Benefits of Customer Loyalty to Small Businesses

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Happy customers are loyal customers, and loyal customers are your most valuable customers. Recognizing and rewarding customer loyalty can give you a competitive advantage and increase your revenue. People who really love your business will happily tell their friends and family about you, and they're more likely to make repeat purchases with little to no prompting.

In addition, it's far easier to convince existing customers to make another purchase than it is to convince potential customers to part with their hard-earned money without any guarantee that they'll have a great customer service experience or even like the product. This makes repeat customers an affordable target for the bulk of your marketing strategy.

You don't need to spend any money to make sure your current customers are happy with their experience by simply remembering to treat them with a genuine and positive attitude. Learn their name, smile and make a personal connection. Ask for customer feedback to understand how you can improve. Building customer loyalty doesn't necessarily require an elaborate rewards program (although that certainly doesn't hurt) but do prioritize customer satisfaction in order to reap the benefits of a loyal customer base.

Loyal Customers Are Affordable

Do you know how much money it costs to convince one person to make a first purchase from your business? If you haven't run that calculation yet, give it a try. Consider the cost of all of your marketing efforts and don't forget to include the salaries you pay your marketing staff. In the end, you may be surprised to learn that customer acquisition can cost hundreds or thousands of dollars, whereas customer retention costs practically pennies in comparison.

That's because new customers have a lot of obstacles to overcome. Until they buy from you, customers have no idea if you'll provide high-quality products or services, whether your return or exchange process is customer-friendly, whether your prices reflect the value obtained and many other hurdles and reservations. Buying from a new company for the first time requires a leap of faith, so it's critical that you deliver an excellent customer experience. Otherwise, your marketing efforts will ultimately fail because they represent false promises.

However, customers who have already had a good experience with you don't need as much convincing to make another purchase. They already know that your deliveries arrive quickly or that your services exceeded their expectations. Once customers are in your sales funnel, it just takes a tiny push to convince them to buy again, such as a single email rather than a year-long campaign. Therefore, you'll experience a far greater return on investment by focusing on remarketing to loyal customers.

Loyal Customers Advertise for Free

What's better than word-of-mouth marketing? In the marketing world, a personal recommendation is as good as it gets because people trust the opinions and experiences of their friends, family and colleagues. The issues that hold potential customers back are instantly erased when someone offers a personal review.

In a way, that means each loyal customer has a network of loyal customers in the making. Satisfied customers have already been through the sales funnel, and they pull all of their acquaintances further into the sales funnel at the same time. Don't fall into the trap of thinking that one person isn't significant to your bottom line. If you have even one unsatisfied customer, work hard to get to the bottom of the problem before it affects other customers.

If people have a poor service experience with your company, their opinion will definitely work against you. They'll push their network out of your sales funnel instead of pulling them further in. The stakes are high when it comes to providing a good customer experience throughout the entire buying process and through every interaction. You not only want to reap the rewards of loyal customers but also avoid the negative reviews of unimpressed customers.

Loyal Customers Don't Choose Competitors

Perhaps best of all, loyal customers resist shopping with your competitors because they've had so many positive experiences with your brand and consciously choose to give you support. Your business is also the only one about which loyal customers rave when giving recommendations to friends and family. They want to see your business succeed because they feel they have a valuable customer relationship with your brand.

In fact, developing a customer loyalty program (such as a rewards program) can keep you competitive by preventing customers from defecting to a competitor who offers better discounts. Some discounts are better than no discounts, so evaluate the competition and make sure your business does not fall into the "no discount" camp.

It's easy to perform market research on your competitors' customer loyalty programs. These programs are likely to be well-advertised, but you can also make a small purchase from a competitor in order to get on its email list, or you can send a secret shopper to evaluate how well the employees treat customers who need assistance.

Calculating the Benefits of Customer Loyalty

Every product or service has a life cycle that affects brand loyalty. If someone purchased your product or service today, when would he likely need to make another purchase? For example, you'll need a new toothbrush or haircut at least every three months, a new phone or laptop in the next five years and a new car or roof in another 10 to 15 years. Think about the life cycles of your products in order to develop a game plan to maximize the benefits of customer loyalty.

For example, if you own a roofing company, you'll want to create a database of your clients organized by the service date. Look at clients for whom you installed a new roof 10 years ago and consider following up with them by offering a free roof or gutter inspection. On the other hand, if you own a hair salon, you could segment your email database so that people receive discount codes for a trim every few months or so. Both the hair salon owner and the roofing company owner will use different follow-up schedules, but the idea is the same — know when and how to stay in touch with your customers.

The key is to not rely on your customers to remember your company if your product or service has a long life cycle. You can stay top of mind with customers even if you have to wait a long time to gain their business, such as with the roofing company, by sending discounts that can be shared with friends and family or by introducing a referral bonus. That way, when your customer is once again in the market for your product or service, she'll remember not only your business name but also your customer-centric attitude.

Ways to Build Customer Loyalty

Building customer loyalty is all about making sure your customers love their experience with your business from start to finish. Therefore, start with all points of contact. Emails should be answered promptly and with good grammar, the people who answer the phone should be friendly and truly helpful (i.e., make sure they have the tools they need to address common problems instead of giving people the run-around) and sales representatives at your brick-and-mortar store should remain positive and approachable. In short, your customers should get the impression that your staff is genuinely pleased to see them or hear from them.

In addition, pay particular attention to your website as well, ensuring it is easy to navigate, doesn't take too long to load, processes a wide variety of payment methods and looks professional. Next, be sure you collect email addresses from your customers in order to easily contact them in the future. You can build customer loyalty by frequently emailing discount codes exclusively to repeat customers.

More elaborate loyalty programs exist, such as a rewards card. Small businesses can consider offering a simple punch card that offers a free product after 10 purchases, for example. You can develop a referral program that rewards customers who recommend your business to a friend by giving them a special discount, an exclusive personalized product saved just for VIPs or points that can build up and be redeemed for a special product or a steep discount.

Measuring Customer Loyalty

Regardless of the type of customer loyalty program you develop, it's important to track its success. Why continue your efforts if they aren't getting results? The only way to know for sure whether the follow-up emails are effective or your rewards program has increased revenue is to collect and analyze data.

If you send emails to encourage repeat business, be sure to use an email tracking program that tells you who opens those emails. You can then compare the "open" data to purchases made by those customers to see if there is a strong correlation. Other statistics you can calculate include sales per customer, customer lifetime value, spendings per transaction and customer wallet share. Use this information to pinpoint which customers to reward with special perks as a thank-you for their loyalty.

You can also use analytics software like Active Campaign to track how often customers visit your site, with or without making a purchase. This information can help you reach out to customers who seem interested in making a repeat purchase but have some sort of hesitation. A discount code could do the trick. Remember that tracking these customers and offering them discounts adds up to significant cost savings compared to trying to attract a brand-new customer, so it's a worthwhile effort.

Customer Loyalty in Action

You are probably a loyal customer without even realizing it. For example, do you ever choose to get gas at a particular gas station because you know you'll get a discount thanks to your rewards card? Have you ever made an extra purchase in order to meet the minimum requirement to receive 10% off your next purchase? Both represent common customer loyalty programs.

Kohl's Cash is an excellent example of customer loyalty in action. Customers are issued Kohl's Cash for every $50 they spend, but the "cash" (in-store credit) cannot be used on the purchase that earned it. Instead, customers have to use it within the next two weeks or so. A program like this encourages customers to not only come back soon but to buy more items in order to earn more Kohl's Cash.

Other customer loyalty programs include Baskin-Robbins's free birthday scoop or Kroger's Fuel Points reward program. Starbucks phased out its punch card for a modern app that tracks loyalty and rewards, and Amazon actually has loyal customers pay for their benefits via Prime. Keep in mind that customer loyalty can be built with something as simple as an email newsletter campaign and a cheerful smile. You don't necessarily need to develop a card-based program, but it's wise to have some sort of customer loyalty strategy to take advantage of the benefits associated with repeat customers.