How to Strengthen Customer Exit Barriers
Top businesses use some of these nine strategies to increase customer loyalty.
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Building a barrier to prevent customers from leaving their relationship with you or creating an artificial cost to switch to your competition sounds pejorative. However, exit barriers and switching costs are healthy elements of any customer relationship. Indeed, best practice suggests that customer exit barriers and switching costs should be built into every element of the customer relationship. Leading businesses use the following nine exit barriers, either alone or in combination, to deliver value to the customer relationship. Customer learning curve: If a customer has taken time to learn how to work with and become familiar with you, the chances of his staying improve. Provide customers with knowledge about a particular domain, tied to your company's products and processes. eBay extensively educates its customers in the art of the auction--or at least, the auction in eBay's world. Process integration: Becoming tightly integrated with a customer's business can make it expensive, inefficient, or painful for that customer to sever a relationship. If a home banking customer has invested the time to set up his account for online or phone-based bill payment, it will be disruptive to do this again with another bank should the customer consider switching banks for other reasons. B2B organizations can build exit barriers through shared equipment and contractual commitments like volume purchase agreements. Personalization: Consumers expect, and respond well to, personalized marketing. Using customer-specific information to customize the interaction can enhance the buying experience and overall relationship. Companies need to collect and analyze customer information that includes transactions, as well as interactions (e.g., click streams, buying behavior, preferences). Mass customization: Marketers can prevent customers from looking elsewhere by offering the ability to customize or personalize standard products to meet unique needs. Lands' End, for example, offers mass customization of its men's and women's dress shirts--as well as chinos and blue jeans--all without having to specify every detailed measurement. Risk reduction and trust: Safe is better than good. Marketers can build loyalty by reducing the perceived risk of a company's products or services and generating trust through accumulated service history and support. Companies that adopt this exit barrier use psychological strategies to make switching appear to be too risky, even in the face of more attractive solutions. Loyalty programs: Delivering incentives or benefits for frequency-of-usage or increased patronage creates tangible motivation for customers to come back. Frequent flier miles have been a marketing mainstay for years. CRM technology just makes them better and easier to weave into the sales, marketing, and service processes. Brand affinity: Marketers can build loyalty by establishing a brand's "psychic" value through positive affinity or affiliation with a community. Linking your e-commerce site to destination sites like iVillage.com and WebMD.com creates brand affinity by aggregating products and editorial content specific to a particular interest or lifestyle. Customer collaboration: Keep the customer's attention by maintaining an ongoing, value-added dialogue with the company, supply chain partners, and/or other customers. AOL and Priceline effectively use collaboration to retain customers, even though their core services are no longer leading-edge. Become a standard: Being the only choice is still a good way to keep customers. This involves dictating industry standards, either proprietary ones in a closed environment or industry standards in an open environment. The classic example is Microsoft, which has been using this winning strategy in operating systems and browsers. Restraint-of-trade issues aside, organizations can build this exit barrier through electronic channels by supplying freeware. Elizabeth Roche is vice president and research lead, Technology Research Services, META Group. She can be reached at elizabeth.roche@metagroup.com
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