The Value of Customer Loyalty
What can you do to move your business from average to booming? Prioritizing the growth of your business is key to ensuring your company doesn’t just last but that it grows into the powerhouse you envision.
Growing your business isn’t an overnight process. But there are several strategies you can implement to keep your business moving upward. One of these strategies is to build customer loyalty. Customer loyalty can add significant value to your business and is key to taking it to the next level.
Understand your Customers
The first step to growing a larger and stronger client basis is to gain a comprehensive understanding of the needs and wants of your customers. This will help you develop products and services tailored to them. There are several ways to do this including research, interviews, and surveys.
Feedback from your customers is critical to improving your business model. Reviews and surveys can help you understand what you are doing well and where you can improve. Be sure to select a wide range of customers. From frequent to rare buyers, new and old customers. Doing so will give you an extensive overview of customer preferences.
Improve Customer Service
No matter how awesome your product or service is, if your customer service doesn’t match up it is difficult to satisfy customers. Each customer needs to feel they matter, they are heard, and they are valued. Here are a few tips to improve customer service:
- Address problems and questions right away
- Take the time to thoroughly answer questions
- Listen to what they are saying on social media channels
- Make your business easily accessible
Happy and satisfied customers are more likely to repeat buy and recommend others to buy products or services from your business.
Take a few moments to view your business from the standpoint of your customers. Is it easy for people to find you? Can they easily contact you? Most consumers expect a business to reply within a matter of hours. For small business owners, this can be difficult. But there are many services that offer chatbots on social channels or websites that improve and quicken response rates and provide 24-hour service. Implementing such can boost customer satisfaction and reduce unhappy and negative experiences.
Keys to Creating Customer Loyalty
It takes time and effort to get customers to not only buy what you offer but to continuously return. While customer satisfaction is great, creating loyalty takes it a step further. Below we will discuss several strategies to encourage customer loyalty.
1. Recapture Existing Customers
While getting new customers increases sales, often your most valuable customers already buy from you. Customers who already buy from you and more likely to do so again especially if they have a positive customer experience. Strategies to draw them back include capturing contact information and shopping preferences. Then use this information in your marketing efforts to convert them into repeat customers. Target, for instance, has a loyalty program using its red card. They track customer shopping habits and send targeted coupons to their loyal customers for products they already buy. This improves customer retention and builds the value of the existing customer base.
2. Ask for Referrals
Your best advocates are happy, returning customers. Ask current customers for referrals to attract new clients. Often your target customers have individuals in social or professional circles that are likely in your target market too. A few ideas to actively seek referrals include:
- Ask every customer who else they know that would be interested in the product or service
- Incentivize referrals with discount codes
- Encourage customers to share their experience through social media channels and tag your brand
3. Initiate Loyalty Programs
Keeping customers hooked and coming back for more is essential. One of the best ways to keep them coming back is to reward them for their loyalty. It costs much more to acquire a new customer than to sell to an existing customer. As a business, set up a loyalty program that provides various incentives, exclusive offers, promotions, and discounts.
Your most loyal customers should be the first to know about upcoming sales and promotions. Consider sending personalized emails for birthdays/anniversaries with a greeting and coupon. Test which loyalty program works best for you and your target market.
The best loyalty programs are easy to set up, have attractive rewards, and are free. Building an attractive loyalty program will help your sales skyrocket, and help customers feel appreciated for their business.
4. Nurture Meaningful Relationships
Lastly, seek to connect with your customers on a deeper level. The more loyal your customers feel to your brand, the more likely they are to recommend you. And it will deter them from going to your competition.
Be sure to treat your customers as valuable human beings and not sales numbers. Do not just push your products and services. Show excellent customer service, make business easy to interact with, and consistently communicate not only with sales but valuable information.
Other ideas include hosting customer appreciation events, sending links to helpful articles, or giving to local charities. The goal is to connect with your customers on a regular basis, without always asking for their business.
Valuing Customer Loyalty
From a business value standpoint, a business appraiser looks at the following:
- The lifetime value of a customer
- Customer concentration
- The strength of the relationship with the customer
- Who at the company owns/manages the relationship
The lifetime value of a customer is the amount of money a customer will spend with you because of the relationship. This piece of information along with the cost of acquiring a customer will impact the value of the business. Using both the lifetime value and customer acquisition cost a business owner can project what the future profitability of the company will be.
Customer loyalty is not always beneficial. Especially if a large portion of your revenues is concentrated in one client. In this case, the value of your business will be lower than a competitor that has dozens of clients. The reason being, if that relationship is compromised, a large chunk of revenue walks out the door. As a business owner, be sure to diversify against this risk.
Lastly, the strength of the relationship needs to be tended to. If the business is not cultivating existing relationships, it is difficult to sell the business to an outside party. Most individuals are comfortable with who they are familiar with. As such, be present in their lives, meaning let the brand be present in their lives.
Step outside the picture as the business owner, you should not be the face of the Company. Your brand and your team should be the face. If your business has strong relationships that are tied to the business (enterprise goodwill) and not to you, the value of your company will be higher.
Increasing customer loyalty means you increase the lifetime value of your customer. When considering cost, it is six to seven times more expensive to acquire a new customer than to retain an existing one. The more loyal your customers are the more valuable your business becomes. Not to mention loyal customers are vital to growing your business.
Peak Business Valuation, a business appraiser in Utah, enjoys working with small business owners to understand the value of their company and opportunities for growth. Please reach out via email or through a phone call to schedule your free consultation.Schedule Your Free Consultation Today!