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April 17, 2013

The Value of Repeat Business

by wheatr

In line with what we have often discussed in class, this article discusses the additional long-term value loyal customers can provide. The article starts by saying, “Once a prospective customer becomes a buyer, it’s important for marketers not to overlook or ignore their their needs.” This reiterates what we have discussed about the need to continue serving customers post-sale and along all touch points to truly create customer value. The article also asserts that it usually takes 3-5 years for companies to reach the point that 25% of their customers are repeat customers. This demonstrates the need for long-term investment and patience in waiting to see returns – something today’s businesses are often unwilling to do. Through several infographics, the article offers tree recommendations for “providing a customer experience the customer deems worth repeating”:

  • Encourage High Initial Purchase.
  • Push for the Second Sale.
  • Invest 25% of the Marketing Budget On Returning Customers.

While I do not challenge these recommendations overall, I do draw a slight issue with one of the statements made a few times in the article – that firms should especially focus the 25% of marketing efforts that should go toward return customers on those who make larger purchases. While I undsertnad the logic – retain those customers who buy more – I argues this is a risky strategy because high disposable income customers’ loyalty is both expensive and difficult to obtain. Those who have to think less about the value of their purchases will garner less value from discounts and marketing ploys. In addition, they can afford to spend anywhere and thus do not have to make decisions between companies. As such, I suggest companies avoid investing too heavily in trying to obtain the loyalty of these customers.

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