It’s a generally accepted principle of business that customer loyalty is important, but when I talk to business owners, I find that they often only think in terms of customer loyalty driving repeat purchases. Actually, research has shown that loyalty is tied to four customer behaviors that will drive your business growth and profitability.
This research was conducted by Satmetrix with Bain & Company, and it was discussed in Fred Reichheld’s book, The Ultimate Question. I read about the research in a follow-on book called, Answering the Ultimate Question.
Here are those four customer behaviors that can drive your business growth:
- Repurchases. As most business owners know, improving customer loyalty increases repurchases. Loyal customers are likely to return to businesses they trust and like.
- Larger Purchases. Improved customer loyalty also tends to result in increasing purchase amounts by these happy customers. Businesses are more likely to upsell and cross-sell with these, their fans.
- Referrals. More loyal customers will mean more referrals to the friends and colleagues of those customers. This effect is amplified now with the growth of social media and customer reviews on the Web — one very loyal customer can potentially refer hundreds or even thousands of new customers with a blog post or Google review.
- Feedback. Loyal customers will care enough about your business to tell you when they’ve had a great experience or a poor experience. They’ll also often suggest improvements in your business processes to prevent future problems. Other customers are not likely to give you feedback unless asked.
Customer loyalty is a higher degree of support for your business than customer satisfaction. A satisfied customer will switch to your competitors to save a few dollars or for convenience. A loyal customer will likely stay with you and pay more if necessary, to enjoy your great services and products.
According to the authors of Answering the Ultimate Question, these customer behaviors increase business revenue, provide relief from pricing pressure, bring in new customers, reduce marketing and sales costs, and provide customer-generated ideas for business improvement.
Find out who your loyal customers are and encourage them to become even more loyal. Your business will benefit from your actions, this year and for years to come. If you need help, please contact Rust Reviews!