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Dorothy Lane Market's Customer Retention Strategy
Back in 1995, Norman Mayne, the CEO of Dorothy Lane Market, knew he was creating a major stir when he was one of the first executives to start talking about "firing" customers. But he did just that, and then launched Club DLM. Still the most radical, data-driven loyalty program in the supermarket industry, Club DLM is aimed squarely at attracting, keeping and pampering only the most profitable and most regular customers at the expense of everyone else. "If you are loyal, we treat you very well," says Mayne, whose father, Calvin, started Dorothy Lane as a roadside food stand in 1948. If you are not? Go elsewhere. Mayne fully acknowledges he is ceded the cherry-pickers to Kroger and Meijer, his chain-store rivals. Mayne figures it is one big reason why he is been able to keep Dayton, Ohio-based Dorothy Lane Market in the black amid growing competition.
"Customer defections have a surprisingly powerful impact on the bottom line, when defections are cut in half, the average growth rate more than doubles. A 5 percent change in the rate of customer retention swings profit increases from 25 percent all the way to 100 percent.” (Frederick F. Reichheld, 1996).Companies can learn from this example, to Attract, keep and pamper only the most profitable and most regular customers at the expense of everyone else.
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YouSigma. (2008). “Dorothy Lane Market's Customer Retention Strategy." From http://www.yousigma.com.
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