Growing Customer Loyalty
Satisfied customers are the best customers. In addition to returning to your business to make repeat purchases, satisfied customers are more likely to recommend your business to others. They’re also less likely to purchase from your competitors. Long-term success can be obtained by growing a loyal customer base take care of your customers and they’ll take care of you.
This isn’t a trivial issue. Building customer loyalty is an investment of time and resources and can be a difficult thing to do. Loyalty is, after all, a trust issue. But research by Yuping Liu (Journal of Marketing) suggests that loyalty programs have significant return on investment in the long run. One great way to build customer loyalty, according to Liu, is to offer rewards to customers after repeated purchases. While they’re unlikely to benefit significantly the after the first purchase, each additional purchase yields an increased buying momentum as the customer gets closer to the reward. Not all customers will play ball, just as not all customers will claim the reward. However, according to the study, these types of programs can increase purchase frequency among those customers that have demonstrated a low buying frequency in the past.
We advocate an additional strategy to build customer loyalty: service. In our own experience, working closely with customers substantially improves their vision of the company and increases the likelihood that they’ll provide a favorable recommendation. This means being polite and understanding of any difficulties customers may have, accommodating any problems with rapid solution service and following up purchases with offers of continued assistance. We have found that a positive customer service policy can surprise customers (in the best of ways) as many seem to be accustomed to poor relationships with companies, particularly in the online marketplace. These bad relationships are particularly problematic online as the switching cost to a competitor’s business is low: the customer must simply enter a different url in their browser.
Regardless, showing customers that you care about their business can go a long ways to building a long-term relationship. Considering that there may exist ceilings regarding how broad you can distribute your business online, repeat customers may be the only way to keep your company solvent in the long run.
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