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It’s far more cost-effective to retain a customer than it is to acquire a new one. And if you want to build a profitable business that withstands the test of time, you must invest in customer loyalty.
The Role of Customer Loyalty
Customer loyalty might seem like a buzzword, but it’s actually an integral component of building a successful business that’s profitable for many years to come.
As Amplitude puts it, “Customer retention, at its core, is a measure of how many customers or users keep coming back to your product over time.”
Research shows that it’s 5 to 25 times more expensive to obtain a new customer than retain an existing one. Likewise, increasing your customer retention rate by just 5 percent can increase profits by 25 to 95 percent.
In other words, customer loyalty isn’t something you stick on the back burner and deal with when you have time. Instead, it’s an investment that must be given prominence in every phase of your marketing, sales, and operations.
You can calculate your customer retention rate (which is the measurable impact of loyalty) using the following formula:
Armed with a clear understanding of your current retention rate, you can develop a proactive strategy that helps you increase this number over the next several months.
5 Hacks for Better Customer Loyalty
There are no shortcuts to improving customer service, but there are plenty of unique strategies you can use to move things in a positive direction. For example, here are a few:
1. Under-Promise and Over-Deliver
The idea of under-promising and over-delivering is applicable in all areas of business. The more you focus on this concept, the more satisfied your customers will be. As a result, they’re apt to remain loyal for longer periods of time.
The key is to not under-promise in such a dramatic way that you hurt your ability to onboard the right customers. (If you undercut yourself, you could actually limit sales.) You want to barely under-promise and then go heavy on the over-delivery aspect of the equation.
2. Show Customers in Social Proof
Your customers are social beings. As much as they may pretend to be independent thinkers, their loyalty to your business is heavily influenced by their peers. If you can shape a positive narrative that their peers are impressed by your products and services, they’re much more likely to stick around.
Social proof can be leveraged in a variety of ways. It’s most commonly utilized in the form of case studies, testimonials, ratings, media mentions, and other endorsements. Casually use these in every marketing resource and customer touchpoint. This includes your website, emails, social media profiles, and packaging.
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3. Reward Customer Loyalty
Customers want to know they’re appreciated. You can show customers you care by rewarding their loyalty. Again, there are plenty of different ways to do this. If you sell a service or subscription, you might grandfather in your pricing so that current customers stay at the same price, even while you increase your rates elsewhere. If you run a retail business, try a loyalty program where customers earn points for every purchase. There’s ample room for creativity!
4. Prioritize Customer Service
Don’t make the mistake of downplaying customer service (like many organizations do). The first sale is typically the least profitable sale for your business. Thus, in order to reach a point where you can recoup value on subsequent sales, you have to provide superior customer service.
The key to good customer service is to act quickly, empathetically, and with an emphasis on convenience. Don’t make people wait and never make them feel like a burden. In other words, build customer loyalty by providing service that makes customers feel appreciated.
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5. Collect Feedback (and Listen)
You need to know how your customers feel at each stage of the customer journey or lifecycle. Because contrary to popular belief, their feelings about your brand are not stagnant. In fact, they face unique challenges and different degrees of friction depending on what stage they’re in.
Collecting feedback is obviously very important for customer loyalty. But it’s equally important that you listen to the feedback and apply it. This is where you show your customers that you value them as individuals.
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Adding It All Up
There’s no better time to address your customer loyalty than today. The sooner you act, the more profitable your business will be. And though it’ll require some effort and upfront cost, you’ll see a sustainable return for years to come. Act fast and take customer loyalty seriously!