Small Business Guide. to Customer Loyalty

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1 Small Business Guide to Customer Loyalty

2 Small Business Guide to Customer Loyalty Picture your ideal customer. Imagine how they might experience your brand, from discovery to purchase and beyond what they re thinking, how they react to and interact with your brand, what they purchase and why. Advocates are crucial to growth and customer retention. But in order to turn a customer into an advocate, you first need to establish customer loyalty. Your ideal customer is not just interested. They don t just treat your business with respect, or come back every Thursday to make a purchase. They re actively involved in the growth of your business. They love it. They re so excited about what you re doing that they bring other people through the door. When they talk about your brand, they glow. That s what you call a brand advocate. Advocates are crucial to growth and customer retention. But in order to turn a customer into an advocate, you first need to establish customer loyalty. For small businesses, loyalty is what distinguishes a dedicated customer from a casual buyer. Eventually they ll want to tell other people how great the business is, essentially acting as a form of organic advertisement. Loyalty can be generated in many different ways. Think about big brands with passionate followings Apple, Amazon, Google. What makes fans so excited to use their products? You ll probably find a different answer in each case. For Apple, it s the simplicity of their devices; for Amazon, it s convenient shipping and customer service; for Google, it s the quality of its search engine. If a brand is particularly good at something, it can generate loyalty by focusing on those qualities and making sure they exceed customer expectations. The key is to find those differentiators that already make your brand great. 1

3 For small businesses, the principles are the same: Find elements that other people can rave about or better yet, are already raving about and build on those things. This guide will help you understand what customer loyalty is, how it positively impacts your company, what turns casual buyers into loyal customers, how to develop a plan for increasing loyalty to your brand, and how to put that plan into action. What is loyalty? Before we get into the whys and hows of building customer loyalty, let s look at what it takes to be considered a loyal customer in the first place. Loyal customers are often the result of a positive experience or series of experiences. Those customers are more likely to return to your business, more enthusiastic about making purchases, and are prime candidates for becoming brand advocates customers who promote the brand of their own accord. Loyal customers are often the result of a positive experience or series of experiences. Those customers are more likely to return to your business... It s easy to see why these types of customers are desirable for brands to cultivate. Not only are they repeat buyers, but in large numbers they can drive down the need for marketing and become great sources of honest feedback. Try to think of some brands that you are loyal to. It should be easy maybe you love a particular brand of shoes because they last forever, or maybe you re partial to a brand of yoghurt because it s made locally. These are brands you are proud to like on Facebook; the brands you re happy to bring up in casual conversation because you believe others would truly benefit from them, or even because mentioning them will make you seem interesting or in-the-know. 2

4 To bring you to that point, these brands had to provide you with some kind of experience that hit a switch in your brain and convinced you theirs was a brand worth supporting, whether it was bringing forth the realization that you ve been wearing the same pair of shoes for four years or the pride you feel in being from the same town. It s through experience that we create emotional bonds. Bands do this exceptionally well because their product is an emotional experience. Fans who refer to themselves as Deadheads or Little Monsters do so because they feel connected not only to the artists but also to other fans. Trekkies, Whovians, and Twihards are born of that same bond. Fandom and loyalty are one and the same. Fans who refer to themselves as Deadheads or Little Monsters do so because they feel connected not only to the artists but also to other fans. Trekkies, Whovians, and Twihards are born of that same bond. That s what we mean when we say loyalty a connection that is so strong that when customers think of your industry, they think of you and only you. Why is loyalty important? The most obvious benefit that loyalty provides is retention. Loyal customers return to spend more money. When a brand makes an emotional connection with its customers, those customers are going to be more willing to put their hard-earned money into the brand, and they re probably going to be happier to do it. You ve probably already heard the statistic, but it bears repeating: it can cost five times less to keep an existing customer than to gain a new one. A dollar saved by retaining a customer is a dollar that can be put to use elsewhere. Loyalty also combats negativity. If you goof up a product or if an employee makes a mistake, having a strong base of loyal fans can help to minimize the damage. At the very least, they ll be more willing to accept an explanation and forgive the faux pas. 3

5 There are other benefits: Loyal customers are more likely to purchase special promotions, deluxe editions, and preorders; they ll follow you on social media, give you feedback, and they re also the most likely to become advocates for your brand, which we ll discuss in further detail later on. Finally, loyal customers can provide a solid foundation for future brand development. As you go through the process of building loyalty, you ll find it s a two-way street. You ll get to know your customers a little better and find out what they love about your brand; you may also find out what they don t like about your brand. How do you build loyalty? So now you have an idea of what loyal customers can do for your business and why it s important to have them, but that knowledge alone doesn t actually help you establish a loyalty base. This section will give you advice on how to get the ball rolling on that. Know your brand The first step is to understand your own brand, what it offers, and what you want to be for customers. A poorly branded business will have a tough time winning customers over. If they come to you expecting one thing and find another, it s probably not going to be a positive experience, and that s a problem....benefits: Loyal customers are more likely to purchase special promotions, deluxe editions, and preorders; they ll follow you on social media; they ll give you feedback; they re also more likely to become advocates for your brand... Make sure that your brand: Has clear values Understands its market Meets expectations Fosters brand culture internally Is consistent 4

6 All of these things will lay a foundation that s critical for building loyalty, but be warned: it s important to strike a balance between building loyalty among your current customers and attracting new ones. Loyal customers provide you with the revenue you need to attract new ones and grow your business. If you focus entirely on loyal customers as your revenue stream, you ll likely find that your business growth stagnates or begins to decline. The reason why establishing a clear brand identity is so important in fostering brand loyalty is that it gives customers something concrete to connect with. Even if you have a great product, if your image is vague or underdeveloped, you may not make any impression at all. Here s a simple example to get you thinking: Home Depot, a home improvement retailer, hosts do-it-yourself workshops each month to help customers understand its products and put them to better use a great example of how to not only exceed customer expectations but also engage them and create a positive, lasting experience. Know your customers Building loyalty will be a different journey for each business, so one way to figure out the best approach is to learn more about your customers. They will give you insight into what is already working for your brand. Learn about your customers... they will give you insight into what is already working for your brand 5

7 Tim Hortons was ranked by Canadian Business as the best Canadian brand overall. It scored well across the board, but it stood out particularly in Reputation ( trust, admiration and respect, good feeling and overall esteem ) and Citizenship ( supports good causes and protects the environment ). It is important to realize how important those types of peripheral qualities are when trying to win over customers and create a positive experience. You ll want to find out what attracted your customers attention in the first place. For some businesses, this is easy. You can check Yelp if you re on there and read whatever reviews are posted the good and the bad. Establish an online presence and see what people are saying about you. Even if you don t want to tweet, it s worth being on Twitter to put an ear to the ground. The Internet can be a harsh place to go for feedback, but negative and neutral feedback is just as important as a rave review. If you re serious about building loyalty, you need to find out what s keeping people from getting there. Another method for uncovering feedback is to simply ask for it. This can be done by actively seeking out opinions from your customers or accomplished more passively by creating a survey. WestJet, for instance, has a feedback link right at the top of its home page that leads you straight to an open-ended survey form with just a few fields to fill out. It s quick, easy, and painless. Customers can do it on their own time, at their own convenience. You ll want to find out what attracted your customers attention in the first place. For some businesses, this is easy. You can check Yelp if you re on there and read whatever reviews are posted Making the feedback process easy on the customer is a great way to get more feedback. You can (and should, if you have the chance) speak with customers in person for direct input, and many brands do that successfully, but that approach overlooks customers who are unwilling to give you their honest opinion in person. 6

8 A survey allows you to ask questions that might sound awkward in person, and it will likely provide you more truthful responses: What could we do to improve? Were you happy with customer service? Would you recommend us to a friend; why or why not? Make sure to offer a text field for additional comments. Gathering feedback allows your brand to do a number of things, and these will vary for each business depending on its needs and the responses received. It could help you recognize holes in customer service, improve a product, or address pricing issues. Not every comment you receive will be immediately plausible, but you will get a better idea of how your brand is perceived and what changes will potentially improve customer experience. For example, you might discover that customers are reasonably happy with the brand but would not recommend it to friends because they don t think their friends would be interested maybe they consider the product too technical or niche. In that case, you might want to look into developing a brochure or web page that clearly explains your product or service, so that your customers can use that same language when speaking to friends and family. Gathering feedback allows your brand to do a number of things... It could help you recognize holes in customer service, improve a product, or address pricing issues. Know what works (and what doesn t) Each business will have something different to offer its customers, but being aware of the way other businesses are building loyalty and finding out whether or not their methods are effective is a good way to learn. While a business s products or services may be unique, its methods for building loyalty may be largely transferrable to your own business. The best way to begin researching is to check out your competitors. This could be as simple as visiting a competitor s store or going to their website and taking notes. Social media is a great place to look because a lot of the customer feedback is public. Paying a visit will show you what they re doing; paying attention to the feedback they receive will clue you in on what s working and what isn t. 7

9 Take loyalty programs, for example; they re popular, but are they effective? What impact do they have on customer experience? According to a survey from Hotels.com, 86% of Canadians do participate in a loyalty program, so it would be foolish to ignore the approach. If you do opt for a loyalty program, though, be sure to understand why they re popular and which approach would work best for your business. 86% of Canadians do participate in a loyalty program The key to developing an effective loyalty program is to balance engagement with enthusiasm. If customers feel driven to participate in order to collect rewards, but do not feel a sense of enthusiasm while doing it, something is missing. For 67% of Canadians who participate in loyalty programs, the deciding factor is free stuff. How can your brand give repeat customers free stuff without trapping them into repeat purchases? There are a lot of ways to do that: periodic sales advertised through an opt-in newsletter, rewards for recommending a friend, or just give them something cool at the door. Conversely, try to avoid those buy 100 get 1 half-off deals that pressure customers into more purchases than they want to make. For a small business, a loyalty program could be as simple as remembering what a customer ordered or writing their name on their coffee. Making the process easier and more comfortable for return customers is always a great move (assuming it s done tactfully). For 67% of Canadians who participate in loyalty programs, the deciding factor is free stuff. 8

10 Online, seemingly minor things can make a huge difference for customers. Faster loading times, an FAQ page, simplified checkout, language options, and enhanced security and privacy measures can greatly improve the overall experience. You can also check out what major corporations are doing. Their methods won t always apply to a small business, but the principles behind new marketing trends are often applicable. Make a point to dig through some online marketing and business news outlets for an hour each week, and it should be easy to spot tactics that fit your business. You ll quickly get an idea of what you need to do in order to build a loyal customer base, and the more loyalty you build, the easier it will become. From loyalty to advocacy Once you ve recognized some strategies that work for you and begin to build a loyalty base, the next step is to nurture your relationship with those customers. Loyalty is not the end. Advocates are customers who take their loyalty a step further and start telling their friends about the brand, sharing it on Facebook, and even getting involved in street teams or brand events. Advocates are customers who advertise for free. Online, seemingly minor things can make a huge difference for customers. Faster loading times, an FAQ page, simplified checkout, language options, and enhanced security and privacy measures can greatly improve the overall experience. Even in its infancy, Amazon did not use ads to promote itself. It relied on customer satisfaction and word of mouth. The brand advocates took care of everything. Advertising is fine, but no amount of marketing research can match the ease and effectiveness of a personal recommendation from a close friend. Ultimately, you want customers who will tell their friends about you, write reviews, share your posts, and contribute to your development. 9

11 Keep them updated Find out if your loyal customers want more information about what s going on with your business, and if they do, then consider setting up a newsletter (opt-in, of course) or a blog that keeps them up-to-date. They will be spreading the word about your business, so try to keep them in the loop. Measure success Before you take any steps toward executing a loyalty strategy, it is critical to consider how you plan to measure success. Only once you ve determined that should you begin to execute. Don t expect things to turn out the way you hope every time, and don t marry your plan. If it s not working, recognize the flaws and correct your course. One of the most reliable (and simplistic) ways to gauge success is to look at sales, and the more sales data you have access to, the easier it will be to determine how successful you ve been. If your business is able to keep track of same-customer sales, this information is particularly valuable when building loyalty. But in general, any increase in sales is a good sign. Social media is another good way to track success if your strategy involves social media. If you do have a strong social media presence, don t just look at your follower count. While that s definitely important, you should also monitor engagement (likes, shares, comments) as well as reach and clicks. Each of these figures can offer you valuable insights into what s important to your customer base. The most reliable way to gauge success is to look at sales, and the more sales data you have access to, the easier it will be to determine how successful you ve been. Shares, in particular, are indicative of high loyalty and advocacy. The people who share your content like your brand enough to put it on their news feed. That s about as close as you can get to wearing a branded T-shirt online. 10

12 Maintain momentum Finally, when you know you re doing something right and have evidence that it s benefitting your business and converting casual customers into loyal advocates, keep the momentum going. Don t just sit on it improve. Again, the steps you took at the beginning of this process are still important when you ve established an effective method of building loyalty. Use the profits generated by loyal customers to continue to attract new ones, while also continuing to interact with your loyalty base. Always be on the lookout for new opportunities to exceed expectations, create stronger emotional bonds, and address concerns or weaknesses. Continue to interact with your loyalty base and look for new opportunities to exceed expectations, create stronger emotional bonds, and address concerns or weaknesses. All of the brands we mentioned in this guide spent years developing and perfecting their loyalty-building strategies. If they had stopped developing these strategies as soon as they saw an increase in loyalty, they would not be notable examples today. Establishing a strong, effective plan for building loyalty is a job without end, but it gets easier as you go. 11

13 Conclusion Loyal customers are one of your greatest assets, not just because they re returning customers, but because they can be one of your most valuable sources of feedback, contributing thoughts and opinions that can help bring in more loyal customers. Starting a campaign to build loyalty is a learning process. Learn about yourself, learn about your customers, and learn about the options that are available to your brand. Take your time and make sure that the policies you establish are what your customers want. A points program that appears to work for Brand A or Brand B does not necessarily mean that a points program is the way to go for you. Your business has its own intrinsic qualities, and those are the things that will get people excited. As with any relationship, you and your customers will learn more about each other over time, and the way your brand establishes loyalty may change. It s a journey without end, but your brand will be better off for taking it. For additional resources and information for small business owners, visit amexforbusiness.ca. 12

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