By Paul Hague, director at B2B International
A penny saved is a penny earned. So goes the old saying, and the same principle applies with customer loyalty — a customer retained is a customer won. Every customer that doesn’t defect to a rival is one fewer that you have to go out and win back, so building a loyal customer base is an essential part of growing a business.
So what do companies need to do to secure the loyalty of their customers? First, it’s important to be clear on what it means for a customer to be loyal to your businesses. It is not simply that they have been a long-standing customer, as this might be more a measure of their inertia than their satisfaction with your service. Failure to understand the difference can be dangerous, as it might only take a proactive competitor, or a small slip-up in customer service, for them to say goodbye.
No, a truly loyal customer is one that knows how good your service is, would recommend it to their business contacts and has enough good will in the tank to continue working with you if something goes wrong.
In our experience, an effective strategy for developing this true loyalty is based on three key pillars.
1. Master the essentials
Customer satisfaction is built on a solid track-record of the basics done well. It’s impossible to foster genuine loyalty among your customers if they can’t rely on you to deliver your core offer well every single time.
The quality of the product or service must be unquestioned, with deliveries always on-time and in-full.
This isn’t to say that you will definitely lose a customer by messing up an order or two, just that they are likely to be remembered and, if a strong recommendation of a stellar performance by a competitor reaches your customer, the relationship could be jeopardised.
When it comes to pricing, it’s important for your customers to feel they receive good value, but you probably don’t want to be the cheapest option on offer. In fact, because of the association between low prices and low service, typically the result will be low levels of loyalty.
2. Build feel-good factor with small above-and-beyond touches
There are some products and services — particularly in the B2B sphere — where there is actually no appreciable difference in quality between alternative suppliers. Many of the items consumed by commercial and industrial businesses are made to a standard specification, with limited scope for innovations or alternatives. For these products, prices and quality of delivery between suppliers also tend to be broadly similar. So can suppliers of such products build loyalty?
The answer is that — as stated in the point above — loyalty is not driven by the ‘hygiene’ factors that every supplier must get right to stay in the market. In fact, it is achieved by the small, softer things that are difficult to measure and which, in isolation, might seem inconsequential.
Some of the most common loyalty drivers we see are sales and service staff that solve customers’ problems, are easy to get hold of, are pleasant to deal with, and that respond quickly. Simply put, if your customer likes dealing with you and you are doing a good job for them, they will find it hard to stop using your service.
From time to time, things will go wrong and small slips will occur. Where they do, it’s vital to be there quickly with a fix and a little something extra to make up for the failing. This might be something as simple as a follow up phone call a short time later to check that everything is now running smoothly.
3. Monitor to manage
The final point is that the only way to improve your loyalty levels effectively is to understand where they are currently. You should measure everything you can about your client relationships. This includes customer churn, complaints, satisfaction levels, recommendation likelihood and the frequency with which new competitor suppliers are introduced.
This will allow an understanding of the degree of loyalty of your customers and allow you to prioritise those customers for whom you could be doing better.
Ultimately, loyalty is not something on which you can afford to compromise.
In fact, the penny-saved, penny-earned analogy probably doesn’t go far enough. If you consider the difference in time and energy needed to go out and convince a new customer to buy your service compared with that required to do a good job for an existing client, ‘a bird in the hand is worth two in the bush’ is probably a more apt proverb, and some would argue the ratio is even higher again.