For retail businesses, increasing sales can occur by selling their products at heavily discounted prices. At first glance, this customer acquisition method seems to work. However, at the end it is grossly unsustainable and it does more harm than good to your business. You may make lots of sales, but hardly any of the cash translates to profits.
Consider this other avenue of increasing sales; through customer retention and loyalty. Not only does instilling customer loyalty increase sales, it also creates profits and builds your business. According to recent research, 20% of your existing customers generate 80% of your profits. The key for any businesses to survive and grow is beyond just acquiring new customers, but to build a sustainable continuous selling relationship with your existing customers.
Here are some reasons why customer loyalty is significantly important.
1. Up-selling and cross-selling
Let me feed you with another statistic…. It has been found out that the probability of selling something to new prospects is only about 5-20%, whilst the probability of selling something to an existing customer is 60-70%. Therefore one can conclude that with the same effort, sales and profits should be higher when selling to your loyal customers.
2. Word-of-mouth (free) marketing
Loyal customers tend to share their positive experiences and making recommendation of a business to their friends. They love your products, they speak about them and humans are generally more influenced by people they are familiar with. Word-of-mouth (WOM) marketing is one of the most powerful channel of marketing, if not the most. With the rise of social media, WOM marketing has grown to large extents.
3. Lower costs to acquire new customers
It is generally more expensive to acquire new customers than to provide a service to your regulars. Businesses need to promote their products to attract their attention and give incentives and discounts, which all amounts to costs. By focusing on customer loyalty, your existing customers will be a strong influencer to get new persons to try out your products, substantially reducing the associated costs in acquiring new customers.
Feedback is crucial to know where improvement is needed. Loyal customers wouldn’t hesitate to provide their honest feedback, especially negative ones as they want to see their favourite shop succeed and ultimately serve them better. Inversely, new customers who visit your shop and have some sort of unpleasant experience usually will not voice any complaint but probably will not return again. Again, with the rise of social media, gathering feedback is not what it used to be! Although customer satisfaction surveys still work fine, people nowadays vent might be providing talking about you and giving you feedback which you might not be catching. We have something that can help you here!
How do I make my customers loyal?
Achieving this much desired customer loyalty is generally a tricky complex task. One of basics is to collect as much data about your customer as possible. Without knowing, your point-of-sales systems might already be collecting valuable information about your customer. With little effort, Customer Relationship Management (CRM) Systems can be hooked up your existing systems. Transactional data contains a complete history of purchases. One can analyse trends related to seasonality, prices customers are willing to pay, whether or not purchase was stimulated by a promotion, source of customers (online, walk-ins, etc…), demographics and so on. Analysing trends would give retail businesses the advantage of having more efficient marketing campaigns. Knowing what the customer is interested in, business decisions would be easier and the analysing the effectiveness of marketing campaigns is more straightforward.
Give your customer a personalised experience and you’re ten steps ahead of your competitor! Let’s face it, we all feel more at ease when we go to a shop and happen to know the sales person. Why? Because when we break that ‘formality’ barrier it would be easier to express oneself! I happen to know a company that in their CRM system keeps a very curious detail about their customers… it is how they take their coffee! Strangely enough this company imports automobiles not coffee beans! How and why do they do it? The first time a customer visits their showroom they politely offer him a coffee and keep a note of his preference. The next time the same customer visits their showroom they say, ‘Do you still take your coffee black and sweetened sir?’ Such a nice surprise would usually be enough to break the ‘formalities’ barrier and provide the personalised service that enhances the possibility of customer loyalty!
We at iMovo are known champions of customer relationship management and we have all the right tools to do it! If you feel we can help you maximise on your customer loyalty, feel free to contact us!