What is customer loyalty?
Customer loyalty can be defined as ‘a person valuing or favouring one service or product over all others’. But look further and there are other aspects to consider…
You see, customer loyalty is both behavioural (based on behaviours) and attitudinal (based on customers’ attitudes). If you go to the same shop or buy the same product time after time, you are demonstrating behavioural loyalty. If you tell others how great a product or service is, or generally feel positive about that brand, then this is attitudinal loyalty.
Loyalty can also be all about satisfaction, convenience or performance, or a combination of these qualities. Alternatively, loyalty could simply be explained by familiarity and comfort with the brand in question.
This guide looks at customer loyalty and shows how important it is and offers ways to make it work hard for your small business.
Your customers are your business
You’d be surprised at the number of businesses that do not pay enough attention to their customers. They have a website, a mobile phone and a sunny disposition, so what else do they need to do? Of course, if you are a recent start-up, you may be preoccupied with more pressing issues like cash flow and the bottom line. But the fact remains, customers are your lifeblood.
Depending on which industry you’re in, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one. Research¹ also shows increasing customer retention rates by 5% increases profits by 25% to 95%. This alone shows how important customer retention is for each and every business, and an effective customer loyalty strategy will keep your customers coming back again and again. Something else to keep in mind is that increased loyalty will also lead to increased profitability, as the longer the relationship, the lower the cost over time of maintaining that account.
Lastly, keeping your customers happy means they’re also more likely to recommend your business to others – creating new customers for you, they will also stay loyal, and be less inclined to switch.
5 ways to create better customer loyalty
Whether you deliver a product or a service, if you make your customer experience better than elsewhere, it will deliver tangible results. Loyalty is a two-way relationship, and whichever way you plan to receive loyalty to your customers, you must be loyal to your customers in return. Some people will tell you customer loyalty is a science, but it isn’t. There are some easy ways to keep good customer relationships.
Business relationships are no different to personal relations – you need regular contact to make relationships grow. When your customers get to know you better and get an insight into your company’s reputation, the result is greater trust.
There are lots of different ways you can reach out – blogging, social media posts, newsletters, prize draws, vouchers, add-ons. Think about your brand, what would work best for you? The golden rule is to make your communication relevant to your audience and not use it as a direct sell opportunity.
You could also consider involving your customers, ask them what features or activity they’d like to see in future. And by all means use your own ideas, as long as the contact is timely and beneficial, you shouldn’t go too far wrong.
Pro Tip: Think about the customers you want to focus on first. Who are your most valuable customers? And which customers carry the most influence? Target them initially, and watch your relationships bloom.
Think about customer loyalty programs. They are not just for big corporations – a well-designed scheme can work equally well for smaller businesses. A report called Achieving Big Customer Loyalty in a Small Business World² showed that of the early adopters who already have a customer loyalty program in place, 64 percent of them stated it’s been been effective. In other words, they work.
You could also encourage repeat purchase. Based on the same report, a repeat customer spends 67 percent more on a purchase than a new customer does. These customers could be transformed into powerful brand advocates who share their view with others. The result? More new customers. Now who doesn’t want that?
Pro tip: Try to include your brand’s personality and services, rather than just being vanilla. And think carefully about what rewards work best in your particular industry, see what others are doing.
Understanding your customers’ needs better, providing good customer service and staying in touch will all help improve customer loyalty.
If you are going to adopt a customer relationship management program you’ll need to rearrange your entire business to focus on the needs of customers.
Make sure customer-facing employees have all the information they need to serve customers. Hand over power so they can make certain decisions independently.
Look at standards for speed and courtesy when answering phone calls.
Use your database to record information about your customers’ buying habits so you can tailor your service better.
Find out more about your customers by generating opportunities for customer feedback.
Consider how you address customers. Using a person’s first name creates warmth, but isn’t always appropriate.
Pro Tip: Use a ‘mystery shopper’ to check standards at the points where customers interact with your business.
Be open, be honest
It sounds simple, but the more open, honest and transparent you are, the more likely you will forge better, deeper relationship with your customers.
If a company makes it easy to get information about their products or services, it tells consumers they’ve nothing to hide while sending out a message that they also care about the their customers’ needs and wants.
Certain products and services lend themselves naturally to openness and honesty, for example Fairtrade and organic brands, but they do not have a monopoly. Think carefully about your company, could you be more honest? Whatever industry you are in, if you arm consumers with the truth, and if you are completely transparent, the bond between customer and company will be a stronger one.
Pro Tip: The first port of call for many consumers is online. Is your site 100% open, honest and transparent? This would be a good place to initiate change.
Measure, analyze, learn
Another easy way to create dialogue with consumers is through measurements of customer satisfaction. Big brands do this all the time. It works for them, so there is no reason why it can’t benefit you. Getting feedback is simple, it can be done in-store, over the phone or online via email surveys.
You can gather all kinds of pointers, tips and help online to help you develop accurate feedback about your product or service.
Once the survey has taken place, or rather, when several have taken place, you will have a much more accurate idea of how happy your customers are. It will also allow you to address directly any complaints and rectify the situation. Use the statistics and learnings to continuously improve your service and product offering, which will of course help to sustain customer relationships in the long run.
Pro Tip: If your customer base is on the small side, and you have the space, then arrange interviews instead. You could hire a moderator to carry out the survey.
Like all initiatives, there can be a downside. Don’t send out too many emails; you know yourself that the companies that bombard you online can be a real turn off. And don’t push those promotions too often, as this can devalue your brand and make any offers or rewards appear less exclusive or less personal. Think hard about your customers, no one knows them as well as you. The last thing you would want a customer loyalty program to do would be to switch off customers.
If your budget allows it, it may be worth consulting a professional. You will find there are skilled and experienced marketing companies and individuals near you. They will be able to guide you to the most appropriate course of action and help you to implement your new customer loyalty scheme.
¹ Research carried out by Frederick Reichheld of Bain & Company
² Authors Jed Williams & Kristy Campbell