Inside Small Business | Small Business & Home Business Marketing

How to Create Customer Loyalty

Kevin Smith, Keystone Business Forum

Creating customer loyalty is a never ending challenge for every business owner. However, over the last few years the definition of customer loyalty has blurred and the key to obtaining it has been lost. So-called loyalty programs have become diluted and commoditized, leaving even the experts wondering if they do more harm than good.

Many larger organizations have forgotten that loyalty is not about points, miles, hole punches or stamps. Although these programs may keep customers coming back, they often fail to keep customers wanting to come back. Herein lies the fallacy of customer loyalty. The lines between customer satisfaction, customer retention, and customer loyalty have become increasingly indistinct. Customer satisfaction is a far cry from customer retention. Although customer retention is an important part of any business model, it is not an equivalent to customer loyalty. The descriptions below clarify these concepts.

Customer Satisfaction – Customer satisfaction does not necessarily provide retention or loyalty. Although vital to achieving loyalty, simply satisfying a customer may leave you short of your goals. Customer satisfaction should be considered an essential building block of retention and loyalty.
Customer Retention – The customer continues to buy your products/service; however, due to the lack of emotional connection, he may opt to purchase elsewhere should an equal, yet more convenient or cost-effective product become available. Customer retention is frequently carried out through “loyalty programs.” These programs are often copied and soon become commoditized across a given market.
Customer Loyalty – The customer becomes an advocate for your company. He or she will provide referrals and continue to use your products and services without basing decisions solely on price or convenience. Customer loyalty is difficult for competitors to copy because it is emotionally based. True loyalty is best achieved through people carrying out an organizational vision and making meaningful connections with the customer.

Loyalty should not be pursued from the perspective of the supplier, but from that of the consumer. Loyalty is about emotion and basic need determination. Nike has never had a “buy nine and get the tenth free” deal. They have, however spent millions in marketing dollars to tap into a consumer emotion, creating an army of people loyal to their brand of athletic apparel. Nordstrom’s doesn’t deal out gas cards nor are they the most economical choice for clothing, but they have earned a reputation for bending over backwards to ensure a positive customer experience. In doing so the company has created customer loyalty that few, if any, rivals have managed to surpass.

So what’s the small business owner without countless marketing dollars to do? The answer can be quite simple. Go back to the basics. The most practical way to ensure customer loyalty for small business owners derives from good, old fashioned customer service. Customer service is about producing a positive emotional response and providing a positive consumer experience. It is about developing a culture in which products and services are seen and measured through the eyes of the consumer. Loyalty is about creating fans of your business, fans who will continue to shout your name from the proverbial rooftops. Following these five rules can help develop an army of loyal fans.

1. Lightning Bolt Leadership – If the right atmosphere is created at the top, the energy will happen on the ground. Commit yourself to instilling a culture of customer service.

2. Eyes of the Customer – Move through the purchasing process as a customer, the whole time envisioning what you would like the experience to be. Communicate that experience throughout your organization consistently and with enthusiasm.

3. Fans from Within – Settle for nothing less that an enthusiastic employee base. This can’t be forced, however. Give your staff a sense of value and they will be excited to give back.

4. Power to Serve – Empower those whose processes are closest to the customer to make decisions to best serve the customer and enhance their experience. Let them know how they contribute to the organizational goals and the ultimate customer experience.

5. Measurement and Reaction – Get feedback from your customers as to how they felt about their experience. It is not only vital that you measure the customers’ experiences, but that you act upon the results. Keep the customers informed of changes made as a result of their feedback.

Following these principles will help produce solid customer satisfaction, a high degree of customer retention, and enduring customer loyalty.

Kevin S Smith is an Organizational Development Specialist and President of Keystone Business Forum in Erie, Pennsylvania. He is a certified Quality Management Lead Auditor, Lean Operations Champion, and Six Sigma Green Belt. Kevin is the author a monthly blog titled “Nuts and Bolts for Business”. You can contact Kevin at the Keystone Business Forum.

Posted on Tuesday, September 2nd, 2008 at 3:44 pm and is filed under Branding, Customer Service, Leadership, Marketing, Small Business. You can follow any responses to this entry through the RSS 2.0 feed.