Strategy

Customer Loyalty 101: The Do's & Don'ts

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Customer loyalty can seem elusive at times, going from fleeting to in abundance. There are multiple factors that impact a customer’s decision to remain loyal, especially within the services industry. Here are just a few of these factors and ways to improve customer loyalty.

What does customer loyalty mean?

Customer loyalty is defined as the “attitudinal and behavioral tendency to favor one brand over all others, whether due to satisfaction with the product or service, its convenience or performance, or simply familiarity and comfort with the brand.” This said customer loyalty is the ultimate “win” for any business.

What factors impact customer loyalty?

There’s a quote that goes something like this “It’s less expensive to keep an existing customer than to have to find a new one.” This quote is more true today than ever. In fact, in a Small Business Trends article by Matt Mansfield, statistics for customer retention show:

  • The probability of selling to an existing customer is 60-70 percent. The probability of selling to a new prospect is 5-20 percent
  • 80 percent of your future profits will come from just 20 percent of your existing customers
  • 65 percent of a company’s business comes from existing customers
  • 32 percent of executives say retaining existing customers is a priority
  • A typical American business will lose 15 percent of its customers each year
  • 27 percent of small business owners estimate that 11-20 percent of first-time customers don’t return to their business

Statistics for customer service show:
  • 82 percent of consumers in the United States said they stopped doing business with a company due to a poor customer experience
  • Companies lose 71 percent of consumers due to poor customer service
  • 68 percent of customers leave you because they perceive you are indifferent to them
  • 60 to 70 percent of customers will do business with a company again if it deals with a customer service issue fairly even if the result is not in their favor
  • 47 percent of customers would take their business to a competitor within a day of experiencing poor customer service
  • 66 percent of consumers who switched brands did so because of poor service

How is customer loyalty measured?

We tend to automatically think the only measure of customer loyalty boils down to one number - profit. And while yes, that is an important indicator, there are other measures of significance, reward, and consequence that should be considered. While customer loyalty will eventually trigger either an increase or decrease to the bottom line, there are additional signals along the way that offer insight into your chances of reaching customer loyalty. Here are some of them.

Customer Engagement

Customer engagement starts the first time any potential customer interacts with your company or its products or services. This can be direct engagement through contact by phone, email or in person. It can also be indirect through social media, third parties, blogs or other means. Why is this signal important in relation to customer loyalty? The more frequent or intently a customer interacts with your brand, the more it increases the chances they are becoming more connected and more serious about taking things to that next step - buying. Although it isn’t always a guarantee, it does indicate an escalation in the level of their interest and seriousness about your company’s product or service over one of your competitors.

Being able to tap into this through analytics tools that capture and measure the levels of engagement is important. It’s even more critical your business has the tools to interact with potential clients and to connect to move things along the buying cycle. Otherwise, analytics simply becomes a wasted exercise.

Customer Experience

Customer experience is the next signal that takes place once a potential customer becomes an existing one. Once a customer is on-board, this isn’t the end, their experience with engagement with a company and their employees, the quality of their product or service, the levels of customer service and a host of other factors will solidify their “experience.” All of these ingredients make up a customer’s perception of your brand as a whole. Price is no longer the key deciding factor in customer behavior. Experience is what many customers share with other potential customers, and today with social media, news travels at the click of a button. Creating a positive customer experience starts right from “engagement” and then on to the purchase, and through to customer support. Customer experience, however, creates many potential risk points for a breakdown in the next signal - satisfaction.

Customer Satisfaction

Customer satisfaction is another state of “perception,” and directly tied to customer loyalty. Once a customer navigates from engagement through experience, they have pretty much decided if they are satisfied with a product or service, company, leadership and customer service. They’ve decided if your brand is the right long-term fit for their needs. When customer satisfaction levels are high, they spread the news. Unfortunately, the same happens when customers are dissatisfied. Unfortunately, damage done by dissatisfied customers is often felt more. The goal for any business is to gain customers through engagement, keep them through experience and satisfaction and solidify their loyalty.

Customer Loyalty

Customer loyalty is ultimately the final goal. If customers are loyal, you’ve been successful at customer engagement, experience, and satisfaction. At this juncture make it your mission to do what you can to keep customers in a state of loyalty. Unfortunately, many businesses become complacent at this stage while focusing on getting new clients. This often leads regress back to client dissatisfaction, bad customer experience, and reduced customer engagement. It’s not until this that some companies recognize the need for customer retention strategies to help improve damaged customer loyalty.

Things companies typically do to retain customers and keep their loyalty

Who should be concerned with and involved in customer loyalty and why? The short answer is everyone, from C-level executives to middle management to front-line employees. Every employee is a touch point for customer engagement, experience, satisfaction, and loyalty. It’s not enough to have a great product or service; every employee also has the potential to make or break customer loyalty.

Why customer loyalty is an intentional and ongoing initiative

Customer loyalty isn’t accidental nor passive; it requires intentional and ongoing effort; It should be infused in your business culture and within communication and action in all levels of your business. Why? There are numerous internal and external factors that impact your company’s competitive advantage. Customer loyalty is what makes your competitive advantage sustainable. Without customer loyalty, your business has no way to ensure its own future viability for that matter. Breakdowns in customer communication, damage to your company’s reputation, product defects, poor service, gaps in the ability to deliver, or a host of other factors can cause a customer to jump ship and go to another competitor. These things happen quickly and often if companies choose to put their daily operations on autopilot.

Things companies can do to improve customer loyalty

The first step is to identify your value proposition, make a plan, execute on that plan. There are many questions that need to be asked, here are just a few:

  • What is it that drew customers to your business, products or services in the first place?
  • What keeps them loyal?
  • What are your weaknesses/ what can you improve upon?
  • Is your business ready and capable of making the necessary changes to retain customers? 

Make sure your business has the necessary tools to identify customer-centric behavior and feelings. Yes, feelings. We often get so caught up in numbers and facts that we forget, customer loyalty is driven purely off of a customer’s feelings of satisfaction or dissatisfaction. The tools and strategies you can deploy to capture customer behavior as a result of the feelings your company, product or service invokes, can be invaluable to establishing a plan to increase customer loyalty.

Business intelligence (BI) and business analytics (BA)

BI and BA tools can be invaluable for turning raw data into smart decisions. These software solutions give companies ways to accurately capture and disseminate customer behavior to help leaders make highly informed decisions faster. Ways to help determine what customers are looking for and how your businesses stacks up to their expectations. This, in turn, helps devise better customer retention strategies.

Project management tools

PM tools help your business get your products or services reach your target market faster, with higher quality and on time to meet customer expectations. It strengthens collaboration, helps businesses track progress and status of initiatives and increases the chances of successful outcomes.

Resource management tools

RM tools offer businesses a way to reduce waste and improve cost structures, making it a necessary tool for increasing customer loyalty. How? When companies effectively manage resources, improve visibility, streamline processes, they reduce gaps and uncover hidden opportunities. Often, these opportunities translate directly back to a win for customers and increase customer satisfaction and loyalty.

Communication and collaboration tools

Communication tools are always a big win for your customers and your business. Keeping communication flowing between your clients, employees, and leadership team is critical to establishing trust. Trust is paramount to customer loyalty. Positive and regular communication has been known to make all the difference in a customer’s sense of loyalty, even when a product or service isn’t as stellar as that of a competitor. '

Customer Loyalty Strategies 

Strategies that your business employs for customer loyalty should be at the forefront of all business initiatives. Make sure employees and your leadership team consistently strives to

  • Understand customer needs (and wants) especially as internal and external influences change
  • Ensure customers feel they are a top priority
  • Constantly reaffirm your goals align with that of your customers
  • Listen to, capture and act on customer feedback
  • Ensure customer experiences are positive
  • Understand what your competitors are doing better
  • Stay relevant in your market
  • Strengthen customer relations.

Regardless of which tools or strategies your business adopts, customer loyalty should be your primary focus as it is the key to developing and maintaining a sustainable competitive advantage.
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