In a world of endless options, it is increasingly tougher to gain the loyalty of a customer. However, the effort invested to build the loyalty and keep them coming back is absolutely worth it. Studies have shown that it costs 6-7 times more to acquire a new customer than to provide service to an existing one (Ciotti, G.). According to a study done by Consumer Insight Group, those existing customers who develop a sense of loyalty to your brand will show their love in different ways: 78% will spread the word, 68% will buy more, and 54% will refuse to buy other products. Does that sound like something you’re interested in?
1. Focus on making customers, not sales
The first step to building loyalty with your customer involves viewing them as a long-term investment. Too often businesses get focused on making the most profit with each transaction, but this mindset results in only short-term goals being hit, and a continual turnover of customers. Instead of thinking sale-to-sale, think about the lifetime value of the customer. This is the net profit attributed to the entire future relationship with a customer, and can be calculated by plugging actual (or estimated if you’re new) numbers into the following formula:
(Average value of a sale) X (Number of repeat transactions) X (Average retention
time in months or years for a typical customer)
Once you know the value, you can decide how much to spend to acquire that customer and to invest in them once you have them as a customer (Sugars, B.). In order to maximize the Customer Lifetime Value, you will have to focus on building a relationship with them and keeping them happy in the long-run.
2. Personalize the service experience
A customer who feels a personal connection to the business will stick around longer, so it is important to make them feel valued. Start by simply getting to know your customers by name. Then, if you do not already have one, it is important to have a Customer Relationship Management (CRM) system in place. This allows you to keep track of information you know about your customers from past interactions, so you can maximize their service experience in the future. This could mean tracking the eyeshadow colours they tried on or purchased in the store so you can remind them the next time they’re in which looked good with their skin tone, or making a note to ask about how their son’s soccer season is going after your last interaction was cut short when they had to rush to pick them up to go to practice. Any information you discover about your customer should go into this system so that you can build strong connections with them. A customer who feels special when they come to your business will continue to come back.
3. Design customer-oriented processes
A 2011 report published by American Express revealed that 3 out of 5 customers were willing to give up a former favorite brand in order to have a better service experience. So how can you give them that experience? Designing customer-oriented processes means every decision you make in running the business revolves around how it will enhance the customer experience. Customer service standards must be created around things like acceptable wait times, return policies, warranties, the tangibles of the business, reactions to service failures and anything else that is involved in the customer’s buying process. Even back-end logistics like employee onboarding should be done thinking about how it will ultimately affect the customer experience.
4. Have strong communication channels
You can’t provide a great customer experience without communicating with your customers on a regular basis. This begins by having clear and effective ways for customers to be able to reach you. Don’t hide behind technology and leave customers desperate to find the phone number to reach you directly. Speaking with your customers as soon as they need to reach you will help you solve their problems efficiently and minimize the risk of someone getting frustrated and not coming back.
Customers also want to know things about your business that can benefit them, so something like a regular e-newsletter containing value-adding content and relevant updates is a good way to keep in touch.
5. Create a loyalty program
A well-crafted loyalty program makes the decision for the customer to use your business easy, and provides you with data about your customers which can help you personalize their service later on. Keep in mind most businesses out there now have some sort of loyalty program, so the more instantly a customer can reap the reward of using yours, the more inclined they will be to use it. A loyalty program will not solely build customer loyalty, but it’s an added bonus which may make the decision process less complicated for some customers.
6. Build loyalty among employees
If your employees feel confident about the company and are happy in their roles they are more likely to put the effort into providing a great customer experience for those who walk in the door. It’s as simple as that.
7. Sell a brand, not a product
It’s easy for a customer to switch companies when all they are looking for is the utility of the product, but it is much harder for them to switch when they feel a connection to what the brand stands for. A Corporate Executive Board study published by the Harvard Business Review showed that 64% of consumers who said that they had a strong brand relationship cited shared values as the largest driver of brand loyalty. The activewear company, lululemon, is one of the greatest examples of this. Consumers can find activewear clothing in abundance in the marketplace, but the company has created a brand representative of all things health and wellness that consumers feel connected to when they interact with them. This connection leaves consumers willing to pay a price premium and stating they will never buy other activewear brands.