Why Customer Loyalty and Retention Can Boost Your Profits
As a small business owner, you probably already know that customers are the bread and butter of your business; it simply will not survive without them.
But how valuable is a “loyal, repeat” customer to your business? Have you taken time to really think about that?
Successful companies all over the world recognize the importance of getting “new” customers. However, many of them almost ignore methods that help them keep their “existing” customers coming back to them on a long-term basis.
This is either because they don’t know how to get them to come back or they don’t take the time and necessary actions to make it happen.
Either way, in order to take control of your local market, your business must place some emphasis on building customer loyalty. If you stop to think about it, repeat business is much easier and less expensive to get than brand new business.
In just about any industry that exists, it is easier to get a customer whom has already purchased from you to purchase again… than it is to get a cold prospect to buy from you.
Wouldn’t you agree?
This is why focusing on efforts that will keep your current customers happy and satisfied is one of the most profitable investments you can make for your business.
If your customers become dissatisfied or turned off to your business for any reason, they will quickly move on to one of your competitors. Once that happens, it may be extremely hard to get them back.
In addition to that, you should also start using marketing tools and techniques available to you that naturally produce loyal customers as well as repeat sales.
So why is customer loyalty and retention such a big deal these days?
Well, it’s always been a big deal actually.
However, this topic is broader these days and is becoming more complex by the minute.
Customer loyalty and retention is about much more than points, discount cards, miles, and rewards; it is also about the processes, strategies, and ideas you use to build relationships with your customers.
Today, technology has changed the way companies interact with consumers. This interaction involves a much deeper level of engagement, which their customers have come to expect.
Customer engagement is the journey that leads to customer loyalty, which is the destination. In other words, deep customer relationship-building is the new way to keep them coming back for more.
Let’s take a look at some facts that confirm just how critical it is to keep your customers SATISFIED…
Why Should Customer Loyalty and Retention be a Top Priority?
- Attracting a new customer costs 5X as much as keeping an existing one (Lee Resources)
- 89{08dcb3ffdf4cb1a9379a9bc68bd0803ddaa3925f3b129155834bfceabdba3410} of consumers began doing business with a competitor following a poor customer experience (RightNow Technologies)
- Emails targeted to customer loyalty programs have a 40{08dcb3ffdf4cb1a9379a9bc68bd0803ddaa3925f3b129155834bfceabdba3410} higher open rate (Experian)
- 86{08dcb3ffdf4cb1a9379a9bc68bd0803ddaa3925f3b129155834bfceabdba3410} of consumers will pay more for a better customer experience
- 89{08dcb3ffdf4cb1a9379a9bc68bd0803ddaa3925f3b129155834bfceabdba3410} of consumers began doing business with a competitor following a poor customer experience (RightNow Technologies)
- Poor customer experiences result in an estimated $83 Billion loss by US enterprises each year because of defections and abandoned purchases (Parature)
- Unhappy customers are more likely to tell others about a negative experience… than satisfied customers will tell about a good one (Harvard Business Review)
- 25{08dcb3ffdf4cb1a9379a9bc68bd0803ddaa3925f3b129155834bfceabdba3410} of customers are likely to say something positive about their experience
- 65{08dcb3ffdf4cb1a9379a9bc68bd0803ddaa3925f3b129155834bfceabdba3410} are likely to speak negatively
- 23{08dcb3ffdf4cb1a9379a9bc68bd0803ddaa3925f3b129155834bfceabdba3410} of customers who had a positive service interaction told 10 or more people about it
- 48{08dcb3ffdf4cb1a9379a9bc68bd0803ddaa3925f3b129155834bfceabdba3410} of customers who had negative experiences told 10 or more others
- Mobile coupon usage is expected to soar; by 2016, the total redemption value of mobile coupons will be more than $43 billion (Juniper)
- Customers who engage with companies over social media spend 20{08dcb3ffdf4cb1a9379a9bc68bd0803ddaa3925f3b129155834bfceabdba3410} to 40{08dcb3ffdf4cb1a9379a9bc68bd0803ddaa3925f3b129155834bfceabdba3410} more money with those companies than other customers
- 80{08dcb3ffdf4cb1a9379a9bc68bd0803ddaa3925f3b129155834bfceabdba3410} of a company’s future profits will come from just 20{08dcb3ffdf4cb1a9379a9bc68bd0803ddaa3925f3b129155834bfceabdba3410} of their EXISTING customers (Gartner Group)
What do these numbers mean to you and the success of your company? Have you evaluated your customer retention rate? Do you have a plan to keep your customers?
How Can Customer Loyalty and Retention Help Your Business Financially?
- Reduced Marketing, Advertising, and Acquisition Costs – when you are actively keeping your happy customers coming back, you’re not so stressed about spending a lot of your budget on bringing in brand new customers. Besides, once you have a long-term customer, you don’t have to spend any additional money to get them because you already have them.
- Reduced Customer Turnover Expenses – losing customers costs you money because you have to bring in new ones to replace them. When you constantly make your customers feel satisfied, they stay. This, in turn, leads to fewer customers you have to replace over time.
- Increased Overall Loyalty Equals More Profits – studies show that loyal customers can help you boost your profits by about 25 percent. So, this means automatic sales growth for your company, which is always good. If you can manage to keep a bulk of your customers with you, you can expect to see some nice returns.
- Increased Up-selling and Cross-selling – when your customers stick with you, they tend to spend more money with you as time progresses; creating a stronger cash flow. Whether it’s brand new products and services that you offer… or existing, long-term products and services, a loyal customer is likely to try it out if they’re happy.
- Increase in Referrals – your satisfied, loyal customers will refer anyone who needs your product or service to you – without any additional effort on your part. You can look at it as free advertising. When your loyal customers start to refer others to you, your profits naturally go up even more.
- Boost in Brand Recognition and Awareness – when your customer-base grows bigger and stronger, your company’s brand naturally becomes more recognizable as more people talk about you.
- Fewer Adjustments Needed – if you have built a network of loyal customers who love the way you do things, you won’t have to implement a lot of changes trying to cater to new customers. In time, you’ll be able to familiarize yourself with the demands and needs of your loyal customers… allowing you to focus on satisfying their needs.
- Less Time Spent Creating New Relationships – yes, getting new customers is important in your business. However, it takes a lot less time, money, and effort to keep your existing customers satisfied than it does to woo new customers.
- Existing, Long-term Customers are More Forgiving – every company makes a mistake every now and then. It’s how your customers react to the mistake that can cause problems. While your newer customers may be quick to make negative remarks about your company in the case of a mistake, your long-term loyal customers are more forgiving since they “know” you. This negativity can impact your ability to get new customers.
- More Feedback and Suggestions – your loyal customers can offer great feedback or suggestions for your business since they understand your company operations and processes. Ultimately, they can help you enhance your products or services, which will lead to more sales.
In a nutshell, customer loyalty is a real emotional attachment between your customers to your brand. This happens when your customers appreciate everything about your business; as a result, they choose to keep doing business with you… which leads to more sales, profits, and return on investment (ROI).
Now, let’s take a look at some reasons why some customers will choose to do business with you again – instead of running off to one of your competitors…
What Makes Customers Come Back To Do Business With You?
- They feel appreciated – simply saying “Thank You” to them is one way to make your customers feel special. It’s a no-brainer for companies to thank their customers after buying something; it’s just proper business practice.
This is a very effective way to show how much you appreciate them.
- They received prompt service from you – even if a customer raises a complaint, your company can shine based on how you handle that complaint. There’s nothing more disappointing than hearing that customer is unhappy with your product or service.
However, if you take steps to correct the problem right away, the customer will likely do business with you again.
- They find tremendous value in your product or service – when your customers are happy with your products and services, they’re more likely to come back to your establishment – it’s as simple as that. Why keep shopping around when they can get just what they need and/or want from you?
- They come back because you invest in them – making your customers happy also involves giving away some freebies or special steep discounts every now and then. While you don’t have to do this all the time, whenever you do, your customers will greatly appreciate it.
Giving your customers more than they expected will put your company in a position to keep them around a lot longer.
- They can get special discounts going forward – if everything went well on their first visit, first-time customers will definitely come back if they signed up for your loyalty and rewards program.
These are some of the common reasons customers will return to your company to do more business.
On the flip side, why do some customers choose NOT to come back?
There are many reasons customers will do future business with one of your competitors instead of coming back to you… Are you aware of potential problems with your company that will cause some of your customers to stray?
Many businesses are not… which is a huge mistake.
What Makes Customers Choose NOT to Come Back To You?
- You are not staying in touch with them – your customers come in and make a purchase… then they’re gone. Is that how you want the relationship to end? Of course not. What you really want is for them to come back over and over again to purchase more. The only way to achieve this is by staying in touch with them. Whether it’s via email, text messaging, direct mail, phone, mobile app, or other forms of technology, establish some type of connection with your customers for an on-going relationship.
- Your staff was not attentive or they were rude – no one likes to be treated unprofessionally when doing business with a company. If a consumer experiences unprofessional, rude behavior by one of your staff members, they’re as good as gone in most cases. Rude behavior is almost like a slap in the face. Therefore, top-notch customer service must be stressed and practiced by everyone in your company.
- You were pushy or hard-selling – whenever a customer feels like they’re being “sold-to,” a red flag goes up immediately. Put yourself in their shoes – do you like aggressive sales people? Therefore, make sure your employees do not pressure your new customers to purchase your products or services – otherwise, they won’t return.
- They did not feel appreciated – there are many different things to show your appreciation for your customers – and every time you fail to show them your appreciation, you missed an opportunity to make them want to come back.
- Your product or service didn’t meet their expectations – nothing else matters in marketing if your product or service is not up to par. Most of the time, when a customer receives a bad product or bad service, you may as well call it their last visit – they will not be back.
- Your product is not priced appropriately – when pricing your products and services, be sure they make sense and are in-line with your competitors’ prices. Your customers will run far away if they feel like you’ve milked them when it comes to prices – especially if they already know that they can go elsewhere and get the same product or service for a much better price.
On the other hand, selling them something at a very cheap price could make your product or service appear to be of “poor-quality.” So be careful with that as well.
Any business today should strive to keep their loyal customers coming back for the various reasons mentioned in this report. Clearly, building local customer loyalty will help you boost profits in the process. There are so many benefits of building stronger relationships with your customers that we couldn’t possibly cover all of them in this short report.
However, if you think that you’ve been going about things the wrong way, it’s about time to change your old bad habits into good ones in order to realize the level of ROI you expect and deserve.
Obviously, acquiring brand new customers is always a good thing. But your ultimate goal should be geared towards converting them into long-time loyal customers who will buy from you over and over again.
I help local businesses in the area implement strategies that assist them in generating more repeat sales from their existing customers.
SOURCES:
http://www.oracle.com/us/products/applications/cust-exp-impact-report-epss-1560493.pdf
http://fonolo.com/blog/2012/03/customer-experience-statistics-2012/
http://www.bain.com/publications/articles/putting-social-media-to-work.aspx
http://www.gonewnorth.com/interesting-customer-retention-stats/
http://loyalty360.org/resources/article/loyalty-360-releases-top-12-customer-loyalty-trends-for-2012