Customer Satisfaction vs. Customer Loyalty
It makes sense to cultivate customers you already have. Lee Resource Inc. says, that the cost is up to 5 times higher to attract a new customer than to retain an existing one. As per the Gartner Group, it is the 80/ 20 rule. This means that 80 percent of your income will be derived from just 20 percent of current customers.
But keeping existing customers is challenging. In fact, it is the holy grail of business.
While customer satisfaction plays one of the most important roles in customer loyalty the terms however are not interchangeable. We must differentiate between the two.
Customer satisfaction is simply a measure of a customer’s personal perception regarding how well their expectations are met or even exceeded.
Customer loyalty, is defined as a commitment, feeling or attitude that increases a customer’s likelihood of returning to your company to buy again.
Keeping the Customers You Have
Building customer loyalty is about appealing to all your customer’s senses involving his/ her purchase process. Both objective and subjective criteria come into play. One is objective, the other subjective. The objective criterion is to offer products and services that meet precise needs. The subjective criteria is the WOW experience. This is where a company truly shines. This is where people will talk about how your company provides amazing value and service.
According to TeleFaction data research, Customers who rate you 5 on a scale from 1 to 5 are six times more likely to buy from you again, compared to those giving you “only” a 4.8 score.
Calculate your customer retention rate. Know where you currently stand and decide what an acceptable rate is for you. It is pretty easy.
Legend:
- CEOY- number of customers at the end of year
- NNCA – number of new customers acquired during year
- NCSY – number of customers at start of year
- Customer Retention Rate: (CEOY-NNCA)/ NCSY
- Example: (300-60)/280 = .86 or 86%
Below are 10 powerful customer retention techniques you can use to increase customer loyalty and thus build revenue from existing buyers.
Important Retention Tactics
- Attract the Right Customers – If you’re attracting the wrong customers, they’re bound to be dissatisfied with your products. Study your market and match products and services with needs.
- Segment Your Customers – Remember the 80/20 Rule—80% of your revenue is generated by 20% of your customers. Find out who is buying what and focus your attention on your most profitable prospects.
- Identify True Loyalty – True loyalty means your customers are loyal because they truly love what you are offering not because they lack options
- Don’t Take Loyalty for Granted – Even if your sales are up it is never safe to assume your customers are 100% satisfied. Survey your customers. Ask them what you are doing right and more important where you need to improve
- Always Build Value – Show your customers that everyone in your company is committed to customer satisfaction. Customers may initially deal with sales but marketing and customer service are part of the team committed to their satisfaction
- Solve Problems – Problem resolution is a powerful customer retention (and sales) tool. Every company makes mistakes. How you resolve your mistakes determines your success in retaining more customers
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Start a Loyalty Program – In the chart below from Forrester Research see by industry where loyalty programs are most effective. Retailers have the most success while Airlines have the weakest results. Analyze the benefits of a loyalty program for your business.
- Use Coupons – Harris Interactive/ RightNow found that 68% of survey participants were more loyal because of coupon programs. Use coupons to limit customer attrition.
- Add Value – Differentiate yourself from the competition. Provide better service and an improved customer experience. Competing on price alone is a losing battle.
- Provide Self-Service – Customers want self-service options, such as research, online FAQs, support, satisfaction surveys by other customers, product suggestions, and seamless checkout.
Customer Satisfaction is Great, Customer Loyalty is Even Better
Customer retention can save you money and increase profitability. You also insulate yourself from competition. Customers want more than products that work.
Create an outstanding customer experience and build your brand. Make that one time buyer into a customer for life. Become a Customer For Life Company™