For any business or corporation, one of the major targets is to earn and maximize the profits. And this target will only be granted as long as business delivers a top-notch quality product that succeeds in keeping customers happy and satisfied. However this is not just the one time transaction.
As much as gathering new customers is important, it is equally crucial to keep the old customers happy as they are ones who have capability to boost your revenue by promoting your brand. If the customer is satisfied with the product, they will most likely make the purchase again as well as recommend the product to others. This movement is known is customer loyalty.
Customer loyalty is identified as positive relationship between the business and customer which takes place when the customer is more willing to use the product from a certain business repeatedly rather than going for competitors’ products. This happens when customer has an overall positive experience from the usage of the product.
From this statement, we can derive one significant concept that is if the customer is loyal user of the specific brand, any form of adjustments in the form of pricing or added features will not discourage the future purchase from old customers as long as they get same standard of quality that they prefer.
Other than continual purchase, there are other forms of customer loyalty which are:
1) They recommend your products to their friends and family. Hence indirectly becoming brand promoters of your business.
2) Comfort over unknown. They are not interested in competitors’ products despite additional benefits that come with it.
3) If any issue arises, the customer has a full trust and understanding that business will look after their problem in a best possible way.
4) They provide a valuable feedback which can be used in making further improvements in product.
The importance of customer loyalty
There are several reasons that why customer loyalty holds significance for any kind of business be it producer or service provider.
a) Firstly, it is more costly to convince the new customer that why they should purchase your product. It is due to fact that new customer doesn’t have any knowledge what to expect from the usage of the product.
Hence a set of creative marketing strategies will have to be used in order to encourage them to buy the product. While on the other hand, loyal customer don’t require any convincing as they are already familiar with the product and have used it.
b) Secondly they are the sustainable source of earning additional profits and revenue. Since they are least concerned with prices, these loyal customers will be more willing to spend more as they trust the brand and contentment they get from the product.
c) Thirdly the feedback provided by the loyal customers is invaluable. This is vital from this perspective that when a customer becomes loyal to one specific brand, they will be eager to offer suggestions that what changes business can make to improve their product and services they currently offer.
d) Loyal customers offer long term benefits in the form of repeated purchases. The rate of customer retention increases as customer continues to have good experience from the product. Hence this expands the revenue and reduces the excessive expenditure which otherwise would have been spend on marketing expenditure.
How to build customer loyalty?
Now that we have read the importance of customer loyalty, the next question is, how can we build customer loyalty? What are some measures that should be taken to ensure that customer stays loyal to the brand for long term period? below are some measures that can implemented to obtain customer loyalty which are :
1. Know your customer
If you have no idea who your customer is, then thinking about how to get them to pay for your product is just like finding the needle in a haystack. To reach any destination, you need a map.
Similarly in order to make effective sales, you need to collect as much as information and data about your customers regarding their buying habits, their preferences, what do they look for when they are making the purchase? Is it quality or availability?
By doing this you will get a clear image about your target market. The gathered information can later on be used for solving any unforeseen issues and providing a quality service.
2. Set up the customer loyalty program
The best way to earn the trust of the old customers is establishing the customer loyalty program. Customer loyalty program is basically a system where you reward a customer with a point with every purchase they make; and when those points add up to specific level, you reward the customer with an award such as generous amount of discounts on goods for sale, free purchase or special customer service.
There are two ways of doing this, the former one is known as point system where customer scores a certain point for every transaction they make from a system. The Second one is known as card based system in which people are rewarded for using either credit card or loyalty card for the purchase they make.
The main objective of using either of these aforementioned customer loyalties is same, which is encouraging customer to spend more and continue coming back for these rewards.
3. Use the referral system
References can provide potential benefits if used properly. In this scenario, instead of rewarding the customer with the point, business rewards the customer directly with an award if they recommend their product to other people.
Since it is proven from study that people are more likely to purchase the product based on recommendation from others, then in this case, using referral system will be ideal strategy. This is a very effective strategy to implement however, customer loyalty will likely fall otherwise.
4. Expand your presence in Social Media
This is the era of vast amount of information available with just few taps or clicks on the any digital device be it a Personal computer (PC) or Smartphone. To know about any business, customer will inevitably look for social media account for that business. Thus it is important to have official social media account so that your business appears to be authentic and relevant.
Having a social media account can be a game changer. Not only you can advertise your products in an innovative manner but you also get an opportunity to engage with both your followers and customers respectively. Hence it is necessary to interact actively so that trust can be build and customers have an access to share feedback about the product. You can also learn how to become a reseller in this article.
5. Collect the Feedback and do act on it
Promises are only true if words are backed by actions. When business use such statements that satisfied customers are their top priority or we value our customers, they need to be true to their statements by acting on it.
Hence in order to encourage customer to have confidence in your business you need to collect their feedback and suggestions by sending them online surveys through email or social media pages. After collecting their feedback, make sure to act on those suggestions made by customer and do inform them personally if any modifications were made.
By doing this, one key objective will be achieved that is, when customers will observe that their suggestions were taken into consideration by making adjustment to the product, they will feel more appreciated, hence strengthening the positive relationship between business and customer.
How to measure customer loyalty?
Loyalty is an emotion and emotions cannot be measured. And yet businesses require information about how loyal customers are to the brand. Fortunately there are some quantitative methods available which can be use in figuring out the customer loyalty, which are:
1. Repeat Purchase Rate (RPR): calculates the proportion of customers who have returned for repeat purchase. To measure RPR, divide the number of customers who have made more than one purchase by the total number of customers in the selected time period.
2. Net Promoter Score (NPS): is another customer loyalty measurement tool in which business measures the probability of customer referring their brand to other people by using score. The major drawback of this tool is just because customer had answered that they will most likely recommend your product doesn’t necessarily means that they will. However it does present the overall loyalty rate.
3. Customer Lifetime Value (CLV): measures the total revenue/profit margin that the business earns from the existing customer, from the very first purchase to current one. In other words, it provides general idea of your customer spending habits and their loyalty to the brand. The higher the value of CLV, the more loyal customers the business has.
4. Churn Rate: refers to the percentage of the customer who had stopped using your product over selected time frame. The formula for this rate is simply dividing the number of customers who have left with the total number of customers who were at the beginning. This helps to determine how many customers were lost and gives warning signal to take timely action if the churn rate is too high.
Customer loyalty will likely fall if you do these things
Any business will want to maintain their brand image and earn a decent profit margin for the long period of time. But it is easier said than done because there are times that business must be vigilant when it comes to working on customer loyalty.
Because any slight misstep or tiny mistake in applying customer loyalty strategies can lead to unwanted consequences such as losing the lifetime customer for good. So what are those mistakes that can push away the customers from becoming loyal customer?
1. Avoid giving useless rewards to existing customer
Customer will only stick to the particular brand as long as their needs are fulfilled as well as are given something in return for choosing this brand. However it is necessary to incentive customer with useful reward, a reward which a customer can actually benefit from. Hence it is imperative that business conducts the research and investigate the customers’ preferences and their likes/dislikes.
By the help of this information, firm can solve the missing puzzle pieces that what pleases the customer most. Which rewards will most likely motivate customer to stay loyal to their brand. Otherwise if the rewards are useless, then the risk of losing valuable customer increases.
2. Offering the poor customer service
People can tell the values and nature of the business by using the customer service. They can determine easily whether the business cares about its customers or not by just making a phone call.
There are instances that when a business doesn’t perform its daily operations up to the standard due to unforeseen circumstances for example late delivery or defective product.
Despite this, business must be quick on toes to solve the aforementioned issues quicker as possible as this can put a bad impression on the customer about the brand.
In addition to this, when customers give suggestion, take those suggestions into consideration instead of ignoring as this can point out your shortcomings and what can be done to overcome them.
3. Making changes in the prices frequently
While there is nothing wrong in charging the high price for the high-quality product as it is only natural that business will want to make more revenue with each unit they produce.
However the high price strategy can backfire if frequent changes are made in prices or product doesn’t deliver equivalent value up to the mark.
Therefore it would more sensible to keep the prices at consistent level and inform the new adjustments in price to customer clearly in order to avoid misunderstanding.
4. When competitors’ product surpasses your existing products
No matter what type of business it is, there will always be competition in the form of rival firms who sell similar products. Competition itself is not entirely bad as this causes corporations to perform at their best, hence providing good quality product in order to attract more customers.
While customer loyalty can relatively reduce the burden and stress that competitors give however it shouldn’t be taken for granted as there is always room for improvement and any smart business that see this opportunity will not hesitate to fill this gap.
If competitors are offering better services and your business doesn’t take any action then it won’t take very long for customer to switch sides. That is why it is necessary to constantly work on making new developments in your products and maintaining brand image or else customer loyalty will likely fall.
5. Not making use of Personalization
If the personalization is not included in increasing customer loyalty then you might as try to drive a car on empty fuel. Treating every customer in a same manner is big mistake as people have their own lifestyles and different personalities.
To create additional loyal customers, you have to think out of box; meaning try to build friendly relationship with your customer by giving them formal welcome and remember their name.
Through this, its helps to feel customer important and at ease, secondly it makes gathering data about customer much easier.
After collecting sufficient information, later on you can make specifications either on customer service or designing personalized product accordingly to their suited needs.
6. When company doesn’t follow social and moral values
In this age of excess information available, businesses must be careful that they are not engaged in any socially unacceptable activities as this can ruin the brand representation and decrease their proportion of loyal customers.
Before making the purchase, customer will generally take a quick survey about business’ core principles and observe that whether it stays committed to its principles or not, for example treating employees fairly. If the customer gets any hint or news that a business is generally not good to its employees then without waiting any longer they will immediately change their market, leading to reduction in sales and customer loyalty will likely fall.
Logically speaking, any organization should treat its employees fairly as they are ones responsible for producing and selling the products. Thus when employees are treated well then employees will be more motivated to work harder, indirectly increasing the customer loyalty and improving the brand image.
Other than staying committed to principles, businesses can increase its customer loyalty rate by joining for cause or lending generous amount of charities to those social organizations that need it.
In conclusion, customer loyalty is imperative factor in order to earn lucrative amounts of revenue and establish positive brand representation. The most important thing in customer loyalty is to build a strong and positive relationship with your customer for long term.
This is achievable as long as these mistakes are prevented. With proper research and correct strategies implemented, accomplishing customer loyalty will be just like a walk in a park and we hope you now understand why customer loyalty will likely fall when you do above mistakes.