The Importance of Customer Loyalty to Small Business

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn

Business Management

By Marc Ford, Coach, Author and Editor at YBKBS

“Loyalty is hard to find. Trust is easy to lose. Actions speak louder than words.”

Unknown
Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn

Customer acquisition, or getting customers and clients as it’s known in plain english, is at the top of the agenda for most businesses and their owners – most of their marketing budget, strategy and time, if they have those, is spent on advertising materials meant to drum up new visitors, clients and customers for their small business.

Not to mention, new technologies such as group buying sites and consumer reviewing apps are emerging to help businesses expand their reach. New ways of tagging people on content posts, sales funnels, lead funnels, funnels for funnels, chatbots, autobots and deceptorcons. 

The last two are the names for Transformers so I’m making sure your with us so far…

However, many fail to put as much focus on customer loyalty programs. And it’s just bemusing.

They are the richest vein of marketing you could wish for and if you tap into that vein just right, I am telling you, not only will you marketing spend go down, but what you do spend has a much higher return on investment.

Building and growing any business is much more than just accumulating new customers – it’s retaining recurring ones, too.  Unless of course you are an undertaker or a driving instructor.

Two businesses where people leave after they’ve either died or passed their test, never to return. Very few businesses are like that, but you get my jist!?

Many businesses overlook the importance of customer retention and loyalty programs and they really shouldn’t. They are able to bring increased sales, brand awareness and a sense of security during tough times. 

In fact, many businesses report that 20 percent of a business’ existing customers generate 80 percent of its profits. It’s that good old 80/20 rule that gets banded about a lot, but is essentially spot on.

In order to bolster profitability, businesses must cultivate and care for their recurring customers, engaging them in customer loyalty programs and providing them with frequent incentives. Lets take car insurance for example. 

About 10 years ago, they had it all their own way. You bought their insurance. Renewal came around. You stayed with them because it was just less hassle.

Problem is that we became educated to the increasing cost of insurance if we didn’t look around. If you spent say £300 a year on insurance and didn’t have an accident, a conviction, a bump, a scrape, hadn’t moved, hadn’t changed car and hadn’t claimed, why on God’s green earth should your insurance go up to £400 the next year?

Hardly reward for being sensible is it?

It’s the same with gas and electric and tv and broadband right now.

We’re left feeling a bit bitter and twisted because new customers get the best prices and good, loyal ones are just paying whatever someone wants us to pay. We then spend our valuable time either looking elsewhere or haggling with someone in Scotland or further afield to get the best deal we can. Why should we go to those lengths when all we are, are good customers and clients?

So why should your business be any different?

Go on…tell me why!

You can’t and if you are arguing with me, well my friend you’ll soon be in trouble enough as others remember ‘The Customer (or Client) is King or Queen’…not you! So here are five reasons why loyal customers are essential to your business:

Loyal customers are easier to sell to

Because loyal customers are more familiar with their preferred businesses, they are usually more inclined to try new menu items, new products and recommendations. 

In fact, according to Marketing Metrics, the probability of selling to new prospects is about 5 to 20 percent, but for an existing customer is 60 to 70 percent. 

In other words, it’s extremely worthwhile – businesses can put forth the same amount of effort, but expect much higher success.

Loyal customers can act as brand ambassadors

As brand ambassadors, your loyal customers can reinforce your values to other consumers.  Because they frequent your store or restaurant and are satisfied with your product, they are also more likely to share their positive experiences with others – in the form of recommendations, reviews or social media praise. 

They are also more inclined to speak about your brand in everyday conversation with their peers, or “word-of-mouth marketing” and they also do most of the selling for you. 

In some instances you’ll find someone referred to you by a existing customer or past client, will never actually ask the price. They just know it’s good stuff they’re getting.

Acquiring new customers is more expensive

Research has shown that it is six to seven times more expensive to acquire new customers than to continue serving loyal customers. To acquire new customers, restaurants and retail stores have to catch their eye with advertisements, provide introductory information about their brand, draw them in with discounts and deals and encourage them to try new items or products. 

Each of these tasks can be costly. On the flip side, focusing on customer loyalty is much less labor-intensive.

Loyal customers protect your business from competition.

Your loyal customers are the foundation for your business. If competition gets stiff or budgets get tight, they will be there to give you some padding – an “economic moat” as Warren Buffett puts it. 

Newer customers will be more likely to switch to a competitor, hurting your sales. Loyal customers reduce the risk of price sensitivity; they aren’t likely to abandon your brand after a small price adjustment. In tough times, your business’ ability to retain customers could be its saving grace.

Loyal customers offer constructive feedback

How can your brand grow if you are unsure which areas of your business need improvement? 

Your loyal customers know your brand inside and out and can tell you, honestly and constructively, what you’re doing right and what needs some work.  Newer customers could shy away or develop biases after one or two unpleasant experiences, giving way to negative reviews that might not be an accurate representation of an average visit. Feedback is essential to maintaining quality products and service. 

So, now that you know the importance of customer loyalty, what are you doing to reward and retain your loyal customers?

Latest Articles

eKitchenette - Serving the food industry the CoVid era and beyond ybkbs small business news for smart business owners
  

eKitchenette: Serving the Food Industry in the COVID Era and Beyond

In challenging times, innovative solutions are called for. And for three local entrepreneurs from Leicester, the pandemic inspired them to come up with a creative way to support local restaurants and food businesses. 

Thomas Edde, Ali Datoo, and George Martin founded eKitchenette, an app that combines influencer marketing and online ordering to build a trusted community of food business owners, influencers, and consumers. I met Thomas via Zoom this week to learn more about the business and the team’s journey so far.

Vilma Jackson : Meet the Performance Artist Paving The Way for Deaf Creatives
  

Vilma Jackson: Meet the Performance Artist Paving the Way for Deaf Creatives

Multi award-winning Deaf performance artist Vilma Jackson has launched a new chat show featuring an all-star selection of Deaf panellists. The first episode of The Vilma Jackson Show was released on 11 March, and the second will follow soon. Episode 1 showcases the wide array of talent that exists within the Deaf community and the barriers Deaf people face, while the second will address the wider debate around diversity, inclusion, and equality as they apply to the Deaf community.

The Man Whisperer, Kenny Mammarella-D’Cruz where we talk about male mental health business, masculinity in the business world and his very unique perspective of lockdown and how it helped him, help men in business during it. YBKBS Small Business News for Smart Business Owners
  

Kenny Mammarella D’Cruz: Words of Wisdom from The Man Whisperer

Talking about mental health and struggles can be challenging, and this is often particularly true for men. Unfortunately, we live in a culture that does not encourage men to open up about their feelings.  But one man is on a mission to change that. As we mark the one year anniversary of lockdown this week, editor Marc chatted with Kenny Mammarella D’Cruz, also known as The Man Whisperer, about his vital work in the area of men’s mental health.

  

Founder Anneka Hicks Speaks Out: “Why I Left Excluded UK”

Founder Anneka Hicks has stepped down from Excluded UK to create a new venture dedicated to tackling the mental health fallout of the COVID-19 pandemic. Here she tells us why she’s stepped down from the group she founded, the toll it’s taken on her personally and fighting for the 3 Million self-employed and small business owners excluded from financial help from the UK Government.

Small Business Brexit - Visa to hike interchange fees for UK customers YBKBS Small Business News for Smart Business Owners
 

Small Business Brexit – VISA Hike The Interchange Fees for UK Customers

Small Business may well be dealt a tougher hand in Post-Brexit Britain as VISA are set to notify an INCREASE in interchange fees for doing business in Europe. 

The payments giant is to hike fees for purchases made by UK-based customers from most of Europe – prompting more fears of higher prices and fuelling the argument that Brexit is adding to the cost of trading with the EU.ck on their feet.

 

Meet the Couple Dedicated to Uplifting and Promoting Black Businesses

BBR started life in 2017 with a Facebook group, but its origins can be traced all the way back to 1985 when Huw walked around the streets of London amassing data on over 2,000 Black-owned businesses. This information became the UK’s first Black Business Directory. 

Paul Scully MP, Minster with Responsibility for Small Business (SME's) talks to Steven Mather for his podcast The Business Herald and YBKBS Small Business News for Smart Business Owners
  

“I Tip My Hat Top Anyone Running Businesses at This Particular Time” – Small Business Minister

Paul Scully MP, Minister with responsibility for Small Business talks to Steven Mather about funding, who they’re really talking about when it comes to small business and what their position is on the 3million small business owners currently excluded from the Government support during the Pandemic.

Listen to Our Podcast...