Building a Loyal Customer Base
A loyal customer is likely to keep buying for longer, and buy more often, but many micro-businesses spend much of their time and effort trying to attract new customers. This article explores how a micro-business can create a loyal customer base.
There’s lots of academic literature on how to build loyalty but it’s not always aimed at the smallest of businesses. For a general introduction to the subject of customer loyalty and a useful framework called the Loyalty Ladder, read Generating and Increasing Loyalty.
I’ve developed these six principles to help micro-businesses build a more loyal customer base:
- Customers will be happy to give you their loyalty, so long as you continue to give them what they want. But once you stop, they’re gone.
- Existing customers are easier to sell to than new ones, so split your activities accordingly.
- Review customer service levels. ‘Moments of truth’ happen each time a customer speaks to you, whether it’s to notify a change of details or ask for more information. How you respond will determine whether a customer stays and buys more, or leaves.
- Make customers want to stay and buy from you – form bonds between you. Can you make them feel that they don’t want to risk going anywhere else as they can rely on you to meet their needs?
- Use what you know about them. This is more than just using their name on letters and emails, it means tailoring your product or service around their requirements.
- Create Loyalty Schemes which form bonds, rather than Reward Schemes which give points for purchases. Reward schemes generate loyalty to the points rather than to you and are often better suited to sales promotion programmes. You can’t buy a customer’s loyalty.
A list of principles may be useful in themselves, but they also need to be implemented. The following potential initiatives demonstrate what the principles might mean in practise.
“Thank you” is the language of customer retention. Compare to these for trying to attract new customers; New !!! Free !!! Improved !!!
Set up accounts and regular payment schemes by direct debit. Can you offer a Retainer Scheme or maintenance contract where the customer pays a fixed amount for a pre-determined amount of work?
Offer a discount or gift programme giving something of genuine value to the customer but inexpensive to you or that cannot be copied by competitors. An understanding of your customers and what they are really looking for will help you to work this out. For example, a delicatessen could offer wine, coffee or chocolate tasting sessions from partner organisations.
Create clubs with members’ evenings and seminars which are exclusive to members, rather than publicly advertised. Customers will then feel privileged to have been invited. Clothes, sports or fashion shops could benefit from this, e.g. by offering ‘new season’ collections before they are made available to the general public.
Use a database to collect and use customer details, e.g. caller identification or communications automatically triggered by events (e.g. birthday’s, extra purchases). Offers can also be based on purchase and usage patterns, such as seasonal or anniversary offers, or a printer cartridge offer timed for when volume of usage indicates that a customer may be about to run out.
Following the principles and thinking through the examples will help you to create your own initiatives and build a more loyal customer base, leading to more sales. However, you also need to make sure the results of any initiatives you do are measured and that you have the systems in place to do them effectively. Read Measuring Marketing and Does a Micro-business Need a Database? for advice on how to ensure your activities are effective.