Loyal Customers, what are they really worth?
Every company whether small, medium or large must aim to have an army of loyal customers. They are a special group and certainly worth their weight in gold. According to Customer Insight Group, successful companies typically see 55–70% of their sales come from 12–15% of their customers. Add to that the fact that companies typically spend 5–7 times more to attract new customers than they do to retain existing ones and you start to understand why loyal customers are special. They do more than just play the role of a cash cow. They can serve as your biggest advocate, swear their allegiance to you by refusing to purchase from your competitor, serve as a great sounding board, providing you with valuable feedback or better yet play the role of an extended sales force moving prospects one step closer to the point of purchase.
So given all that, what is a loyal customer really worth to a company? One simple answer is we do not know. Why? Because it is almost impossible to quantify all the benefits that a loyal customer brings. For example, how do you quantify the valuable feedback shared to enhance your product? What is the value of a social engagement such as a Share, a Retweet, a Follow or even a Like?
Metrics such as the Customer Life Time Value has its drawbacks. It fails to take a holistic view of a customer’s true value, and rather focuses on quantifiable metrics such as revenue, customer lifespan, discount rate, cost of acquisition etc. as a result, undervaluing a loyal customer’s worth.
So let’s try this again, what is a loyal customer really worth to a company? How about this:
Value of a Loyal Customer =
(Customer’s Lifespan X (Average Annual Quantifiable Benefits + Average Annual Qualitative Benefits)) — (Total Acquisition Cost + Sum of any other Qualitative Costs)
The exact answer we may not know for certain, yet one thing we do know for sure is that they are invaluable to any company.
So now that’s out of the way, why don’t we ask a different question: How do I turn my customers — both present and future — into loyal ones? The answer is simple, be customer obsessed. Have the customer at the heart of everything you do — in other words, be so awesome that they have no choice but to want more.
Just like any meaningful relationship, building customer loyalty takes time. It requires a significant amount of investment in resources (time, money, infrastructure and personnel). Remember in order to earn your customer’s loyalty, you first need to earn their trust.
There is no clear blue print on what will work for certain, however to stand a chance prioritise the following:
1. Build a customer centric culture within your company — From the janitor to the CEO, everyone should be singing from the same hymn sheet i.e. I work to serve my customer, I work to serve my customer, I work to serve my customer. As a leader, reward team members that display the behaviours you want to promote.
2. Be transparent — If an event at your end impacts your customer, come clean, notify them and collaborate to resolve the issue.
3. Remain top of mind — Share updates (via newsletters, social media), measure their satisfaction (e.g. Net Promoter Scores), seek their feedback and listen. Don’t forget to congratulate them on their accomplishments and successes.
4. Become a trusted adviser — Do not view them as a pay cheque, instead, view them as a partner/colleague who can benefit from your expertise and develop a mutually beneficial relationship.
5. Focus on the experience — Build a great product/service (or both) that they can’t stop talking about. Also make it incredibly easy for them to engage with you.
6. Reward their loyalty — Show them you care.
7. Be selective — Do not try to boil the ocean, just focus on those you can serve best and serve them to the best of your ability.
8. Be quick to respond — Address issues/queries as soon as is humanly possible. Develop a bias for action.
9. Establish metrics that matter and obsess over them.
10. Learn as much as you can about your customers — Knowledge is power, so turn that knowledge into a competitive advantage.
11. Invest in the right tools, technologies and processes — Ensure that your customers encounter as little friction as possible during their encounters with you.
Remember, loyal customers are special for a reason. Establish what you need to do to earn your customers’ trust and do what it takes — within reason- to earn it, it will pay dividends.