Jun 9, 2010 Ian Johnson
It can be argued that customer loyalty is the single most important aspect of business success. Every business knows the impacts of losing customers, and most agree that any added incentive that helps to improve their customer’s loyalty, is a huge plus. Well, there is one customer retention plan that not only keeps customers coming back for more, but actually encourages them to provide a company with real time, market and competitive information. So, what is this retention plan, and how does it work?
The Customer’s Rebate Plan
Like every business, customers just want to save money. While everyone wants the lowest possible price, most understand that there is a give and take. However, for those companies that simply offer the lowest price up front, without any incentives whatsoever, the end result will become a customer who is here today, and gone tomorrow. The question remains, how can a business offer just enough to satisfy customers and keep them coming back for more, but not so much up front that they take the first offer and run?
The back end rebate plan is the ultimate customer retention plan. Its basic premise is to incentivize the customer to continue to purchase by providing a discount each time they buy. However, the discount isn’t immediate, and is only paid out at the end of the plan. In this case, every time the customer purchases product, an amount goes into their plan. Once the plan is finished, the customer then receives a credit, or rebate, on their account for future orders. Here is a step by step summary of how the plan works.
- Agree upon a total volume to be purchased for the duration of the plan.
- Agree upon a per unit rebate amount every time the customer orders.
- Agree upon a payout date when the plan finishes, and the customer is given the credit.
Assume that a customer wants to purchase 100 units, but only take 10 per order. If the company immediately gives this customer the 100 unit price, there is no guarantee the customer will return. However, if the rebate accrued by the customer on each order of 10 units, equals the price of 100 once the entire volume is taken, then the customer get their best price, and the company gets the volume.
This Customer Retention Plan Provides Essential Market Information
Once customers have accrued enough of a rebate in their plan, they are more likely to come back when faced with a competitive bid. Otherwise, they risk losing their rebate amount. Therefore, the customer will likely discuss the price of the competitive bid, and try to secure the same pricing. This plan incentivizes the customer to return, and provides the company with real time pricing information, directly from the market.
There are all kinds of studies that show the importance of customer retention. However, the best companies know how important their loyal customers are, and will do whatever it takes to keep them coming back. Consider this but another tool in a company’s arsenal.
© 2010 Ian Johnson
Read more at Suite101: Improving Customer Loyalty: The Ultimate Customer Retention Plan http://marketingpr.suite101.com/article.cfm/improving-customer-loyalty-the-ultimate-customer-retention-plan#ixzz0tLnuws9R
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