Reward Customer Loyalty or penalise it?

Reward Customer Loyalty or penalise it, is it really a difficult question? Many years ago, I was involved in developing customer loyalty programmes for Nissan in the UK with the aim to reward long term customers. Our belief was that it would be easier to sell new cars to existing customers rather than find new ones. The program had a series of promotions and events that only existing customers had access to and was a great success.

Reading on the BBC website today, it has come to the fore that where we don’t switch services for many things such as mobiles and insurance, the longer we stay with one provider the more expensive it gets, but if you do switch provider you can get a much lower rate.

To my simple mind, this is counter productive and will drive customers away, meaning that as a business you are investing large sales and marketing budgets winning new customers who will only stay with you for the short term. If these businesses looked more strategically at their business development and focused on marketing to existing customers and rewarding them for their loyalty they would create long-term loyalty and reduce their cost of sale.

As businesses we are all about people, be that our staff or our customers and no business is any different. The sooner companies understand that and try to understand the buying behaviour, the quicker they will be able to achieve long-term sustainable growth. It is not rocket science but you would think it was for many of these companies.

Let me know what you think.