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Table of contents
- The Importance of Customer Loyalty
- A Product Manager's Guide to Building Customer Loyalty
- What is customer loyalty? Why does it matter?
The Importance of Customer Loyalty
While NPS is often considered The Ultimate Question when measuring the importance of customer loyalty, it can be a somewhat misleading metric. The customer might be disloyal for other reasons in the future — perhaps they are extremely price sensitive or they have a bad service experience. However, NPS is still very useful for looking at overall loyalty trends in the user base, and for uncovering Promoters that might be helpful in the future.
Customer loyalty can also be measured by the level of commitment each customer shows to the company. There are six stages in customer loyalty, and each stage increases in the amount of loyalty the customer shows. For example, a customer who is a repeat purchaser is more loyal than the customer who buys for the first time. A customer who refers a friend is more loyal than the customer who simply buys once and uses the product.
The goal of any company is to move the customer from stage one awareness all the way through to stage six repeat buyer and referrer. Can the customer service team play a big part in driving customer loyalty?
Customers love doing business with companies who offer great service. A recent Harris Interactive survey discovered that customers would pay more if they could guarantee superior service. That means that companies with great customer service will see stronger customer loyalty, and lose fewer customers solely to price competition. Customer service teams also have a big part to play in preventing disloyalty. In that same Harris Interactive survey, eighty-nine percent of respondents who had recently switched from a business to its competitor did so because of poor service.
We talk often about how high effort experiences can cause customers to become disloyal. Customer service teams that measure customer effort score can have a big impact on reducing friction and increasing customer loyalty. While satisfaction may not necessarily result in loyal customers, dissatisfaction almost certainly leads to disloyalty. We used to rely on proximity to keep customers coming back.
A Product Manager's Guide to Building Customer Loyalty
Most people would shop at the local corner store, get a savings account at the local bank and book their annual holiday at the travel agent next door. We were loyal to local businesses because we knew the owner from soccer practice. Simply by typing in a description of what they want to buy, customers can compare prices across every online business.
One click, and they can get it delivered the next day. Customer loyalty is decreasing as competition is increasing. In order to attract customers, and keep them coming back, companies need to invest in building company loyalty. By meeting and exceeding expectations consistently, companies can start to build a relationship with customers. Competing simply on price is a race to the bottom. Companies with zero customer loyalty are forced to play this game, offering deeper and deeper discounts to attract new customers.
What is customer loyalty? Why does it matter?
Follow her on Twitter sarahleeyoga to keep up with her adventures. How did you like this blog? Related articles. Timm, Ph. D Last Updated: Dec 11, Customers don't have to keep buying from you, and they don't have to tell their friends how great your business is. But if you put in the effort to earn their loyalty, that's exactly what they'll do. An ongoing challenge for any company is the retention of customers.
It is well known that getting new customers costs much more than maintaining ones already doing business with you. Incorporating these eight ingredients to a well-rounded strategy for building customer loyalty will produce dramatic results. Reliability arises from consistent follow-through and execution.
- The Art of Customer Loyalty.
- 1- Retaining customers is cheaper than acquiring new ones.
- Crucible, Part 8: A Deeper Fear.
Standardize service and product quality. McDonald's restaurants typify reliability of product quality if not service in their standardization. We all know that we can go to a McDonalds anywhere in the world and be assured of getting the same Big Mac and fries. Reliability begets repeat business. Become the McDonald's of your industry by assuring customers that they will receive the same top-quality service every time they do business with you.
Credibility is enhanced when you do exactly what you say you will do--every time. Avoid holding any hidden agenda. Your customers understand the need to make a profit, so don't try to imply that you are in business just for fun. Provide clear value and remind your customers of this value. Share your customer's sense of urgency.
Provide customers with easy access to information they may need, such as delivery schedules, tracking of shipments, etc. Use the internet for this if possible people are coming to expect such access. But learn the lesson that the better e-commerce companies are starting to get: give your customers access to live people in case of problems. Have an aggressive customer recovery strategy. Be sure that all employees recognize the value of each customer.
Teach them to recover potentially lost customers, even if the short-term cost may seem high. Empower the employee to make good decisions in light of customer needs, not just the company's. But do they know it? One way to do so is by launching a customer loyalty program, where they can earn rewards or discounts for consistent spending. For example, you could set up a program where, after every four purchases, customers get the fifth one half off.
Your VIP customers will be happy to earn the extra discount and this could motivate people to spend more. Besides an official loyalty program, consider what other ways you can show customers you're grateful for their business. Some ideas include sending out thank-you cards, throwing a customer party at the end of the year or passing along helpful, free resources through a monthly newsletter.
All these strategies can keep your business in front of your top customers and clients—and build stronger relationships. Customer satisfaction surveys are a great way to learn what people like about your business and what they don't. But it's maddening to submit a survey to a company and feel like no one is listening. This is your chance to make a difference. If you see some feedback that can actually improve your business—say a customer complains about how a sale was handled—work to fix that issue right away. Then contact the customer who gave you that idea and let them know how you'll do better.
This can help turn even an angry customer into someone who will give you a second chance. People understand that things won't be perfect every single time. By showing that you're willing to ask for feedback—and improve—customers will be more loyal because they know you're working to do better. When customers reach out for something, they want an answer—and fast.
That's why you should be careful about completely automating your sales and customer service channels.