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A Small Business Guide to Increasing Customer Loyalty

In these competitive times, it’s more important than ever for small businesses to focus on customer retention. According to a Customer Service Institute report, around 65 percent of a company’s business comes from existing customers.

Unfortunately, some businesses still spend too much time chasing new customers when all they need to do is look after their existing ones. It’s not just big brands that have the capacity and resources to build customer loyalty; any small business can use various techniques to keep existing customers happy.

This guide looks at why building customer loyalty is so important, and describes how any small business can maximize customer loyalty to support business growth.

Why Customer Loyalty Matters 

There are five main reasons why small businesses should focus on increasing customer loyalty:

1. Repeat Customers Spend More in the Long Term 

Existing customers have already decided to use your business, so you’ve already gained their trust. For this reason, they’re more likely to buy from you in the future and spend more in the long run. They’re also more likely to turn to your business during seasonal events such as Christmas, Valentine’s Day, and Black Friday.

2. It’s More Cost-Effective Than Recruiting New Customers 

According to the Harvard Business School, increasing customer retention rates by five percent can increase profits by 25 to 95 percent. Ultimately, the more customers you retain, the better your profits will be.

3. It’s Easier to Convert Loyal Customers 

Existing customers that visit your website have an average conversion rate of around 60 to 70 percent, according to Paul Farris’ book Marketing Metrics. This is much higher than the conversion rate for new customers. An Adobe study also found that customers who have already made two purchases from a store are nine times more likely to convert than first-time customers.

4. Loyal Customers Build Brand Awareness 

Customers who are loyal to your business are more likely to tell friends, family, and colleagues about your business. This kind of word-of-mouth marketing – which happens online and offline – is one of the most powerful forms of marketing. According to Nielson, 92 percent of consumers trust recommendations from friends and family over all other forms of advertising.

5. Repeat Customers Provide Valuable Feedback 

Loyal customers are more likely to take an interest in how you run your business and how you treat customers. For this reason, they’re usually more willing than new customers to answer surveys and questionnaires. In effect, loyal customers become your very own focus group. They’ll help you identify common customer issues, giving you the opportunity to improve your business.

How to Increase Customer Loyalty 

There are various ways to boost customer loyalty, but the following strategies are some of the most effective:

Build a Community Around Your Brand 

If you’re trying to increase customer loyalty, you need to build a community of people that will buy your products, listen to your messages, and tell others about your company. There are various ways to encourage a community around your brand: 

  • Engage more with existing customers on social media. React to conversations, respond to questions, and offer advice. 
  • Use your social media channels to highlight your company’s values and mission. 
  • Regularly create helpful content for your target audience and share it on social media. 
  • Consider creating a Facebook or LinkedIn group that customers can join. 
  • Regularly ask questions and start conversations based around your business. 
  • If you have a physical store, advertise in-store promotions and events. 

Regularly Ask for Customer Feedback 

Understanding your customers is at the heart of building customer loyalty. What are their values? What do they really want from your business? To find out, you need to get customer feedback through surveys, social media polls, emails, and direct discussions. The key is to respond publicly to feedback and then explain how you’ll fix any issues. In short, show you’re listening to customers’ concerns and then take action.

Offer Rewards 

In a consumer report from iVend Retail, 60 percent of consumers said that the shopping experience they valued the most was earning rewards or loyalty points.

Set up a loyalty program that gives repeat customers exclusive deals that aren’t available to anyone else. By promoting exclusive discounts, loyalty cards, and points programs, you can encourage customers to choose your brand over others. To reach a wider audience, remember to spread the word on social media. Also, encourage people to sign up for your email list by offering an immediate discount to email subscribers.

Set Up a Referral Program 

Rewarding customers who are willing to refer new people to your business is a great way to build loyalty and attract new customers. Offer discounts for referrals or a free gift for new customers to encourage existing customers to tell others about your business.

Focus on Customer Service 

With so much choice, consumers can afford to be picky about who they do business with, and they’re more likely to stick with a business that looks after its customers. According to a report from HubSpot, 93 percent of customers are likely to make repeat purchases with companies that offer excellent customer service.

To improve the customer experience: 

  • Set up procedures so that staff knows how to deal with customers appropriately and how quickly they should resolve customer issues. 
  • Make sure someone is tasked with responding to customers on social media. Around 67 percent of consumers use social media to resolve issues. 
  • Answer customer questions before they’re asked. Create how-to guides and a comprehensive FAQ page. 

Promote Your Company’s Values 

Around 90 percent of customers will be more loyal to a company if it supports social or environmental issues. Think about your business and its core values and try to identify issues that your target audience will connect with on an emotional level. Perhaps you can align your business with a local cause. For example, consider donating a portion of your profits to a local charity and then promote your mission across social media. This will boost brand awareness and also help you grow a loyal following of supportive customers.

The Bottom Line 

While gaining new customers is important for business growth, many small businesses struggle to reach their full potential because they don’t focus on customer retention. In a perfect world, every new customer would return to your business time and again, telling others about how great you are. In reality, it takes time, patience, and consistency to increase customer loyalty.

However, if you make a long-term commitment to engage with your audience, reward customers, and make people feel part of something special, you can build a loyal customer base that regularly chooses your business over the competition.

ServiceWorks can help. Our software suite is designed especially for field service businesses to help you manage your customers, schedule, inventory, and billing so that your business runs smoothly. Not only will your life be easier, but your customers will enjoy a great experience and want to work with you again. Test drive the app free for 14 days — no credit card required — and see what we can do for you.

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