There is so much emphasis on customer acquisition these days that very few businesses are focusing on customer retention. As important as getting new customers is, returning customers account for more than 80% of a company’s profit. This is why businesses should not relegate customer loyalty to the background. The following 5 reasons will explain further why building customer loyalty is vital for business success.
- Loyal customers make repeat purchase – It will take a long time to groom a new customer to the point where he or is comfortable doing business with you on a regular basis. But a loyal customer doesn’t have such constraints. Studies have shown that returning customers not only spend more time on your website or in your physical premises, they also do repeated business. In fact, more than a third of the revenue of any business comes from repeat customers. These people are so loyal; they cannot take your business elsewhere.
- Builds brand awareness – Your best publicity tool is a loyal and satisfied customer. Loyal customers can act as brand ambassadors for your business, reinforcing your values to other customers. They are more likely to refer to your business to colleagues, friends, families and even strangers than a new customer. And because referrals from peers play a huge role in influencing buying decision, this will bring in more customers and grow your business.
- It is more expensive to acquire new customers – it costs about 6 or 7 times more to acquire a new customer than to retain an existing one. In other words, customer acquisition is expensive. Businesses have to advertise, offer incentives and spend loads of money. By focusing on customer loyalty, you can build a strong base of loyal customers that would be strong influencers for your brand, effectively reducing the cost associated with getting new customers.
- Loyal customers can protect your business – Your loyal customers are the foundation of your business. Even when business gets tight and you have to re-evaluate your pricing system, loyal customers are not fazed. In fact, they have very low sensitivity to price and would not leave your business for another due to an adjustment in price. Additionally, loyal customers are willing to overlook certain errors or breaches that first time customers will not overlook. However, this doesn’t discount the place of liability coverage for your business.
- Loyal customers provide valuable feedback – As your loyal customers carry out repeat purchase, they will provide valuable feedback that would help you create better customer experience in your business. For example, a loyal customer is more likely to point out a mistake than a first time customer who would rather go on social media to leave bad reviews. Your loyal customers know your business inside out and so will be able to tell you constructively and honestly how they think you can do better.
These 5 points show the huge significance of loyal customers to your business. Now that you know how important they are, what are you doing to reward and convert returning customers into loyal customers?