Customer loyalty for a small business is as much about brand perception as it is about brand behavior. Your loyalty efforts can go a long way towards bringing people back into your store, but you can’t expect their return alone to bring profits. For that you need to continue driving value, service and incentive, sometimes all at the same time.
The Wall Street Journal does a good job in this article outlining the difference between an unprofitable loyal customer and a profitable one. Yes, it’s true. There’s no arguing the economics here. But I will debate their efforts to remove any possible graying of the issue since your first step must always be to create loyal customers. I’ll say this loud and clear, if you DON’T have loyal customers at all, I can guarantee that you will have far less profitable ones than if you have lots of loyal ones.
Case in point. CVS does a great job with their customer rewards program. On every other street corner you can count on a CVS on one side and a Walgreens on the other. Any time I need to go to a pharmacy store to pick up a few quick items (not to mention my prescriptions) I will always choose CVS because of their rewards program. Sometimes I will make a larger purchase than other times. But I can guarantee one thing: Walgreens will lose out on my money 99 percent of the time (I have nothing personally against Walgreens and it’s a well-run business, nor do I have any affiliation with CVS. I just needed to make a point here).
Loyalty isn’t just about understanding marketing, good PR or even social marketing, either. It’s also about excellent operations. In fact, some experts believe a good loyalty foundation can be found in your company’s marketing, accounting, finance, operations and even HR practices. Remember, brand perception can be developed based on the overall experience with a company.
But getting back to the WSJ article, remember to always have metrics in place so you can measure your customer loyalty efforts. You’ve got to have metrics in place so that you know that you’re targeting the right customers, getting the results you need and that your profitability levels are where you want. This can be a science, so it’s important to have a plan in place.
Loyalty experts also point to the importance of the Three “R’s” when it comes to loyalty: retention, repurchase and referral. Data tracking firm Forrester recently released a survey that showed evidence that customers with a good experience with certain companies will most certainly purchase again, refrain from shopping with a competitor and also spread positive word-of-mouth to friends and family. These are all critical elements of being able to survive a recession and thrive in good times.
Here are a few great resources for customer loyalty:
What’s the Secret: To Providing a World-Class Customer Experience
What does your customer loyalty program look like? Share your thoughts here.
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