Jul 2, 2015 | Evaluating Customer Loyalty Programs

Building Customer Loyalty - 5 Reasons to Make it a Priority Now!

Niamh - Marketing @ Thanx by  Niamh - Marketing @ Thanx

Reducing customer churn by 5% can increase profits up to 125%! Let's look at the most important reasons why building customer loyalty should be atop your to-do list (plus – a funny anecdotal story).

building-customer-loyaltyWe all know that building customer loyalty is on the mind of every business owner. However, the extent to which this thought pervades a business owner's consciousness can still cause me to stop in my tracks.

It starts with a simple case of writing a letter asking for help – and how this approach just might just be the solution to getting loyalty prayers answered (and finishes with five reasons to prioritize loyalty for your marketing strategy). 

Building Customer Loyalty – Through Written Letters

I'll be honest – I can’t deny my excitement when business owners surprise me about how they build customer loyalty. Once they grasp what "loyalty" means in today’s modern, and instantaneous society, it can be the tipping point for company success. 

A colleague of mine recently came across a 'call for help' in a local San Francisco restaurant, Homeroom (an incredibly tasty mac & cheese joint in the Bay Area). As she headed to the washroom, there it was, posted right on the door. 




Amazing, right? Clearly, Homeroom knows the power of give-and-take customer relationships. That's loyalty at its core, essentially saying, "Dear Customers, we love your business, so we're trying as hard as we can do something nice for you." And the customer response? Love the business even more. The cycle just builds from there. 

We actually asked Homeroom's employees why they posted this letter and what message they wanted to send to customers. Here's what they had to say: 

“I think that the answer to our loyalty prayers is a customer experience that's non-intrusive, easy to use, works across platforms, and is customizable to what we want our rewards to be. From there, the only question is how we can learn more without eating up a lot of our time.” – Erin Wade, Homeroom

With an effortless customer experience, the hard part of loyalty takes care of itself. From there, companies just have to execute to succeed. 

5 Reasons Building Customers Loyalty Needs to be a Priority Now

Oftentimes, loyalty can seem like a far removed abstract concept – ultimately, you know is important. But unless you have some big shot, multi-million dollar company, it can be hard to put a metric on it.

Well, thanx to new technology, that's just not true anymore. We live in an age swimming in data, and it’s time to put those numbers to good use. Loyalty is, without question, a no brainer (courtesy of AccessDevelopment.com):

  • Building loyalty with 5% more customers would lead to an increased average profit per customer of between 25% and 100% 
  • 70% of members agree that they’d modify when and where they make purchases in order to maximize the benefits received
  • A repeat customer spends 67% more than a new one
  • Engaged consumers buy 90% more frequently, spend 60% more per transaction and are five times more likely to indicate it is the only brand they would purchase in the future
  • 82% of small business owners said that loyal customers were the main way they grow their business 
  • There are 3.3 billion loyalty program memberships in the US, an average of 29 per household

Loyalty is a proven approach to increasing revenue for your business – it simply can't be pushed down the list of priorities. In no particular order, here are the top 5 reasons why building customer loyalty is essential, and why businesses need to take action now:

1. Do you really know who your customers are?

We all like to think that we know our customers inside and out. After all, you’re at work enough hours a day to build personal relationships with your top customers. But, let’s be honest, we all have had that moment: we walk into a room to pick up something, and completely forget what it was we came to get!

Restaurant and retail business owners – by definition – wear many different hats. Looking after top customers personally, across multiple locations, is just not realistic. Integrating a smart loyalty system can remove at least one of your hats and do the job of looking after your clients. Ensuring you have the right loyalty program in place can provide personalized, unique experiences, and allow you to provide relevant marketing and rewards to individual customers. 

2. Do you know your retention cost vs. acquisition cost?

This is vital! If you take the time to look at the costs to you for acquiring a new customer versus the overhead for maintaining current ones, I imagine you’ll be shocked. It’s a proven fact: business sense = improve marketing to your current customers

Growing average check sizes and increasing customer visit frequency has an incredibly dramatic effect on profit and customer lifetime value. It costs 5 times as much to attract a new customer than to keep an existing one (yet 44% of companies focus on acquiring new customer versus 18% on retention). Though you need to acquire customers initially, shifting your marketing even slightly to retention will have a grand effect.

3. It's easier to up sell loyal customers

Repeat customers feel comfortable – above all, they trust your brand. Through this familiarity, they welcome testing new ideas and get excited by the thought of being the first to try something. Capitalizing on giving your best customers a unique opportunity can be a win for both you and the client.

"Marketing Metrics found out that the probability of selling something to new prospects is only about 5-20%, whilst the probability of selling something to an existing customer is 60-70%." - Nextupasia.com

4. Building customer loyalty = free marketing

I've mentioned it before, but connection is one of our 6 human needs; it's human instinct to want identify and connect with something or someone. This results in the best form of marketing: word-of-mouth! Music artists are notorious for being marketing machines, and they epitomize the customer loyalty, free marketing equation. Lady Gaga has her Little Monsters, Justin Beiber has his Beliebers and Barry Manilow has his Fannilows! When one identifies strongly with something, they promote it! It's a desire to spread the sense of identity they feel. 

5. The cherry on top - quality feedback & engagement

Information is so readily available these days, it's at our fingertips. This can mean it comes from many different avenues, and is incredibly segmented. Having a clear route to collecting and analyzing feedback not only allows you to get quality feedback, but allows you to respond and be actively engaged with your client base.

Repetition is the mother of skill, so (I know you've heard this before, but I will iterate again) directly engage with your customers to dramatically increase ROI. Promoters with repeat bad experiences visit 45% less after 5 months than those with just one. If you have a direct line to your customers, and can interject after just one bad experience, you will retain their business. 

So, there you have it — the "building customer loyalty" journey

These 5 points are food for thought when thinking about your company's marketing plan. Building customer loyalty is integral to the continuing success of your business. Remember, knowledge is not power; knowledge is potential power. Knowing who your customers are is the starting point, but being able to take action on that insight will drive you forward.


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