Can Customer Loyalty be Bought? 

Forget about customer relationship management software, customer loyalty programs and cards. Customer loyalty can't be bought. It must be earned. Learn the 8 ways your business can earn customer loyalty.

There is no shortage of lip service in corporate N. America these days about customer loyalty. The advent of the loyalty movement began in the 80's in the airline industry and expanded to cover every major industry. Research firm Gartner estimates American businesses spent more than 1 billion dollars on loyalty programs in the year 2003. Over 75% of consumers have at least one loyalty card, according to Jupiter Research. My wallet alone has 12 loyalty cards. But does it pay?

Does Customer Loyalty Pay?

A mere 5 % increase in customer retention can result in a 75% increase in customer value according to Fred Reichheld, author of "Loyalty Rules". A great reason to pay attention to loyalty. Here are more benefits:

  • grab more sales from existing customer base
  • help spread word of mouth marketing
  • identify product/service problems earlier
  • improve profitability
  • provide a competitive advantage

Defining Customer Loyalty

Customer loyalty is the practice of finding, attracting, and retaining your customers who regularly purchase from you. Customer loyalty is not customer satisfaction. Customer satisfaction is the basic entry point of good business practices. Your small business should provide satisfaction to all your customers.

Loyalty cards and programs have their rewards and pitfalls. Rewarding customers for spending more dollars can create a vicious cycle of creating customers who want rewards and will look anywhere to obtain them. With loyalty cards and programs reaching a saturation point, how can a small business stand out?

Software, card programs, and loyalty schemes are the tools of customer loyalty programs but they aren't the essence of loyalty. To build loyalty, you must earn it. Look at these 8 ways to earn more customer loyalty for your small business:

 8 Ways for Small Business to Earn Customer Loyalty

Company Loyalty First: Customer loyalty is a 2-way street. How can you expect customer loyalty if you don't practice company loyalty? Are you loyal to your best customers or are you giving discounts and extra attention to new customers? Loyalty is about being fanatical with devotion to your best customers.

Employee Loyalty Second: Any customer loyalty program must factor in the front line of the business. It's the point of contact between customer and employee that sets the foundation of repeat business. "Hire for attitude, train for skill”. Hire nice people. As a customer, I'm always amazed when small businesses put unfriendly, surly people in front of their customers. Loyalty is often the direct result of the relationships your employees build and maintain," says Ben McConnell of marketing consulting firm Wabash & Lake and co-author of "Creating Customer Evangelists."

Quench the Thirst: Consumers are thirsty for trust following corporate scandals and the general distrust of corporations. If your small business is not trustworthy, your odds of establishing customer loyalty are diminished. Establish good business ethics and practices.

Finding Loyalty: Any small business wishing to start a customer loyalty initiative needs first to identify important customers and understand their customer's behaviors. Use whatever tools, software, and data-mining techniques to locate your repeat, regular customers. Equally vital is to know your profit margins. Don't offer discounts until you know the impact on your bottom line.

Reward Customer Retention: The key metric to track in your customer loyalty program is customer retention. How many customers are defecting? How many clients are retained? Measuring customer retention is half the battle. Your staff must be rewarded for retention. Your small business doesn't have to be like big corporations who talk retention but reward sales people for bringing in new customers only.

Use Customer-centric Language: It's easy to think you put the customer first. However, take a closer look at your marketing communications. How many times does your literature refer to "we" the company versus "you" the customer? Go back and speak from the customer's perspective.

Bolster Customer Communications: Part of customer loyalty and retention are maintaining regular contact with your most profitable customers. Communication to your best customers should take the form of showing your appreciation and providing new learning experiences to add value to your customer's life. Send special thank-you notes, surprise gifts, and regular communications such as newsletters to connect with them.

Use the Small Business Advantage: Small business will always have the advantage in connecting with customers and building a solid relationship. Your passion for helping customers with your products and services is difficult for large companies to replicate.

As customer evangelist guru Ben McConnell states, "Small businesses thrive on outstanding customer loyalty. It's their currency of growth and their best differentiator. Without loyalty, small businesses are destined to compete on a playing field with larger competitors where they are outnumbered and outwitted."

Win the customer service game by putting customer loyalty to work in your small business. Just remember, it's more than cards and software. It's more about earning trust and relationship building.

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