Three Points Regarding Customer Loyalty

Posted by in Customer Service


About twenty-two years ago, the Harvard Business School was involved in a study with Bain & Company analyzing the impact and cost of gaining new customers as well as that of servicing and keeping existing customers loyal. Twelve years ago, they revisited the topic as applied to e-commerce, and found that the cost of gaining new customers was a good bit more than keeping customers for regular retail outlets. Nothing has changed with these findings. Keeping a customer will pay off over the long haul when compared to the cost of gaining a new customer. “The bottom line: increasing customer retention rates by 5% increases profits by 25% to 95%.”

 

So, ultimately, it is often more profitable to keep existing customers than to attempt to land new ones. So, let us look at a few ways to retain customers once you have them. In a recent article by Gregory Ciotti on Help Scout, he lays out fifteen points on making loyalty strategies work. Those points are divided into five main categories: Communication, Selling, Reciprocity, Support, and Loyalty Programs. For brevity sake, I wish to take a look at the first three points.

 

Communication includes standing for something - something that will make customers care about being loyal to you. It is also suggested that when it comes to socialization, use positive proofs rather than negative ones. In other words, do not promote your points by knocking the position of others or by using a negative appeal to promote your case. Instead use your position in a positive manner to persuade them. Lastly, he refers to “invoking the inner ego,” which is basically to determine exactly what your target demographic is, and know them in detail. Then, in order to attract them, “craft a brand message that perfectly matches their plans, goals and aspirations.”

 

When it comes to selling, a lot of it comes down to the words used. There are words that are more persuasive than others, and there are ways to word things to attract even “tightwad” customers. “Certain persuasive words encourage customers to buy more than others, in particular: free, new and instantly. When customers hear these words (and the promises they imply are backed up), they'll enjoy their purchases more than they would have otherwise,” Ciotti says.

 

Reciprocity, he says, is to “Go above and beyond for customers and get rewarded with repeat business.” In a different article, Ciotti refers to this as “the art of the ’frugal wow.'” It doesn’t always have to cost a lot of money to give back to a customer; it just takes a “wow” experience to buy their loyalty. He relates a story that actually comes from the aforementioned Bain & Company, and is a great example:

 

"One of my favorite examples of this happened at Rackspace, the managed hosting and cloud computing company. An employee on the phone with a customer during a marathon troubleshooting session heard the customer tell someone in the background that they were getting hungry.


As she tells it, "So I put them on hold, and I ordered them a pizza. About 30 minutes later we were still on the phone, and there was a knock on their door. I told them to go answer it because it was pizza! They were so excited."

 

Another great example is related in his article too:

 

To keep their brand aligned, Sweetgreen likes to hire people who don't necessarily have experience but are super passionate. One of those employees came up with what the company calls "Random Acts of Sweetness."



Sweetgreen's street team randomly hands out gift cards to recognize other people doing good in the community. When it rains, they'll sometimes put a shower cap over bike seats with a gift certificate tucked underneath. They've been known to slip gift cards on car winshields alongside a city-issued ticket to offset the downer of returning to a parking violation.

 

It is these types of little things that add the “wow” factor that can lead to customer loyalty. These “going above and beyond” stories are heard occasionally, and they are usually great. Sadly, they should be more the norm and not so infrequent of a scenario.

 

Looking and listening to the customer is a key way to identify what it would take to touch the customer in such a way. Of course, that harkens back to the importance of communication as mentioned before. However, it is also an added benefit. Adding that personal human touch can produce an unexpected and exciting experience that should gain loyalty over the run-of-the-mill service found elsewhere. It doesn’t have to take much or cost much, but the right amount of reciprocity and a personal touch can go a long way in customer retention.

 

Image courtesy of FreeDigitalPhotos.net

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  • Jeff McCormack
    Jeff McCormack
    Thanks for the comments everyone - great points.
  • Bruce T
    Bruce T
    Many sales professionals get up to 65% of their new business form existing clients.
  • Penny D
    Penny D
    I've been in a customer relations job for 22 yrs. and I've had a tremendant amount of repeat customers by the way I spoke to them as well as the way they were treated and worked with. I also gained alot of new customers with the smallest of service jesters.
  • Pamela S
    Pamela S
    I think these ideas are great & there are other things that could be done if people think of how they want to be treated.
  • Severiano C
    Severiano C
    Exelent Article. I enjoy it very much.

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