Customer Loyalty 101

Loyal customers spend 67% more with your business and cost 5x less than new customers. Here's a simple roadmap for creating loyalty with your existing customers.

Customer Loyalty

Loyal customers are the backbone of every fast-growing business. You’ve probably heard that it costs 5x more to acquire a new customer than to retain an existing one – and that loyal customers spend 67% more than new customers.

But how do you build a business where loyal customers are the rule, not the exception?

That’s what we’ll cover here. We’ll start by understanding what customer loyalty is, then we’ll discuss some interesting stats that show just how critical repeat customers are to your business. Finally, we’ll look at 3 simple things you can implement in your business right now to start driving loyalty and repeat purchases.

What Is Customer Loyalty?

The true meaning of loyalty is well understood, and it’s a quality that many of us share. After all, you more than likely exhibit loyal behavior toward your friends, family or even your suppliers. Just as you support and remain loyal to key individuals in your life, as a business owner, you’ll want to build that same level of allegiance with your customers.

To put it simply, customer loyalty is both an attitude and behavior. When you build loyal customers, they will favor your brand over others.

Whether they’re overly satisfied with a service you provide or stand behind your company’s core values, customer loyalty encourages consumers to consistently support your business, even n a highly competitive market.

Why Should You Care About Customer Loyalty?

It’s fairly clear that loyal customers generally equate to greater sales and, in turn, growth. But is exceptional customer service really worth the time, money and effort? Although the answer may seem obvious to some, it’s a question many business owners struggle with.

Sure, there can be costs associated with exceptional customer service, but when done effectively, the rewards will far outweigh the costs. This is especially true for small businesses, so be mindful of your approach and your customer’s overall experience when dealing with your company.

To put the importance of customer loyalty into perspective, let’s take a quick look at few startling numbers and facts:

  • According to a 2011 American Express survey, 78 percent of consumers did not complete a transaction based on a poor customer service experience. Within the same survey, it was stated that 70 percent of Americans are willing to spend an average of 13 percent more with companies who do provide exceptional customer service.
  • Approximately one out of 26 unhappy customers will complain, so a lack of feedback doesn’t necessarily mean great customer service. More importantly, 91 percent of unhappy customers who don’t complain simply leave and go elsewhere.
  • Incredibly, 97 percent of global consumers stated that customer service is important when choosing which brands they choose to buy from and show loyalty to.
  • Perhaps one of the most important stats for small business owners is the following: 80 percent of companies believe they offer “superior” customer service, while only 8 percent of their customers believe that.

As a small business owner, this may seem daunting – but it can actually be used to your advantage. When it comes to a competitive edge, such as lower prices or free shipping, the big-box stores will generally beat out small businesses. Don’t get discouraged, however, as customer service is often a weak area within these larger companies.

Within the American Express survey mentioned above, it was stated that 80 percent of Americans agree that small businesses offer better customer service in comparison to larger companies. This means that the general population sees the true value in smaller companies who place greater emphasis on the satisfaction and happiness of their customers.

You need to know where your strengths lie and what’s important for long-term growth. In summary, if you provide and promote your outstanding customer service, customer loyalty will follow.

So, how do you get started and how can you keep your customers loyal?

How Do You Build and Maintain Customer Loyalty?

Although the concept of customer loyalty appears to be fairly black and white, it’s not that simple. Just because you build a company that offers a great product doesn’t mean that customers will instantly flock to you.

Of course, in many ways, reaching your target customers is a marketing play, but that’s simply the tip of the iceberg. You can pour all the money in the world in to attracting customers, but once you have them, how will you ensure they’ll keep buying?

Let’s say for example that you launch a large marketing campaign, attracting customers to purchase your latest product. You were confident in what you were offering, but a percentage of your customers weren’t happy. In this situation, it’s up to you to rectify any issues that came up.

If you simply ignore these customers and choose the immediate profit you made, you could actually miss out on multiple future orders, costing you more money over the long-term. Not only will you have spent money to attract these customers (who will now likely never come back), but you will have missed out on an opportunity to really wow them by taking ownership of the problem and making it right.

When you address a customer’s concerns and make them feel as though they’re valued, you may be able to persuade them to come back. Just look at this way – after communicating and acknowledging their concern, you might refund the customer for their order and then provide them with a 20 percent coupon for their next purchase.

What costs you a now could result in a customer who purchases from you multiple times in the future while referring their friends to your business too. This perceived generosity helps build trust and, in reality, will often lead to more sales and more positive word-of-mouth. Coupons also encourage consumers to spend more too.

In fact, according to the firm BIA/Kelsey, small businesses estimate that in the next 12 months, 17.7 percent of their total revenue will come from customer acquisition promotions, including coupons. What’s even more interesting is that up to 77 percent of buyers say that when redeeming a coupon, they spend between $10 to $50 more than they anticipated. 17 percent also spend an extra $50 or more.

Here are some key tips in order to achieve customer loyalty:

1. Encourage Positive Relationships

Perhaps one of the most obvious places businesses fail is their ability to build positive relationships with their customer base. As a small business owner, think about the people you personally do business with and why.

Now ask yourself as a consumer, would you buy from YOUR company? Do you go above and beyond to make your customers feel like they’re important and that their business is valued?

As you focus on building relationships, small changes can make a big impact.

Start with the following tips:

  • Tell your story early and often – As humans, we remember stories. Your “About” page should tell the story of why you started your company, how you’ve grown it, what’s important to you and what your vision is moving forward. Not only should you publish your story on your web site, you should also talk about it with customers, partners and the media if you do any P.R.
  • Utilize email marketing – Let’s face it, small business owners don’t generally have a massive budget when it comes to marketing and advertising. That’s where email marketing can deliver huge returns. Email is STILL a great way to start and nurture relationships with your customers, but don’t just send updates on your products. Give them a look inside your company. Share customer interviews and case studies. Write blog posts and record short videos that will help your customers.
  • Incentivize your first-time customersRepeat customers spend 67 percent more than new customers, so it (literally) pays to spend time thinking about how you can turn your one-time customers into repeat purchasers. Coupon codes work well, but so does suggesting additional products that compliment what they previously purchased. For example, if someone bought a bracelet from you why not email them 7 days later to tell them about the matching earrings you’ve got in stock? Throw in a 20 percent off coupon and you’ll find many first-time customers become repeat purchasers quickly.

2. Provide Unbeatable Support

Surveys and research have shown that customers are sick of poor customer service. In a way, it’s sad that bad customer service has become the norm. But for business owners like you, it can act as a beneficial selling point.

It’s a cycle that can’t be ignored: the better support you provide, the more likely customers are to come back and support you. Pretty simple, right?

To ensure you’re meeting the needs of your customers, you’ll want to:

  • Find out more about their expectations – seek feedback whenever possible, especially within 7 days after placing an order.
  • Follow-up whenever you receive feedback, whether it’s positive or negative. If you can, personally respond to all feedback. Even a small “thanks for sharing” email goes a long way.
  • If you receive a complaint, confirm the validity of the issue at-hand and then provide an effective solution within 24 hours. Always make a “wrong” a “right” ASAP.

3. Give More Than Your Customers Expect

“Under promise and over deliver” is the phrase that comes to mind here. For example, if you offer free 3 day shipping, upgrade their order to overnight express if they spend more than $100 with you (AKA, if you can afford the increased shipping cost).

Little strategies like this go a long way in driving word of mouth and repeat purchases. As a personal aside, I’ve been purchasing my vitamins online from the same small business for over 5 years because they’ve employed this exact strategy – they state 3 day delivery but the package always turns up at my door the next morning.

It Starts And Ends With Your Culture

Hopefully you now have a good understanding of the benefits loyal customers can bring, as well as an idea of the approach you might want to take to drive increased loyalty in your business.

At the end of the day, creating loyal customer really does begin and end with the kind of culture you create in your company – as well as the kind of people you hire.

If you create a culture around empathy, being helpful, honest and reliable, then you’ll attract customer service folks who resonate with those values and act appropriately towards your customers.

On the other hand, if your entire focus is on “growth at all costs” and you as the business owner are willing to sacrifice loyal customers for short-term revenue, then your employees will pick up on that and act accordingly towards your customers.

If you’re not sure where to start with it comes to creating loyal customers, why not create a Net Promoter Score survey using Fieldboom.

You can ask your customers how likely they are to recommend your business to their friends and also additional feedback that creates opportunities 1) for follow up and 2) to improve loyalty.

Now make sure you take a look at our customer loyalty infographic. We’ve compiled the 20 best stats that prove, without a doubt, doubling down on your customer loyalty efforts pays.

Krista is a content writer for Fieldboom. She studied psychology and neuroscience and loves writing on all topics, especially customer service.