Loyalty: A Prescription for Cutting Costs

Reichheld, Fred; Detrick, Christine
September 2003
Marketing Management;Sep/Oct2003, Vol. 12 Issue 5, p24
This article examines how retaining current customers can help save money. Across a wide range of businesses, customers generate increasing profits each year they stay with a company. In financial services, for example, a 5% increase in customer retention produces more than a 25% increase in profit. Take the case of Vanguard, a mutual fund industry cost leader. Its expense ratio--total costs as a proportion of assets under management--is just 0.26%, compared with an industry average of 1.4%. Loyalty leaders also reduce costs by building trusting relationships with employees and associates. Loyal associates nurture relationships with valuable clients. The companies that best understand cost savings through loyalty take these very deliberate steps. Modify customer-acquisition incentives. Reward sales teams and marketing channels for acquiring customers that stick around. Reallocate marketing investments. Shift resources toward programs that attract the richest mix of loyal customers. Identify ways to help under-performers. Test a 360-degree feedback system, starting with senior managers and rolling out to all employees. Use the Internet. Make sure your Web site is so simple to use that many customers will prefer this faster and cheaper alternative.


Related Articles

  • How sales reps make 360-degree turnaround. Snader, Jack // Marketing News;2/17/97, Vol. 31 Issue 4, p11 

    This article reports that to obtain a more reliable picture of the performance of their sales representatives' and other employees, an increasing number of companies are turning to an employee assessment process known as full-circle, or 360-degree, feedback. Sales managers view the process...

  • Former Pepsico executives do a 360 in managing Yum Brands' workforce. Shuit, Douglas P. // Workforce Management;Apr2005, Vol. 84 Issue 4, p59 

    Focuses on a 360-degree assessment tool designed to promote customer-oriented values in products of Yum Brands Inc. Contribution of the tool to reinforce the customer relations and international expansion of the company; Advantages provided by the shift in people management philosophy to the...

  • EMPLOYEE RELATIONS.  // People Management;1/25/1996, Vol. 2 Issue 2, p13 

    Presents updates on employee relations in Great Britain as of January 25, 1996. Introduction of 360-degree appraisal at the Department of Education and Employment; Issuance of a code of conduct on bullying at work by the Gloucester City Council in England; Series of wildcat walkouts by postal...

  • Keep employee feedback constructive, consistent. Weiss, Gail Garfinkel // Urology Times;Jun2004, Vol. 32 Issue 9, p10 

    Provides information on how manager can improve employee feedback. Benefits of feedback for employees; Need for employees to be told about one's annual performance evaluation; Effectiveness of the approach in which managers set time aside every week or every other week to meet one-on-one with...

  • Great feedback. Richardson, Annie // Training Journal;Jan2013, p66 

    The article discusses feedback in employee management, presenting suggestions for the delivery of effective feedback. According to the author, feedback should be delivered in a specific and succinct way soon after a behavior is observed. It should also focus on behavior and not an employee's...

  • The Heart's Desire. Sanders, Seiche // Quality Progress;Jul2013, Vol. 46 Issue 7, p5 

    The editor introduces several articles from the issue, including "Feeling Connected," by Jonathan D. Port, which looks at employee relations, "Take Charge," which discusses control charts in management, and "Full View," which explores the use of the plan-do-check-act cycle in employee reviews.

  • A cheat's guide to making the business case for 360-degree feedback. Goodge, Peter; Coomber, Jane // People Management;5/15/2008, Vol. 14 Issue 10, p51 

    The article presents a guide to making the business case for 360-degree feedback. An abundance of academic research supports the positive impact of 360-degree feedback on people and performance. It could add real value to coaching, change programmes, training, assessment and development centres,...

  • Leadership Tips.  // Executive Leadership;Nov2009, Vol. 24 Issue 11, p8 

    The article offers leadership tips from business experts. Author Susan Scott suggests to exchange feedback and comments as best practices for business. Chris Brogan, president of New Marketing Labs, says that retailers such as Home Depot Inc. and Whole Foods Market Inc. benefit by tapping into...

  • A 360-degree turn for the better. Ward, Peter // People Management;02/09/95, Vol. 1 Issue 3, p20 

    Evaluates the 360-degree feedback methods of performance measurement. How the feedback method works; Comparison of traditional performance measurement systems and 360-degree feedback; Features of 360-degree feedback; Sources of feedback method; Pitfalls to be avoided as result of 360-degree...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics