0 Critical Factors to Building Profitable Customer Loyalty … and why you have to do it, even (or especially) if the economy sucks

by Sallie Burnett, Customer Insight Group

So the economy is bad. You still have choices. You could slash your marketing budget across the board, cutting both profitable and unprofitable programs by an equal amount. Yes, it cuts costs - but it also makes a smaller company. Or you could stop marketing entirely - a survival technique that's the business equivalent of lying down on I-70 waiting for the next semi.

Or - smart you! - you could decide to take action and stack the odds in your favor. You could decide to focus your newly limited resources on the area of greatest opportunity: your existing customers, specifically those who have high growth potential. The result is lower marketing costs and increased sales - not too shabby an outcome in any economy.

If you choose to go this route, common sense, experience and statistics are on your side. According to the Customer Service Institute, it costs five times as much to attract a new customer as it does to keep an existing one satisfied. A study by Marketing Metrics found the average company has a 60-70% probability of selling again to existing customers, a 20-40% probability of successfully selling to lapsed customers - but only a 5-20% chance of selling to a prospect.

Losing a customer? That's where it gets really expensive. According to studies by the Technical Assistance Research Programs Institute, 91% of unhappy customers will never buy again from a company that has displeased them and will also voice their dissatisfaction to at least seven other people.

The good news: Growth rates soar for those who are adept at loyalty. Frederick Reicheld, author of The Loyalty Effect and Loyalty Rules, found that loyalty leaders grow on average more that twice as fast as the