Going for Gold

Achieving customer loyalty is more important than ever

Keep your customers. It will cost you much less to retain your current clients than to try to make your competitor's customers switch to you.

Studies have shown that, on average, it can cost you up to 5 - 8 times more to create a new customer than to keep one.

Most companies' greatest ultimate asset is the existing customer base. New customers are scarce and products and offerings are, in the eyes of customers, beginning to look more alike. Loyal customers purchase from you again and again. As a rule of thumb, if you can increase the loyal part of your customer base by just 5%, you could see increased earnings of up to 50%.

To be loyal, customers must be satisfied. Although a satisfied customer is not necessarily a loyal one, the two factors, satisfaction and loyalty, are closely associated. On average, around a fifth of customers who say they are "satisfied" are also loyal and will probably buy from you again. Compare this with the great majority of "highly satisfied" customers who are, on average, loyal. So, the degree of satisfaction can be a good loyalty indicator.

How do you know whether you have "satisfied" or "very satisfied" customers? Generally, customers are "satisfied" when their expectations have been met. Only when expectations are exceeded will they be "very satisfied" and, probably, loyal.

What to do with "indistinguishable" products?
Sound familiar? In the eyes of many customers, competitive products are beginning to look alike. So, what can be done to ensure that customers' expectations are exceeded so they become more loyal?

Some attempt to "bribe" their way to customer loyalty by means of various bonus schemes. However, it is very hard to buy real loyalty, even if you offer free flights, wine, or expensive freebies. What's worse, most bonus schemes themselves are gradually becoming similar.

Often, it can be much more fruitful to invest the resources in building stronger relations with your customers. That is best done by being very attentive to your customers.

Avoid alienating your customers
Most companies continue to operate without specific methods to measure effectiveness in satisfying customers. Markets are crowded with products and customers increasingly find it difficult to distinguish between them. In many companies we still see an enormous gap between the stated goal to increase customer satisfaction and actual attempts to achieve the goal.

On the other hand, lots of companies spend up to two thirds or more of their marketing budgets on getting new customers. Conversely, they spend only 20% or less on existing customers, even though they represent the majority of sales.

If your company does this, you should carefully review your situation. The apparent lack of interest from a supplier is much more significant than most people realise. Up to 67% of customers who changed supplier made the switch because they did not feel sufficiently looked after by their previous supplier. In itself a worrying statistic, but it's caused in part because products are increasingly perceived as similar. It's neither difficult nor particularly risky for customers to switch suppliers.

Indeed, good relations with customers are crucial. Ultimately, it's very difficult to really maintain "meaningful relationships" with clients by proxy or by relying solely on, for instance, computer software systems. Whilst they can be useful in handling certain interactions, they can hardly buy you instant friendly customers, let alone customer loyalty.

What do your clients say?
Customers generally respond well to a supplier who treats them with genuine appreciation. For most vendor-customer relationships in the business-to-business world, longer lasting relationships are very important. Customers may well want a kinship with you and your company, but this relationship needs to be gradually built up and nourished.

As with trust, you earn loyalty. Once you have generated a good customer relationship, you must maintain it so that it endures rather than perishes. However, gathering and understanding customer satisfaction information is the first step to getting this relationship right.

Strong Customer Relationships... [more]

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