Harvard Business Review on Increasing Customer Loyalty

The Mismanagement of Customer Loyalty

by Werner Reinartz and V. Kumar

THE BEST CUSTOMERS, we’re told, are loyal ones. They cost less to serve, they’re usually willing to pay more than other customers, and they often act as word-of-mouth marketers for your company. Win loyalty, therefore, and profits will follow as night follows day. Certainly that’s what CRM software vendors—and the armies of consultants who help install their systems—are claiming. And it seems that many business executives agree. Corporate expenditures on loyalty initiatives are booming: The top 16 retailers in Europe, for example, collectively spent more than $1 billion in 2000. Indeed, for the last ten years, the gospel of customer loyalty has been repeated so often and so ...