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Sep 30
2005

Developing Customer Loyalty: A Key to Growth

Posted by: Steve Marr

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True customer loyalty is perhaps the greatest asset a company can develop. Loyal customers provide repeat business and-equally important-referrals of new customers. Word-of-mouth advertising may be one of the oldest and most effective methods of developing new customers.

Customer loyalty is difficult to build and measure. Some business owners assume that all repeat customers are loyal customers, but that may not be the case. Other factors-such as pricing or convenience-may contribute to repeat sales. The deeper and more important issue is to determine why customers come back before you conclude that they are truly loyal.


For example, I fly regularly with one particular airline, based entirely on schedule and pricing. The airline might conclude that I am a loyal customer, but I am not. If a competitor offered a lower price or better schedule to a destination where I was traveling, I would switch. I used to shop at a pharmacy near my home based strictly on location. Service was sloppy and frustrating, but I remained a customer for seven years before dissatisfaction drove me away. Based on my repeat business over several years, the pharmacist could have wrongly concluded that I was a loyal customer.


Wise business owners develop ways to build true loyalty that not only holds customers but also turns those same customers into a word-of-mouth marketing department.


First, anytime your product or service falls short and a customer wants a refund or adjustment, act quickly. King Solomon observed, "Fools mock at making amends for sin, but goodwill is found in the upright" (Proverbs 14:9 NIV). Solomon also understood that "Hope deferred makes the heart sick" (Proverbs 12:13 NASB). Acting quickly to correct problems, with a cheerful spirit, strengthens customer relations. A customer that needs to pull teeth to receive satisfaction won't tell many good stories about your business, whereas those who receive prompt and easy corrections will become sold on your business. Look at every customer complaint as an opportunity to build a stronger relationship.


Consistent follow-through in every aspect of service is the key to success. Jesus said, "He who is faithful in a very little thing is faithful also in much" (Luke 6:10 NASB). A distributor of promotional items gave less attention to smaller orders, and often shipped these orders after the promised delivery date. Customers continued to order, but only because the price was the lowest in town. Others, who were fed up with late deliveries, sought new suppliers for future orders. Referrals, if any, were always prefaced with the caveat: "The price is good, but the service stinks."


One question will determine if you have been successful in developing true customer loyalty. Ask your regular customers, "Would you recommend our product or service to others wholeheartedly?" A good follow-up question would be, "Have you ever recommended us to others?" Focus on these two key questions, and avoid the temptation to develop a longer questionnaire. A sandwich shop offered a free drink for a week to customers willing to answer the questions. Responses were received in a closed container to encourage candor.


The best way to evaluate responses to your two-question survey is with blunt honesty. If more than one-third of respondents would not endorse your business, you need to dig below the surface, understand the reasons, and take immediate corrective action.


Consider rewarding customers who make referrals. A health club might offer a free membership month- a carpet cleaner might clean one room for free- and a pizza store might give a $5.00-off coupon for each new customer referral. Your business will benefit in two ways: You'll obtain new customers, and you'll have a convenient way to measure the effect of word-of-mouth advertising.


A loyal customer is one who is willing to invest in the relationship by sticking with your business even if your price is not always the best, because they believe that, over time, you offer the best value for the money. These same customers will become the most effective sales team you could ever build, spreading the good news about your business to everyone in their network.

Steve Marr, Your Christin Business Coach

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