Creating a Customer Loyalty Strategy
The Key to Success…
Customer loyalty is the key to reaching your business’s profitability goal. The real money is on the back end of the customer relationship. It doesn’t matter weather your small business (or any other business, for that matter) does consulting, accounting, contracting, or healthcare, or computer repair. If you have a small business you absolutely can not afford to ignore where the lion’s share of your sales and profit will come from; repeat business from your existing customers.
There’s a saying in the so-called Internet marketing industry; “The money is in the list.” Leaving aside for a minute that the term “Internet marketing” describes a communication medium applied to marketing, not an actual industry, that’s true not only for business owners selling online, but to any other type of business as well.
Your Company’s Value
A large part of the intrinsic value of your company is in your customer list. If selling your company is part of your exit strategy, having a long list of existing customers is going to be a large component of the value others see in your business. Simply put, you’ll be able to sell your business for a much higher price if you have a long list of satisfied customers.
When considering ongoing operations, having a list of loyal customers makes reaching your business profitability goals so much easier. Instead of focusing your marketing efforts on creating new customers within your target market, you can aim at a list of proven buyers. You’re much more likely to generate another sale from a customer who you have an ongoing relationship with, and who has bought from you in the past, than one who knows little about your business, products, or services.
Think about it, would you rather have a list of 500 prospects, or a list of 500 accounts? I thought so. Whether you have a contracting business, accounting firm, or consulting company, having an ongoing business relationship means the customer will call you first when they need something, rather than seeking out someone new. People generally take the path of least resistance when trying to get something done. It’s just human behavior, and marketing is nothing if not the study of human behavior. Calling your business when they need what you provide should be that path for your existing customers.
If your business exists in the online or traditional space, the ability to mine a list of existing customers for new sales is of incalculable value. Weather you’re an Internet marketing newbie or a “Guru” building a list is of primary importance. One of the first thing that any new Internet marketer is told is “capture that email” so they can begin an email marketing campaign. While that is definitely an important part of generating sales and profits, a list of actual customers, not just prospects, is of much greater importance.
When someone gives you their email address in exchange for a report, e-book, or newsletter, all you know is that they have some level of interest in what you do. You really know little else about them. How qualified a prospect they are you’ll not know until you begin your email marketing campaign. A list of actual customers,as in those who have already purchased from you, is infinitely more valuable. You absolutely know they are a qualified lead because they have demonstrated such by handing over their hard earned money to your business in the past.
The reality is that if you have no customer loyalty, your business is just a marketing and promotional campaign, not a viable, long term business. Eventually you’ll exhaust the supply of new customers in your market, or the ROI of your marketing efforts will be too high to sustain your operations.
Why No Love?
Given the importance of customer loyalty, it’s amazing that so few businesses create a formal customer loyalty strategy. Sure, many businesses have a rough idea about creating customer loyalty, but few formalize the strategy. Business owners will talk about good customer service, selling quality products, delivering them on time, exceeding customer expectations, and making sure they attend to the details that keep customers coming back. While all that is certainly important, it’s not a formal strategy that can be refined over time to maximize performance.
To have a formal customer loyalty strategy, you need metrics that can be measured to determine the effectiveness of your efforts. That way you can see if your strategy is effective, and make changes in an effort to improve it. You’ll know weather or not your changes are working or not and be able to create an actionable strategy.
It points to discovering as much as possible about your customers, what motivates them to buy from you, and why they return. You’ll want to measure their overall customer experience, and if possible, improve upon it. Your business depends upon it. A 1997 study by Patterson, Johnson, and Spreng found 78% of the decision to repurchase something from a business was based on customer satisfaction.
How can you measure and increase customer satisfaction and use it create a customer loyalty strategy?
It depends on the metrics you use to define your customer’s experience, but some of the more effective ones are delivery time, product selection, relative price, ease of use of your website, call back time, ease of contact, and satisfaction with the product / service as delivered, and proximity/convenience. Some things, such as time can be directly measured and assigned a value. Others must be measured on a scale with multiple points. In many cases a 5 or 7 point scale is used to define such variables, with responses ranging from extremely unsatisfied to extremely satisfied or some variation thereof. You get the point.
To make your measurements even more effective, the different attributes should be weighted. This will help in defining which components have the greatest impact in the overall level of customer satisfaction. For example, satisfaction with the product or service may have more weight than delivery time. That will depend upon your customer base and the type of business you’re operating.
One of the most important findings in the 1997 study was that meeting or exceeding customer expectations was the prime factor in reported customer satisfaction. It makes perfect sense, but if your business meets or exceeds customer expectations, they’ll give little thought to using your services again, fail to do so and you create a disconnect in their minds that soon extends to their wallets. Basically you’ll not get them to extract that Visa from their wallet again if they weren’t happy the first time.
On the flip side, studies indicate that customers give little or no thought to using your business again if you exceeded their expectations. That’s the best thing you can have, a loyal, repeat customer that automatically buys from you.
Your strategy to create customer loyalty at that level should focus first on customer satisfaction and the customer experience, and second on ensuring that you are staying at the forefront of offerings in your field. As trends emerge, you need to be at the front of them in order to give your customers no reason to turn elsewhere to satisfy their future needs. They’ll be your loyal customers until the end, and that’s the real key to reaching your business profitability goal.
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