NOVEMBER 20198IN MY OPINIONA technology savent, Shalini is structuring transformational solutions through technologyBy Shalini Prakash, Investment Advisor, 500Startupsvery business is aware that their client base is the lifeline of the company. A fresh stream of new customers means the potential to grow the business further. So most companies interact regularly with its customers by sending exciting in-formation and/or valuable promotions for high brand recall. The more engaged a business is with its existing customer, the more likely it is to get referred. Research suggests that it costs five times more to attract a new customer than it does to retain an exist-ing one. A study done by Frederick Reichheld of Bain & Company highlights that customer retention rates by 5% increase profits by 25% to 95%. The numbers sug-gest that a business should focus more on retaining the existing customers than acquiring new ones, meaning, retaining customers is less costly than acquiring new ones. This gives rise to loyalty programs. A loyalty or rewards program works on the princi-ple, "A repeat customer gives and gives more." Having a customer-loyalty plan could help in increasing repeat customers, which, in turn, could boost a business's revenue. Based on a report by Manta and BIA/Kelsey, a repeat customer spends 67% more on a given purchase than a new customer does, so in turn, a customer feels the need to be rewarded.This behavior forces businesses to resort to deep discounting or cashback. However, it is impossible for a business to thrive on them. It is a general tendency for people to be attracted to discounts, which is clearly the reason why businesses try to provide cost benefits for customers. However, the question today is, how ef-fective are these discounting policies in the long run? For example, Paytm mall's Cash Back Policy pro-vided cashback on almost 80% of the categories (gro-ceries and daily use products in particular) which has resulted in a steep sales decline this year be-cause of which they have removed cash backs on warehouse supplies. "Cashback was the biggest attraction for consum-ers on Paytm mall, and if that is discontinued, it di-rectly impacts sales negatively on the platform," said Mayank Shah, category head of Parle Products. THE CURRENT STATE OF LOYALTY PROGRAMS. WHAT CAN SELLERS DO?EThe new-age customer treats the points as personally earned and expects to use them as ubiquitous as cash
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