This article originally appeared on Livemint.com.
The Indian economy seems to be starting its growth engines with changes in regulatory frameworks inspiring hope and confidence. As the economy rebuilds and nudges income levels up, more companies will compete to win over the Indian customer with new choices and platforms.
This presents huge opportunities, but also many challenges for companies in what is expected to be a dynamic and competitive market. How should a company respond? The economic argument for retaining existing customers and driving advocacy is compelling. Bain & Co. analysed data for several industries and discovered that a 5% increase in customer retention could yield anywhere from a 25% to a 100% improvement in profits.
Easier said than done though. Many companies talk of driving customer advocacy to foster growth, but few actually do. Only one in nine companies globally achieves sustainable and profitable growth. These winning companies have a high probability of being market leaders and one common feature: they invariably achieve twice the level of customer advocacy as others. Such loyalty leaders outperform the market on both growth (more than twice the average) and costs (15% lower), as loyal customers stay longer, command a higher wallet share and refer more—eventually leading to healthy financials and strong brand equity (click to see figure).