I am sure you’ve heard the marketing adage that says it’s cheaper to keep a customer than to get a new one. I’ve done some experimenting with the numbers, and from what I can see it’s true – anywhere from 5-15% cheaper. But although we may all agree with the statement, most of us don’t know the first thing on how to affect customer loyalty or even begin a conversation about it.

Today’s show fixes that. Today we’re going to focus on loyalty and not only why it is important to your competitive position in the marketplace, but also how you can measure it and use it to your advantage. Because, examining the loyalty structure of the market is a key competitive tool and becoming increasingly more important.

With me today to talk loyalty is a returning guest – one of my favorites – and the only one I know that can make loyalty research exciting and sexy. Aldy Keene is the president and CEO of The Loyalty Research Center. He’s consulted, taught at the university level, and worked with companies in nearly every industry helping them to transform customer loyalty into increased profits.

What is customer loyalty? Simply defined by my guest it is the strength of the relationship between two parties. Don't misunderstand this definition and mistake loyalty for specific outcomes of loyalty -- it is the sum of the parts.

Aldy used this example. Often people use tenure of a customer to indicate loyalty. However, how many people have been married for 25 years and they can't stand each other, but they stay together. High tenure is an outcome of loyalty, but by itself it doesn't indicate the "strength of relationship."

When creating a loyalty structure, we need to think in terms of how our business model is set up to provide high value and high uniqueness of that value to our customers. AND THEN find metrics that are easily communicated and highly discrimiate of key behaviors. These could be segmenting by loyal, neutral, and vulnerable, and then reporting margin, share of wallet, referrals, and even purchase probability. From what my guest reports, you'll find that your most profitable customers, and highest margins, are likely to be found in the loyal group.

What I find astounding is that we as companies continue benevolently ignore our loyal customers -- those with the highest margins -- and spend fortunes trying to buy the transaction of loyalty vulnerable customers. You can't buy love and strength of relationship -- you have to earn it.

This is a great show filled with powerful insights that will inspire and encourage your efforts.