But as retail executives explore various approaches to boosting sales, they should be mindful to balance those efforts with another critical component of consistent business growth: retaining their best customers. After all, any net gains in new customer revenues will be offset by unsatisfied or underserved existing customers who decide to take their business elsewhere.

Too often, companies pay inadequate attention to customer retention and it can come back and bite them. Studies have shown that it can cost a company up to six times as much to replace a customer as it is to keep them. In retail, on average, it takes more than 10 customers to replace one high value customer. Just as it doesn't make financial sense to spend a lot of money to retain low-value customers, executives are wise to invest in customer satisfaction and loyalty efforts that are designed to retain their most valuable customers--both current and long-term.

Increase satisfaction and loyalty

One effective way of retaining top retail customers is through dynamic loyalty programs. Still, it's important for retail executives to remember that 80 percent of consumers belong to multiple loyalty programs, so it's essential that a loyalty program has unique elements in order to stand out. Additionally, most loyalty programs are simply points or rewards programs when instead they should be focused on retaining high-value customers. Companies need to find better ways of developing loyalty programs that actually keep customers loyal.

Consumers are increasingly cherry-picking and splitting their shopping across different retailers. Bargain-hunting certainly plays into this, but another critical factor is the transparency with which people are able compare prices. By visiting different websites and soliciting feedback through social channels, consumers can easily compare product prices and recommendations.

As retailers look to leverage loyalty programs to retain high-value customers, decision-makers can use analytics to examine customer information such as customer behaviors, spending patterns, and income. They can also use predictive analytics to help forecast spending among customer segments (e.g., married couples who recently had a baby).

Retailers can use a variety of insights from different marketing efforts to strengthen their loyalty programs. For instance, executives can examine the types of offers that have been made to different groups of customers, along with the communication channels that were used, to help determine the effectiveness of campaigns.

Meanwhile, information that's obtained about customers' shopping habits and preferences can also be gleaned from data that's gathered in loyalty programs. This type of information can help retailers to decide things like the size of a store to be opened, where to open it, the types of pricing levels to be offered for different products, as well as the types of events to be held.

The power of personalization

Companies that develop personalized loyalty programs tend to have a greater impact with high-value customers. For example, some retailers that Peppers & Rogers Group has worked with have established loyalty program elements that exude exclusivity. These include VIP hours, assistance from fashion experts, free repairs, etc.

Retailers should strive to make loyalty programs easy to understand and motivational. Provide customers with clear targets to pursue and regular updates on promotions helps to make loyalty programs engaging while encouraging frequent use of them.

Certainly retailers that focus on low-margin products face greater challenges in making loyalty programs attractive compared to say a hotel or airline. But one advantage retailers do command is the frequency of shopping, especially for high-volume categories such as groceries or clothing. Retailers that take advantage of these opportunities and craft personalized loyalty programs that are geared toward high-value customers stand a greater chance of retaining those customers and their future business.

About the Author: Orkun Oguz is a Partner of Peppers & Rogers Group. Contact him at ooguz@1to1.com.