Customer Loyalty
There is an old Latin saying, Qui non proficit, deficit. In marketing, the opposite is also sometimes true: If you’re not losing the customers you already have-if you can maintain and deepen their loyalty-that can be a victory.
The AT&T Opportunity Calling catalog should really be classified as a customer loyalty program rather than a sales stimulation program. Its purpose is to keep you from switching to another long-distance phone service, not to stimulate you to make more long-distance calls. When the government deregulated phone service, it mandated free and equal competition among companies offering long-distance service. But canny old Ma Bell got the jump on her young whipper-snapper competitors by launching this massive rewards program.
In a stroke of genius, AT&T decided to offer handsome rewards which wouldn’t cost them anything and wouldn’t require any warehouses and shipping facilities for handling merchandise. They found the answer in negotiating rebates and discounts they could offer on brand-name products and services widely available at retail. And apparently it was easy to find plenty of product and service companies eager to participate-it gave the latter a chance to make powerful sales promotion offers to 22 million residential phone customers at no advertising cost.
Within 2 years after the program was launched, the response rate per catalog had edged up to 5 percent. AT&T had built a mighty defense, backed by a $100 million promotion budget, against attempts by Sprint, MCI, and the other long-distance companies to steal their customers in the government-mandated free-for-all competition. AT&T had issued 3 million certificates and checks with a face value of $50 million. Some 50 percent of the eligible customers in their database said they had used the program or intended to.
What descriptive name should be given to this new kind of marketing. Is it sales promotion? Is it direct marketing? It is neither and both. We prefer to call it MaxiMarketing.
Another way you can sustain customer loyalty through your customer database is to set up a program which will frequently repromote your company’s image and positioning-and, ideally, to get your customers or other advertisers to pay for it.
Olin Corporation, whose products include pool-care chemicals, publishes an annual magazine called Poolife and mails it to 1.2 million swimming pool owners. An important source of names is letters or calls to Olin for information on product rebates or services.
The magazine contains articles on water care and pool maintenance as well as features on swimwear, computer programs for pool care, food and entertainment ideas. In addition to promoting Olin products, the magazine carries paid advertising by other companies wishing to reach pool owners.
We don’t know whether the paid advertising is enough to cover the entire annual expense of $300,000 or so, but, according to a spokesperson, “Advertiser response has been terrific.” So any way you figure it, Olin comes out pretty well.
Your customer loyalty promotion to your database can also be financed and justified by its encouragement of future purchases of the same or a better product.
Prince Manufacturing Company, makers of Prince tennis equipment, publishes a quarterly magazine called Prince and mails it free to 150,000 requesters. They launched it by sending a test issue to 60,000 in-house names, who were asked to return a postcard if they wished to receive further copies. Some 54 percent returned the cards. Since then additional names have come in from purchasers of Prince racquets who send in the hang tag placed on each racquet.
Each issue includes an interview with a top tennis pro and a guest column of tips from a noted tennis coach. But it also keeps the subscriber aware of the Prince brand name and product line, including new and higher-priced rackets, so that Prince will be favorably positioned in the subscriber’s mind when the customer’s old racket wears out.
Dierberg Food Stores of St. Louis has provided a striking example of how retailers can promote through a customer database and get others to pay most of the cost. This nine-store chain maintains a database of 150,000 customers. Four times a year it sends them a beautiful 12-page magazine of recipes, the Customer Club News. Bound into the center is an envelope of money-saving coupons, some of them cents-off coupons redeemable at Dierberg stores, others coupons by other local merchants and restaurants who pay for the privilege of being included. This outside advertising plus co-op ad money from food manufacturers pays most of the cost of printing and mailing the magazine.
