Customer Loyalty and Retention
Customer loyalty and retention are two different things. A loyal customer will be an advocate for your brand and sing your praises whereas a retained customer just may be content staying with your for now but could still be lured away if they see a better offering. Building a loyal customer base is a tough thing to do. You have to have top notch products or services, clear communication, an excellent support structure, and to show customers that you care. Loyalty is rarely instant and needs to be built up over time.
When most of us think of a customer loyalty program what typically comes to mind are loyalty cards like the buy 5 get the 6th one free model that restaurants, ice cream shops, and fast food establishments promote. These are really retention discount programs and while these work fine for the food industry and certain retailers, this model does not apply to the majority of businesses out there.
Customer retention programs are important because of the cost associated with obtaining new customers versus retaining existing one. This cost can be even more devastating if your client mix follows Parento’s 80/20 rule (20% of your clients make up 80% of the revenue) and you lose one of those top customers. By continuing to maintain that client relationship you are moving closer to having enthusiastic fans & brand advocates rather than purchasers.
- 96% of unhappy customers don’t complain, they just leave
- It can cost a company as much as 7x to acquire new customers versus keeping existing ones
- Reducing customer churn by each 1% can increase profitability by 5%
There are a number of different retention programs that an organization can put into place to keep customers happy. There isn’t a once size fits all program because customers may have different priorities. A variety of initiatives based on your business and customer base may be necessary. Here are some creative retention strategies we’ve seen:
- Appeasement: If a mistake was made due to poor service or other factors, you can turn an unhappy customer into an advocate by righting the wrong and rewarding them for their troubles.
- Purchase Frequency Bonuses: A great way to ensure that a customer will continue to purchase with your or increase their rate of purchasing
- Annual Recognition: Providing your top customers a yearly gift or reward on their customer anniversary date separates you from the competition and shows the customer you care
- Self-Service Rewards: This is not applicable in all situations but we’ve seen some companies who reward their customers for choosing to follow instructions to solve a problem on their own versus calling support. This not only saves the company money, but many customers love having the option and are not as critical when a problem occurs.
- Advocates Program: Chances are you already have loyal customers out there who are just not the type to go shout it from the mountain tops. By rewarding them to blog, tweet, or recommend your company you reinforce relationship with that customer while possibly bringing on new clients.