The Importance and Value of Customer Loyalty to a Business
Customers are absolutely fundamental to the success of a business. A business without customers is not a proper business I think. Whether you are starting out or have are long established, a lot of time and money is spent trying to gain new customers. It is important to remember that a loyal customer can be just as valuable (if not more important) than new one. This is because you do not have to spend as much time and money marketing to them because they already know what you offer them. And it goes beyond just having customers that are satisfied, you need to have customers that are loyal. Loyal customers tend to buy more and more importantly they talk more which means a whole load of free word of mouth advertising for your business or company. Therefore building a highly loyal customer base should be the foundation of your basic business strategy.
So what is customer loyalty? It is "strength of the relationship between an individual's relative attitude and repeat patronage with a supplier."
(Fraenkel, 2009). It is as simple as that. In order to maintain to customer loyalty, you have to first win it. Many methods have been suggested, tried and tested. Some have succeeded and some have failed. Here are some of the more successful ones:
- Feedback. Feedback. Feedback. Whenever you do a job or complete a project for a client, always ask for feedback. One of the things I am a fan of, are feedback forms. This way it is written down and you have a way of referring back to see if you have accomplished the objectives you have set yourself based on these. Even if you do not have forms, verbal feedback or even an email can be useful too.
- Always listen to any complaints that you may have. Yes it is not pleasant to be told that something was not up to scratch but it also means give you somewhere to go in terms of improvements. Fixing the problem quickly will help strengthen the relationship between you and the customer (or employee, supplier etc)
If you have employees, it may be possible to train them in the art of good customer service. It is important to reiterate its importance. When good customer service has been done, reward them. Good customer service is not usually expensive and it usually starts with a smile and good attitude.
Provide a quality product or service. If you do, there is a stronger likelihood that they will come back and keep coming back.
So why are loyal customers so important? If you look at it in a purely economic and financial sense, you will see that customer loyalty has a lot to contribute when it comes to a company's bottom line and profit margin. For example:
- If you gain only a 5% increase in customer loyalty, then it can it can lift the lifetime profit per customer by as much as 95%
- In some business sectors, and increase in customer loyalty of just 2% can reduce business costs by about 10%
- It costs up to 10 times more to gain a new customer than to maintain an existing one
- If you increase employee loyalty (also extremely important) by 5%, you could potentially realise profits of 25%
So why is this, how come this is the case? This is because a loyal customer will:
- Buy from you time and time again
- More than likely increase HOW MUCH they buy from you
- Go beyond the norm and buy more than one product or service from you
- Be less likely to be lured away by your competition
- Tend to be more understanding if something goes wrong as long as you respond quickly, efficiently and without complaint.
As you can see the benefits of high customer loyalty can be measured in monetary terms as well as in other ways. There is the satisfaction that both you as the businessman and the customer get from giving and receiving exemplary service and products. Even if a new customer complains and you answer quickly, that can turn them into a loyal fan! People will only do business with people that are trustworthy so integrity is also a plus point when it comes to maintaining customer loyalty. In the current climate where people's loyalty is being tested to the limit, it is important to start treating your customers better. Remember, it is not just about winning new customers but also rewarding the ones that you have already. People not technology, are the most important asset that a business has, never forget this.
Take care and God bless readers, writers and (budding) businesspeople
© Ngozi Nwabineli - November 2009