer service as the core of it. This vision should aspire to have an impact on the customer and be able to involve the entire organisation to achieve it.

Every loyalty strategy must define which are the business’ goals. These goals should not imitate the business objectives and processes established so far. The new strategy should be seen as an opportunity to review and optimize the way the organization works.

Along with the goals definition, the company must define the metrics that will be used to measure the results of the new strategy. As in every company strategy, these metrics should be visible and understandable by all departments, being recommended to create balanced scorecards for all organization levels, from sales representatives up to executive level, in order to stick to that vision that’s looking to involve the whole organization.

Let’s not forget that a loyalty strategy is a part of the CRM system, which responds to a business strategy based on a technological solution. This means that a platform or tool must be implemented in order to work with the user’s data. For this reason, we have to consider the legal basis for personal data protection, define questions like which is the purpose of the usage and for how long will it be stored.

Therefore, we have to integrate different data colleting sources in order to get the users information: Website (blog and/or newsletter), e-commerce, hotel reception, mobile apps, surveys, social media, social logins for the website, etc.

As you might see, a good Customer Relationship Management strategy allows to build loyalty with your customers increasing the hotel’s profitability. For this reason, you should avoid others trying to build loyalty programs with your company data to increase their benefits.