Management - Improve Customer Retention

Steps To Building Better Loyalty

Management Case StudyEvery distributor owner – especially those running smaller firms – has to decide where to put resources. Should companies go after new business or focus more on maximizing retention?

Janelle Barlow, author of Branded Customer Service: The New Competitive Edge, believes business owners that emphasize retention can reap significant rewards. "Retention means people are willing to come back and do business with you as long as they can," she says. "It also means that they're saying positive things about you – what some people call positive promoters. And to me, it means that customers who are loyal will pay more."

As a specific example of loyalty, Barlow offers up her personal allegiance to Apple. "I could buy a less expensive PC, but my loyalty to Apple and the brand is very strong, and I say a lot of positive things about them. It's the loyalty factor, the positive word of mouth, and of course, the repeat business and the willingness to pay."

How can you earn lasting loyalty from your customers? Here are four ideas to help you get results.

Create Community
While it may be unrealistic for customers to come to you every time they need a promotional item, building a sense of community will encourage clients to think of you first.

Barlow, for instance, continues to do yoga at a certain studio because of the positive atmosphere and the friendliness of the instructors. "I have so many alternatives for exercise – I can swim, I can run, I can go to a gym – but I go almost every day to this studio, and part of the reason I do that is they have a real sense of community there," she says.

The key to creating that community – whether you have a physical storefront or an online-only shop – is to provide some sort of personalization with each purchase, says Barlow.

"Zappos.com is a large company, but they have a very good connection with their customers," she says. "Every day, they send out personal cards to customers that they write, stamp and address, and they make some comments on them about how they enjoy doing business with them. I've gotten these cards from Zappos."

By taking the time to add this kind of personalized touch, Barlow says Zappos provides its customers with more than a transaction – it provides them with an experience.

"That's where the whole soft side of service has to come in – how do you deliver, but on top of that, do you remember their name?" she says. "So, if small businesses can create an experience that leads to connectedness – in terms of how they lay out their stores or how they interact with customers – they can create a sense of community with the people who work in the store and also the shoppers who go there."

Ask How You're Doing
Justin Sachs, author of Customer Loyalty: Top Strategies for Increasing Your Company's Bottom Line, says distributors must get in the habit of asking for feedback from customers.

"You never know how you're doing until you ask," he says. "The more information you have, the better you can adjust your marketing and your fulfillment. You need to ask your customers about how they're feeling about the work that you're doing, and then ask a very simple question: ‘What can I do to better serve you and make it more worth the investment you made in my company?' "

Asking that question won't do much unless it leads to action – actually taking and implementing the advice of customers shows you care about what they think. "Do what they suggest," he says.

Sachs offers proof from his own company that feedback can boost the bottom line. After hearing from customers, he found out that his clients needed more web-based help. "Now, we offer website services and we're making more money that way," Sachs says. "We were actually able to increase the lifetime value of our customers simply by offering a service that was the answer to one of those survey questions."

Give Something Back
But with many companies now in the habit of handing out survey forms to customers, either in person or via e-mail, how can you make your feedback request stand out? "What we recommend doing is giving them something," Sachs says.

One easy way to do that, Sachs suggests, is by taking advantage of offers through restaurant.com. "It allows business owners to buy restaurant gift certificates for $3-$4 per certificate, and the customer gets a $25 certificate," he says. "So, for $3-$4 per client, you should be willing to spend that to figure out what they want. You can use that information to dive deep into how you can better leverage your customer loyalty efforts and how you can use it to increase your overall revenue over time."

Barlow agrees that giving away a little something for free – even if it's only worth a few bucks – is a great way to build brand loyalty and retention. "Many, many restaurants will send a special coupon that says, ‘It's your birthday, come on in and have a cup of coffee on us.' It creates that sense of friendliness, that sense of, ‘They gave me something, I need to give them something back.'"

Barlow says distributors can help themselves enormously in the area of customer loyalty by asking themselves this question: What are you doing for your customers beyond what they pay for? "Do things that don't necessarily cost you a lot of money but mean something to the customer," she says. "It really is important."

Be Smart About Online Engagement
Whether it's a simple thank-you or a reply to a post or tweet, Barlow says interacting with potential customers through social media can be a powerful retention strategy. "Once again, you're creating that relationship with the customer," she says. "You've got to build something that builds past the transaction. You want to deliver that transaction effectively, but at the same time, you have to add something else on top of it."

Sachs notes, however, that using social media can't be a casual tactic. "Social media can bite you the first time that you don't fulfill over the top for a client, because that's the first place they're going to go to tell people about how terrible a job you did," he says.

Sachs believes it's crucial to remember the customers you interact with on social media and make sure that your service to them is exceptional. "When you use social media, I think it's critical that you over-deliver in every way possible, because if you don't, you run the risk of having a lot of negative public communication," he says.

Case Study