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Keep improving customer loyalty – it’s crucial for customer retention

Customer loyalty is something every business endeavours to improve but it’s difficult to measure and the benefits are often subjective and not quantifiable. When senior management are taking investment decisions, they may take some convincing that improvements in customer loyalty actually bring benefits to the bottom line.

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Why is it important to invest in improving customer loyalty?


Some simple facts - loyal customers will:
•    Become advocates for your business (Bill Bleuel says that a referral from a loyal customer has a 92% retention rate compared with 68% for a customer acquired from advertising)
•    Be forgiving if there is a problem with your service – they know that it will be resolved quickly and trust you
•    Be available if you want to discuss product/service improvements or developments
•    Be willing to share their future strategy with you
•    Be your first line of defence against competitive threats

When the cost of acquiring a new customer is five times that of retaining and growing an existing one, why would you not want to develop loyal customers?


Customer retention may depend chiefly on how difficult it is for your customer to switch suppliers. Holding on to customers may simply be down to price or how comfortable your customer feels about your ability to deliver on time. If customers are uncertain about you as a supplier your retention potential will be low and they are likely to look elsewhere. A regular measure of customer satisfaction is important to identify any problems quickly.

Loyal customers know that you communicate with them and that you will go the extra mile to support their needs – that’s why they stay with you. But loyalty is subjective, and is more about confidence than just satisfaction and is based on how customers ‘feel’ about you or perceive you.

That doesn’t mean that all the operational imperatives such as reliability, on-time delivery and quality aren’t important – they are. Satisfying these however will not build confidence on their own or impact on retention as unfortunately they do not differentiate you from the competition as your achievements can be replicated elsewhere.

Enduring relationships, like a long marriage, need checking on now and then to understand their current state and direction of travel. This requires investment. The return on that investment though comes in such things as reduced risk, lower sales costs, increased opportunity and more referrals. Oh yes, customers who are confident in you and loyal are more likely to refer and recommend you to others.

And remember,
 “My good opinion once lost, is lost forever” - Mr Darcy, Jane Austen’s Pride and Prejudice

What loyalty is not:
•    When your customers have such high switching costs they can’t move away from you
•    Inertia – your product/service does the job at the right price and there is no incentive for your customer to switch to another supplier – for now. Such inertia can quickly change if there is a sudden problem or a series of annoyances


Customers will change suppliers when their needs fail to be met – you might be the last to know and it may not be because your customer satisfaction score was low.


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