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As you know, product/service is the soul of business and customers are its heart. Solely driving revenue and profit cannot last for long if your kitty is falling short on customers. Retaining existing customer is equally important as acquiring the new ones. This makes it imperative for a business to invest in customer loyalty. Repeat customers require lesser investment and it is a long-term profit grab that keeps revenue higher. The retention rate is not the same for all industries. Mixpanel’s Product Benchmarks report of 2017, the average customer retention rate was below 20% for most industries whereas in the SaaS industry it is above 35%.
To sustain and evolve business revenue you need loyal customers. So, what is it?
Customer loyalty is defined as selecting a brand, product or service over others irrespective of price, offers, options, etc. Customer swings one way and agrees to pay more for a specific quality of product or service.
Why is customer loyalty important?
Retaining valuable customers is always beneficial for an organization, but there is more to it.
Return of Investment: Loyal customers tend to purchase goods or service more often as compared to the new ones and mostly, the purchase amount is quite higher. This continues to grow over a period of time with stronger relationships and trust. According to research done by the Frederick Reichheld of Brain & Company, a company can incur growth in profit by 25% to 95% with customer retention of just 5%.
Word-of-mouth marketing: According to a Nielsen study, more than 90% of people trust reviews and suggestion from their friends and family. Loyal customers are expected to share a good word about your company, thereby performing no-investment-required advertising. It is an amazing head-start for the ones who are unaware of your business.
Cross-selling: Trust created with loyal customers creates an opportunity for cross-selling, where you can pitch more service/products to the existing customers. This will again grow your sales volume even with the limited customer base. For instance, a regular retailer shopping ceiling fans in bulk from Moglix is likely to shop LED lights or other appliances on the grounds of product quality, exceptional service, discounts, etc. received from Moglix.
Affordable: The real reason for leaky bucket theory to favor the plugging of holes and retaining an existing customer is the expenses involved in acquiring new customers. A huge amount of time and resource is required for new customer acquisition. According to a report by the HBR, new customer costs 5 to 25 times more than retaining an old one.
All of the above-mentioned points offer economic advantages to your business. So, how to get this benefit? Here’s the action plan.
How to grow customer loyalty?
1. Offer quality service/product: The first and foremost way to satisfy the customer for repeat purchase is by offering quality service/product for the given amount of money. A dissatisfied customer will never be attracted to your offers or discounts rather incline towards your competitors.
2. Run loyalty program: More than 80% of shoppers prefer shopping from websites/companies that run loyalty programs. That extra discount or preference offered to the existing customers makes them feel special and valued. This makes them do word-of-mouth marketing for your business. Also, this needs to be a consistent activity. With B2B customers, this turns out to be very beneficial.
3. Provide customer care service: Much ignored, but a crucial element of reputation building, customer care service is a great tool for a higher conversion rate. The efficient staff helps resolve customer’s issue and concern.
4. Be honest: Whether it is an eCommerce website or a retail store, customers look forward to having a transparent communication and transaction. This is quite harmful in case of B2B commerce. Instead of fake promises and misguiding the customers, share the reason of delay in delivery, apologies for defected product or service issues, etc. This will help customers wait patiently to receive their requirement and appreciate you for not keeping him blindfolded.
5. Personalize: This will make them feel associated with your brand or organization. Send personalized and segmented emails or messages that include loyalty offers, incentives or any other preference over the new customers. Feeling cared; existing customers are likely to come back on your website to purchase new and more items.
6. Request feedback: It is always better to collect your customer’s feedback and implement their suggestion, if possible or useful. You must inquire what do they think about your product, what changes they would like to see from your end, and what do they appreciate about your business? Feedbacks can be collected via email, phone calls, forms on the website, etc.
7. Be available: Availability is directly related to reliability. If you are there to solve your customer’s query even in odd hours, they consider your services reliable. They feel comfortable being associated with your business and gradually turn into returning customers.
8. Think more than just sale: Undoubtedly, you are running a business with the intent to make a higher sale and earn revenue. But you cannot rely on push selling. You need to pull your customers by educating them through YouTube videos, blogs, newsletters, etc. For instance, if you are selling workspace safety essentials, inform your customers about different PPE, safety essentials according to the industry type, their needs, goods and bad, and so on. Customers are hungry for knowledge; provide them before pitching your product. Education is a strong ground for building loyalty.
9. Reciprocity: In addition to loyalty programs, reciprocity is a kindness act to increase loyalty. For instance, you can send a surprise gift voucher to your existing customer, referral discounts, sharing video testimonials or showcasing your behind the scenes for the special customers. According to a Deloitte, customer insight report, obligatory factors account for 68% of the reasons for remaining in the business relationship.
10. Better behavior: In addition to monetary benefits, there is a behavioral factor that inclines customers towards your product/service over your competitors. Interact professionally and politely with your customers and accept their negative reviews with a smile to keep them calm. Courteous behavior leaves a long-term effect on customers mind and turns them into a loyal one.
11. Grow your business presence: How genuine are your offerings and you are other factors affecting customer loyalty. This will require you to invest some time and money in marketing about your business. A strong social or online presence and participation in public events are some of the quickest ways to start with. Amplifying PR presence is a must to make the newbies know about your business.
12. Follow-up: For existing customers who haven’t returned to you for some time should be followed up for a revisit. You can know why they are not showing up or you can inform them about what’s new (product/service, offers) you have for them.
To wrap up, the loyalty of customers is directly linked to their satisfaction level. So, make use of the above-mentioned ways for unwavering customer loyalty. Build on customer relationship and keep your customers retaining to your business.