In my previous article, we discussed what customer service is and why it is important. Today, we are going to talk about another reason that excellent customer service is critical to a business’s success: creating customer loyalty.
Many people don’t realize it, but nearly 70% of the company’s sales are generated by loyal customers. Without those loyal clients, most companies struggle to ever become profitable and majority eventually collapses.
In this article then, we’re going to talk specifically about what makes a loyal customer, why they are so important, and what businesses can do to ensure they don’t get away.
The loyal customer defined:
Chances are you are a loyal customer to several businesses in your area.
They might be supermarkets, boutiques, or bookshops; you will agree with me that you are a loyal customer to one organization or the other. Loyal customers typically meet several qualifications:
- Recurrently purchase goods from the same company continually.
- Makes different types of transaction from the same company.
- Tell others to shop at the same company or establishment.
- Are eager to pay more and not easily lured away by cost-cutting competitors.
Because of these four (4) traits, loyal customers are a valuable asset to most companies.
THE IMPORTANT OF THE LOYAL CUSTOMER:
Simply thinking about what you already know about loyal customers should have convinced you that loyal customers are important to a business’s success.
However, if you need more evidence, that’s not tough to prove. I quote Beverly Rokes, there are a number of economic facts that would further support the status of the loyal customer. These facts include the following:
- Obtaining a new customer costs a company as much as 10% more than it does to keep a current customer happy.
- Preventing lost customers can dramatically improve a business’s profit and growth. For example, simply by losing 50% less customers than usual your business would be able to double its development. Even dropping customer loss by as little as 5% can raise a business’s profits by up to 85%.
In addition to these two facts, there is another business rule of thumb that applies here: 1/5 of a company’s customer’s account for 4/5 of that company’s income. That being the case, effective companies have had to learn what will retain those customers coming back over and over again.
HOW TO KEEP A LOYAL CUSTOMER:
Now that you know loyal customers are vital, we can talk about how to keep them in the first place.
The key is good customer service. When surveyed, 75% of consumers stated that a bad customer service experience would impact their decision to do business with that establishment again.
Sometimes, that choice would be to go anywhere else and to become their loyal customer instead.
Trades can stop this from happening by doing these three simple things:
- Giving the customers more than what they expect
- Giving the customers the best possible service
- Giving the customers what they want and what they need
Those three (3) steps may seem like a big command, but they worth it for businesses. Let me give you an example that will explain why.
Let’s say you go to the same supermarket every week. During each visit you spend $100. You’ve been going to that supermarket every week for the last five (5) years. Do you realize that you’ve fetched in $26,000 of revenue to that supermarket already? ($100 per week, spending X 52 weeks in a year X 5 years = $26,000).
But that’s just part of what you’ve done for that supermarket. You’ve also told two (2) of your friends about the supermarket during the last five (5) years.
Each of those friends have been visiting the store every week and spending an average of $50 per week for the last three (3) years. That means you’ve also fetched that store $15,600 ($50 per week, spending X 52 weeks X 3 years X 2 friends = $15,600) of revenue in addition to your $26,000!
As a loyal customer, you’ve fetched that supermarket at least $41,600 over the last five years. That’s why supermarkets and every other business need to focus on developing a loyal customer base by providing exceptional customer service.