Just recently I received a renewal notice for my RAC membership. I have been a member since 1975, so I guess that qualifies me as a loyal customer. The cost quoted was £335 which, to put it mildly, I considered a bit steep.
Instead of allowing the thing to renew via Direct Debit, therefore, like I usually would – sloth is a wonderful thing when it comes to customer loyalty – I decided to do a bit of research. How much would it cost to join either the RAC or their core competitor the AA as a new member, with the same level of service as I currently have (but minus my kids, who are now living and working in London and are not insured to drive my car anyway)?
I was not amused to learn that the figure was around £120-£130. Could that difference all be down to having two extra names on the policy? I had made the assumption that they could not possibly be all that much – it’s still the same car, isn’t it, and only one person could be driving it at any one time.
(Note to self: ASSUME makes an ASS of U and ME.)
Cue a fair and frank exchange of views with their call centre, with the end result that the cost, based on a 15 month for the price of 12 deal, was more than halved. During the conversation, it became apparent that the financial incentives for new members were not available to loyal customers like me – especially, I suspect, because my business has been taken for granted for decades. More fool me.
Why did I renew with them then, rather than swap to their chief competitor? Sloth again. But I have made a firm resolution that when the 15 months are up, I shall be moving. There’s no financial benefit in being loyal.
I have discovered in the last 18 months, while recuperating and simplifying my life and also revisiting all the suppliers I pay by Standing Order, that they are all without exception uncompetitive on price – gas, electricity, broadband, you name it. I have changed most of them, and realise that if you want the best deal on anything, you cannot expect to get it unless you shop around and move to a new supplier on a regular basis.
This seems to me the economics of the madhouse. Everyone knows it costs far more to recruit new customers than to keep existing ones, which is no doubt what informs the perceived necessity of incentivising new recruits financially – while assuming (that word again) that unwillingness to do the spadework necessary for a supplier comparison and resistance to change generally and the administrative drudgery that accompanies it, will keep the churn rate to an acceptable minimum.
Trouble is, the internet is making all that donkey work a lot easier. Now that you can compare all competitive offerings with just one input of core information and the push of a button, churn rates must be increasing at an alarming rate.
So what will engender customer loyalty? Almost certainly a concentration on those features which might permit a business to charge a premium for its services or goods (and this is not intended to be comprehensive):
* Quality
* Reliability
* Innovation
* Style
* Customer service
* Speed of response
* Reputation
Virtually no one has a unique proposition these days, in spite of the insistence of marketeers on referring to a business’s USP as if it is some sort of holy grail.
Instead, and particularly for SMEs whose services or products are often quite standard, a combination of qualities based on the above list, plus a price competitive positioning that is not based on a ‘cheapest is best’ scenario, together form what I call your uncommon offering. (This term is not mine: it was coined by adman Bob Bloom in his book The Inside Advantage, which should be required reading for every business owner.)
Now ask yourself what your own business does differently from and better than your direct competitors, to create for yourself an uncommon offering that will confer on your business a competitive advantage. Once you have articulated that, it should form the backbone of both your marketing communications and the customer service standards that underpin everything you do. Then you will start to improve your customer loyalty statistics, even if they are already respectable.
Give yourself an Inside Advantage
If you are interested in this concept, I run a one-day workshop with all senior decision makers in a business to hammer out the Who, What, How and Why of a positioning statement that leads to a long-term marketing strategy and gives you a commercial advantage in your market place.
The methodology works for all businesses of any size, from one-man band to multi-national conglomerate: I have run successful workshops in services, manufacturing, retail and the voluntary sector. If you would like to check it out with some satisfied customers, just ask and I will give you a few names to contact.
David Croydon: 01844 237450/07836 334150
or e-mail dave@hilltopconsultancy.co.uk