Profit from the Loyalty of Love
 How to make customers lifelong fans

by Peter Cheales  

Customer loyalty has become an all-important ingredient in the battle to survive in the cut-throat, cost-conscious and globally world competitive that is careening to what promises to be an even more tumultuous new business millennium. So how to you get your customers to stay with you, even when the going gets rough?

You seduce them with out-of-this-world service.

When business gurus discuss the delivery of customer service, they insist that it’s the little things that count. And they’re right. But as Walt Disney said: “There’s no magic in magic. It’s all in the details.” So before you focus on the little things that count, create a system that allows you to repeat each important little thing that counts, time and again.

Start by building an accurate and constantly updated customer database. In addition to contact information (names, addresses, telephone and fax numbers), track every transaction in terms of the items purchased and the amounts paid, whether payments was in cash, by cheque, by credit card or on account. Refer to the database often. Used as a research tool, it will help you spot trends, identify the fastest moving and most profitable products, and guide you in re-ordering. Possibly more important, it will flag your regular and most valuable customers.

But don’t rely too heavily on a computerised database to build relationships between you and your customers. See customers as individuals, not market units. Use technology to enhance relationships, not replace them. Remember that each customer is a human being. So get out from behind you desk or counter and really get to know him or her. Discreetly probe beyond surface recognition. Find out what they need and want, what they like and dislike, where they work and live, what they do for fun. Always find time for a chat. Get to know what makes the relationship tick. Greet them by name. Congratulate them on their birthdays, anniversaries and other happy events. Commiserate with them when they suffer losses.
By building a one-on-one relationship with your customers, you’ll breed a culture of loyalty. If the y consider you a friend, fewer will abandon your ship.
Research shows that the average South African business, which provides poor to mediocre customer service, loses:

  • 30% of its customers because they’ve found a better or cheaper competitive product elsewhere;
  • 20% because they believe that the vendor doesn’t care;
  • a massive 49% because of the abysmal quality of service, and
  • only about 1% because they’ve “packed for Perth”.

This proves that competitive advantage is more a matter of how you manage your relationship with your customers than the price or quality of the products you sell.

But you can keep most of your customers for life. Romance them. Make them fall in love with you. If you don’t, someone else will, and he or she will reap the benefits. And they’re substantial.

It costs five times as much to find a new customer than it does to keep an existing one. If you retain only 2% of your customer base, you’ll reduce your operating costs by 10% and increase your profits by 34%. Statisticians calculate that if you increase your average customer retention from an annual 80% to 90%, you’ll double the total lifetime value of your customer base. For example, if you retain 80% of your customers every year, you’ll have to replace them all over a five year period (5 x 20%). However, if you retain 90% of your customers a year over the same period, you will have lost just over half of your original customer base (5 x 10%).

So treat every customer like your mother, your father, your brother or your sister. When you build up customer loyalty, defection rates tumble, you eliminate costly retrenchments, the cost of sales plummet and profits go up.

Check this simple equation:
Customer loyalty = increased profits
Customer delight = increased customer loyalty.
Customer delight = Service performance  Customer expectations (the delivery of service)

To delight customers and turn them into lifelong fans, you must understand the nature of service. It’s a combination of tangibles and intangibles, experiences and outcomes, all designed to win customer approval. Build a customer value package that combines things and experiences which create a total customer perception of value received. The quality of service provided is a measure of the customer’s delight with the entire experience of doing business with you.

When you plan your business strategy, build it around customer value. Include a commitment to regularly communicate with the people who support your operation by phone, in-person, by fax and by newsletter. Make them feel part of your business family. Spoil and flatter them. Make them feel special.
Make 2003 the Year of The Customer. Let this year begin A Century of Customer Worship.