Whether you are a start-up or a Fortune 500 company, customer loyalty is your magic potion for running a profitable business. First and foremost, customer acquisition is about attracting new customers to grow the company. Customer loyalty is focused on keeping customers happy and doing more business with them.
Why should you focus on customer loyalty?
While customer acquisition is important to growing your customer base without a proper customer retention strategy in place. However, they do not increase your sales. To understand this better, let’s look at the revenue growth equation used by companies like Google and Facebook.
Monthly revenue = (number of new customers acquired in the month x average amount per new customer) + (number of returning customers per month x average spend per returning customer) + (number of revived customers per month x average spend) per resurrected customer)
This equation shows that your business growth will be driven not just by new customers, but by returning customers and revitalized customers. While returning customers proactively shop at your company, resurrected customers stay inactive for a while, but come back after being constantly toasted. Attracting new customers and revitalizing those dormant takes more time and resources, and requires existing customers to be retained and returned to make more purchases.
If you’re like most small business owners such as you run an online store, you have a limited budget and resources to grow your business. This is when customer retention becomes an effective tactic. In the recent past, several studies have shown that customer loyalty is the most cost-effective source of growth and requires the least amount of resources to run. Let’s look at some results that repeat this fact:
Acquiring new customers is expensive. However, by simply spending 1 / 5th of that acquisition cost, it’s 60 to 70% more likely that a company will make a sale to an existing customer.
Returning customers are worth more sales and profits. The Average Returning Customer Spends 67% More Each Year Just three years after their first purchase.
Returning customers help acquire new ones at a lower cost. A second customer gets an average of 3 people and the number grows with the number of repeat purchases.
Return customers are less sensitive to price changes. They are more likely to buy from you than from the competition, even if business or market conditions force you to raise your prices.
How can a customer loyalty strategy be implemented successfully?
The most effective customer loyalty strategies include various initiatives and programs that complement each other to create a customer experience that tends to keep customers sticking to and continuing to shop with you. Here are a few ways you could get started:
Identify factors that destroy your customer loyalty:
Your customers could stop doing business with you for a variety of reasons. For example, your customers might be dissatisfied with your product, price, or service. Or they could have left your market entirely. So, go through emails, chats, conduct interviews, and get feedback to understand why your customers are no longer doing business with you. And work to prevent customer churn by proactively addressing these issues. You can also offer them discount coupons and deals to attract them to your product again.
Create a loyalty program that values every customer action:
Customers engage with your brand in different ways. Create a loyalty program that rewards customers not only for purchases but also for other actions that lead to the purchase decision. Rewarding every interaction is a great way to keep your customers coming back. For example, you could reward certain points when your customer watches your product video, downloads your mobile app, shares your social media content, or subscribes to your blog.
Make customer service a priority:
Customers stay with a company that values them. So make sure that every member of your team treats your customer in a way that creates more memorable positive experiences. Challenge your team to be helpful even if there is no immediate benefit. When a customer receives a complaint, respond to the problem and make them feel like the complaint is being taken seriously. The way you deal with a complaint is the difference between keeping a customer or losing a customer.
Stay in constant contact with your customers:
Sending out a regular newsletter is a great way to keep your customers updated and let them know how valuable they are. Send new product offers and seasonal offers in the newsletters. But don’t apply too much for your products and services. Focus on adding value to customers by sharing tips, advice, and suggestions that will make their jobs easier. Remember, newsletters are not intended to create great sales pitches, but rather to make your customers feel unique and valued.
When businesses are competing for the same customers, retention should be a business priority rather than a convenience. Implement what you just read to create a successful customer loyalty strategy.