We all have connections to businesses that have won our loyalty. Perhaps it’s because of their exceptional customer service, expansive product selection, or easy purchase process. In some cases, it all comes down to a singular experience in the past that has stuck with us for years.
There’s an old story told about a woman who shopped at the same department store for 45 years. A neighbor asked why she continued going there now that there were so many other options in town. Some of these other stores, the neighbor pointed out, even had better prices on many items.
“I keep shopping there because I really respect the store manager,” replied the woman.
Her neighbor then said, “Oh, are you talking about Doug Schutless? I went to high school with him.”
“Doug’s okay,” replied the woman. “But I was talking about Sarah Waverton. She was the manager there until she retired in 1997, and I always admired the way she treated her employees.”
This is an extreme example of loyalty, but highlights the lasting power of a good experience. Knowing how to build customer loyalty is an essential element of any successful business, as it increases your customer’s lifetime value and often spurs them to refer you to others. In a nutshell, customer loyalty is the most effective way to drive growth through your customer base.
“Customer Lifetime Value (CLV) is the total revenue your firm will earn from a customer during their relationship with the brand,” explains Pratik Dholakiya, the visionary founder of Growfusely.
“Though CLV is not a new metric, it’s being increasingly used by businesses as a litmus to gauge their customer experience (CX) health, as it reflects how much a customer is enjoying a product or service. After all, the better the experience offered, the more loyal they are to a brand, thereby increasing their worth to the business (CLV) […] Monitoring this metric will also help you determine whether or not your customer experience efforts are working, and increase or decrease them in response.”
Yes, experiences matter. And businesses that figure out how to consistently deliver them can reap the rewards for years to come.
How to Build Customer Loyalty Through Experiences
The shift toward customer experiences is unmistakable. One relevant case study is Bed Bath & Beyond, a retail chain that operates more than 1,000 stores in North America, Mexico, and Australia.
Since its founding in the early ‘70s, Bed Bath & Beyond locations have been known for their towering shelves that seemed to be jam-packed with nearly every item on earth. This “more is better” approach worked for decades, as shoppers seemed to enjoy digging through the piles of products in search of various treasures.
In recent years, however, that experience has begun to sour for many customers. When you can open an app on your phone and order an item within a matter of seconds, why would you ever want to go on a scavenger hunt at a retail store that sometimes resembles an oversized version of a hoarder’s closet?
Even as formerly loyal customers defected, Bed Bath & Beyond leaders held strong. They had a system that had worked for many years, so there was no appetite for change.
Finally, faced with rampant store closings and surrendering even more market share to competitors, they changed their tune. Research conducted by Bed Bath & Beyond confirmed what most people already knew… the world had changed as they stubbornly remained the same. The beleaguered retailer is now attempting to win back customers with a more streamlined inventory and a fresher shopping experience.
This case study is informative because it shows the durability of customer loyalty. Even as Bed Bath & Beyond fell behind competitors in delivering a smooth and enjoyable customer experience, their base remained loyal for many years. It was only when the cluttered stores began to fall into disrepair and lag in other areas that customers decided that enough was enough.
Another takeaway is the importance of positive customer experiences. You can deliver amazing services, prices, and selection right out of the gate and attract many followers. But great business leaders know that you should never rest on your laurels. You must follow up on your success by identifying new ways to continue delivering for your customers. If Bed Bath & Beyond had done this, they would’ve proactively transitioned from their cluttered approach several years ago.
In order to meet and exceed your customers’ expectations, you need to understand them on a dynamic level. Start by using segmentation to identify distinct psychographic, demographic, behavioral, and geographic groups. What other segments might help your business? That’s for you to decide, aided of course by data and analysis. You can start this research process by sending out surveys to your customers. Ask them about their priorities, complaints, delights, and whatever else is relevant. Then be sure to reward them for sharing their insights by giving them a small gift card or exclusive promotion.
Equipped with data straight from your audience, you can tailor your messages, solve unique problems, and deliver one-of-a-kind experiences. As research from business firm PricewaterhouseCoopers (PwC) concludes, “Good customer experience leaves consumers feeling heard, seen and appreciated. It has a tangible impact that can be measured in dollars and cents.”
Check out these stats that were part of the PwC research:
- 73% of shoppers based purchasing decisions on customer experience
- 51% of shoppers say companies don’t provide good customer experiences
- 43% of shoppers will pay more for more convenience
- 42% will pay more for a friendly experience that makes them feel welcome
- 65% think positive experiences are more influential than the best advertising
It’s clear that customer experience matters both for you and your customers, yet many of your competitors aren’t providing it. So this is a prime opportunity to stand out in a meaningful way that not only boosts your bottom line in the short term, but will also set you up for long-term success.
Effectively Tracking Customer Loyalty
As with any business initiative, your efforts will be substantially muted if you don’t track their effectiveness. In order to improve, you’ve got to understand how, when, where, and why your customers are making purchases. More importantly, you need to know what their experiences were and how they will impact future purchases.
In addition to the aforementioned Customer Lifetime Value (CLV), let’s review 3 crucial ways to gauge loyalty and understand the future:
- Repeat Purchase Rate: Also known as customer retention or repeat customer rate, this metric reveals the percentage of your customers who will return to make repeat purchases in the future. When your percentage is high, you’re obviously doing positive things that are generating loyalty. Lower percentages highlight the need for improvements, so you’ll need to identify where the lowest repeat purchase rates emerge to better understand where your weaknesses lie.
- Customer Satisfaction Levels: We always have personal interpretations of how our customers feel about our service. But until you ask them specific questions and allow them to gauge it themselves, you’re only using guesswork to ascertain an essential element of loyalty. The easiest way to get these insights is an email survey after a purchase is made. Typically, business owners use a five-point scale that includes the options of not satisfied, slightly satisfied, satisfied, very satisfied, and extremely satisfied. Each time you receive a survey response, you’ll gather important insights that will enable you to retire from your part-time job as a mindreader.
- Churn Rate: This metric reveals the percentage of customers who are either canceling or failing to renew. So if you have a subscription-based product or service, you’d better be paying close attention to churn rate. Here’s an example of the relevance of churn rate. Let’s say your business sells hair products via a subscription model. Your sales in January could be top-tier, leading you to think that the upcoming year could potentially be record-setting. But a closer examination shows that the churn rate has been creeping upward for the past 3 months and hit an all-time high in January. This would suggest that many of the customers who made purchases that month would not be doing so again. Armed with this information, you could focus on retention strategies to reverse the trend and prevent disastrous losses later in the year.
5 Strategies for Building Customer Loyalty
We know that 73% of shoppers base purchasing decisions on customer experience, so the key to a high repeat purchase rate, high customer satisfaction levels, and low churn rate is to deliver experiences that make your customers feel happy and valued. There are hundreds of ways to do this, ranging from small details such as a two-click online checkout process, to more grandiose gestures such as a high-value holiday gift mailed to the homes of your top customers.
Here are 5 actionable ways for your business to begin building loyalty:
1. Offer a Rewards Program
You can’t just ask customers for their loyalty without providing benefits in return. Why is this? Because in the real world, if you walk up to someone and ask them to be loyal to you, you’re basically a dictator. Loyalty should be a symbiotic relationship.
A rewards program is a simple way to outline the benefits of sticking with your company. Whether you provide free products, exclusive items, or something else entirely, just make sure that the reward has actual value. Our world is full of “rewards” programs that are nothing more than a glorified collection of coupons.
The best way to build momentum for your program is to offer an incentive right at the start. So if someone downloads your rewards app, you might automatically add a reward to the account. That way customers can see how easy it is to use and will get excited about future rewards.
2. Make Your Customer Service Buzzworthy
Nearly every business owner thinks that they are good at customer service. But as we’ve seen with the data shared earlier, fewer than half of global shoppers say companies provide good customer experiences. So most customer service is obviously failing to meet the mark.
One of the best ways to attract loyal customers is to treat them as though you will know them for life. To dig a little deeper into this concept, think about how you speak to Uber drivers and servers at restaurants. While most of us aren’t at all rude to these people, we probably stick to minimal communication.
On the flipside, think about how you communicate with those you intend to have a long-term relationship with. You probably ask questions, build connections, share ideas, and give compliments. If you want loyalty from customers, don’t treat them transactionally. Treat them as though you’ll know them for years to come.
3. Surprise Your Customers
When your company provides benefits similar to the competition, you’re merely meeting the standard. You’ll need to seek out unexpected perks if you want to truly move the needle. In this way, you’ll make a name for yourself as a brand that innovates in exciting ways instead of simply chasing industry tail lights.
4. Let Your Customers Speak
The fastest way to make someone feel valued is to do what so few people do: listen. Use surveys and personal conversations to gather feedback and even ideas. In this way, you can constantly improve your service and generate appreciation from customers.
Good businesses incorporate feedback from their customers. Great businesses not only do that but also communicate to their customers exactly how they took the feedback and implemented changes that will make their lives better.
5. Make Referrals Simple
Your most loyal customers also moonlight as your evangelists. But that doesn’t mean you should put them through the wringer when they want to refer you. Perhaps you make it easy to share your products on social media or you could offer a bonus for referrals. However you approach it, make it a simple process to share the word about your business.
Build a Brand That Customers Love
To learn more about building your brand into something that customers will not only stick with but promote, visit our library of free training courses. You’ll get valuable insights into how to create customer experiences that stand the test of time.