Relationship marketing is a big opportunity for businesses that is often overlooked. You can use this to your advantage by being the company or brand that recognizes the power of relationship marketing and uses it for competitive advantage.
This morning The Ad Contrarian took a swipe at CitiBank Marketing for their foray into Social Media. Apparently the CEO is blogging. I kind of agree with him but not for the reasons he suggests. I think it’s laudable that CitiBank is putting a toe into the Social Media waters. The best way to learn about a new channel is by doing. All the Social Media consultants in the world can’t replace practical experience. My issue is not what CitiBank is doing, it’s what they aren’t doing.
When I came to America almost 20 years ago getting a credit card was difficult. As a new resident we didn’t have any credit history in America. I was finally able to obtain one from CitiBank. The credit limit was low, $1,000 if I remember correctly, but it got me started. I was loyal to CitiCard for many years. I used it as my primary business travel card. I don’t know how much cash flowed through the card but it was a lot. I was a heavy user and a profitable customer and, as is typical with heavy users, I knew it.
Now consider the 4th Relationship Marketing Principle: Good customers expect to be rewarded.
So what happened? Well in the Fall of ’09 I received a letter from CitiCard informing me that they would be raising the rate on my revolving balance to 29% as of January 1, 2010. And if I didn’t like it I could pay off my balance and cancel the card.
I canceled the card.
Customers are important. Good customers are very important. Instead of squandering their (our?) resources on Social Media experiments, CitiBank would be much better served if they focused on relationship marketing, if they focused their efforts on their best customers. I have seen studies that show that a 5% increase in loyalty among credit card customers can equal a 95% increase in the net present value of the card holder base.
- There’s a lot of leverage from keeping your best customers. But leverage goes both ways. The leaky bucket is very expensive.
- Loyal customers generate revenue and profitability 5 ways. That’s why the ROI on relationship marketing is so significant.
- There is also a competitive advantage to be had. I’m afraid that this lack of concern for customers is quite common, especially among big dumb companies. As a more enlightened marketer you can use relationship marketing to steal and keep their best customers.