Loyalty Marketing has become a key strategy for most companies in today's competitive marketplace. The practice is based on a very simple premise - as you develop stronger relationships with your best customers, they will stay with you longer; the longer they stay, the more profitable they become.

It costs less to retain a customer than to acquire a new one. To retain a customer involves many factors - personal relationships, product quality, customer service, price, and other brand values.

Loyalty is relationship-based, focused on the overall customer experience and is predictive of how a customer will behave in the future. The most reliable predictor of how your customer will behave is the strength of that relationship and the secret to measuring it lies in customers’ past behavior.

Fractal has developed new, proprietary mathematical models to measure loyalty with greater reliability than traditional methods, provided that past transaction data (Invoices, orders, or other customer interaction data) is available.

Fractal’s methodology examines the entire available history of customers’ purchase behavior and interaction with the firm. It enables one to rank customers by loyalty score, and segment them into groups based on their behavior.

These rankings reveal trends, uncover purchase patterns, and help predict customer’s future purchases, and hence help forecast company’s revenue. Loyalty Builders’ reports will identify the customers whose loyalty is slipping and customers whose loyalty is growing - the knowledge that can help suggest the most effective way to serve the customer who shows up in your showroom, at your website, or your call center.

Traditionally, the approach has been to segment a population into separate ‘buckets’ based on demographics and attitudes. Fractal’s methodology, however, segments customers by behavior and generates quantitative measures of loyalty based on that behavior.

This behavioral data already exists in the order entry or accounting systems. Every new transaction adds to the data set and hence the learning can be continuous. Most important, the parameters of loyalty in the Fractal model create a multi-dimensional picture of the customer and produce segmentation that illuminates behavior patterns, which may otherwise go unnoticed.

In the realm of customer behavior, the kinds of information most often requested are account-level predictions:

Which customers are likely to buy again in the near future?
What products or services are they likely to buy?
Which customers are potential defectors?
Which customers are good prospects to make an incremental purchase above their usual purchase rate?
Which customers are good candidates to buy a type of product that they have not previously purchased?
What is the lifetime value of a particular customer?

Customer satisfaction surveys, which are backwards-looking measures, can’t deliver this kind of information. Satisfaction is quick to grow and just as quick to disappear. It’s tied most closely to a customer’s last transaction or interaction. In contrast, customer loyalty is slow to grow and slow to fade away. Because loyalty analysis predicts future behavior, it can answer the questions above.

What does one like to know about customers’ future behavior? How valuable would this kind of information be to a company?

Depending on one’s unique marketplace situation, one may have a variety of Loyalty Marketing objectives. These include:

· Frequency – driving customer purchase frequency
· Retention – improving customer loyalty strategies, creating barriers to exit, preventing defection of valuable customers
· Relationship Building – developing two-way communication and enhanced customer learning, and improving customer satisfaction
· Advocacy – creating a loyal customer who promotes your brand and refers new customers

Whether one is trying to retain customers, motivate them to increase their purchase activity, trying to establish loyalty relationships, or all of the above, the basic principles of Loyalty Marketing rely on four key components:

1. Dialogue Marketing – the right messages delivered the right way to the right people at the right time

2. Customer Rewards & Benefit Programs – an effective platform of earning and reward offers with a broad selection to match individual customer needs and preferences

3. Customer Behavior Tracking – a systematic approach to tracking and storing customer spending and response behaviors and integrating the right mix of communications and rewards

4. Measurement – a plan to track and measure key performance objectives and customer retention analysis data against loyalty program objectives