One often hears people say that cash flow is the lifeline of a business. But where does cash flow come from? It comes from customers buying from your business. Without customers your cash flow will soon dry up and your business will die.
But why is customer loyalty so important? The most basic reason is that loyal customers are typically responsible for 55–70% of a business' turnover. Marketing experts say it is cheaper to market to existing customers and that 'word of mouth' marketing by existing customers is the most cost-effective way of marketing. Loyal customers are also your best brand ambassadors as they tell family and friends about you, but they will only do you this favour if they are having a positive experience when doing business with you.
From a customer's point of view, customer experience is determined on two levels. First of all, customers pay you for solving a need or problem and in this sense they want value for their money. This has much to do with the quality of your product or service. But this is not where it ends. The second component of customer experience is a much more subtle phenomenon which happens on a psychological level. It is on this level that real customer loyalty is formed … or not. Just consider for a moment: Are there any enterprises with which you are doing business because they offer good value for money, but you actually hate doing business with them because of the way they treat you and make you feel? This 'love-hate' relationship is reflected in the psychological experience of the customer while doing business with a company. Real customer loyalty is to a large extent the result of a consistently positive emotional experience on top of the quality of the product or service.
Moreover, research shows that only 12–15% of customers are really loyal to a single company. So, what can you do to make customers come back to you for more business and tell positive stories about you, even if your product itself is not the best in the market? How can you turn the relationship with your customers into a 'love-love' relationship? Below are five things you can do to turn your customers into loyal ones – i.e. customers who are loyal to your business as such and not only to the value of your product or service.
- First of all you must never take loyal customers for granted. You need constantly to focus on nursing your customers as the most important asset of your business.
- The next important factor is to pay real attention to your customers. One of the basic needs of human beings is to feel valued. Do you really make your customers (new and old) feel valued and that solving their problem is more important to you than selling them something? Businesses often fall into the trap of initially making new customers feel very special, but later neglecting them when they become regulars. Businesses also become over-focused on ‘VIP’ customers and neglect new customers. Another trap that kills customer focus is to switch to ‘autopilot’ while serving your customers. This can easily happen to businesses which handle large volumes of customers. To prevent this from happening, it is important to make sure that the people working at the customers’ edge are fresh and attentive.
- Another aspect is to become an expert in your area of service. Customers often do not know the best solution to their problem and therefore trust you to advise them properly. Most customers can soon tell the difference between expert advice versus a generic sales pitch. If they find out that you have abused them to make a sale, they will hate you for that. In this regard, referring customers to a business which can better solve their problems may eventually make them come back to you (out of loyalty).
- Admit when something has gone wrong when serving your customers. Despite your best intentions, you may miss your customers’ needs from time to time. Customers will respect your willingness to admit a mistake or poor treatment and especially a real effort from your side to rectify the situation.
- Be aware of what your competition is doing. Make sure you are keeping an eye on your competitors and try to ensure your perceived service is better than theirs. Customer experience works on a psychological level and people tend to go where they are treated best.
The important thing about these aspects is that they do not cost a lot of money – but they can definitely help you to make a lot of money. An important spin-off of positive customer relations is that they will spread good news about you – without you spending a fortune on marketing. Loyal customers are your biggest brand advocates.
Remember that customer loyalty cannot be bought – it is earned. It takes time and hard work to earn and you can lose it quickly.
De Wet Schoeman is director of the USB-ED Centre for Applied Entrepreneurship. His main field of interest is to promote entrepreneurship among ordinary citizens, and especially the youth.