WARNING: CUSTOMER SATISFACTION ISN’T CUSTOMER LOYALTY!
by Vicky Lenz
Have you ever considered what just one customer is worth to your business over a five to ten year period or longer? Carl Sewell is one of the nation’s leading Cadillac dealers. In his book, Customers for Life, Sewell calculates the amount of revenue an auto dealer could realize from an average buyer if the dealership could keep the customer for life. Would you believe $332,000? And that’s just one customer! In this article, Vicki Lenz shares her top 10 reasons for creating customer loyalty.
Whether you’re a mega-car dealer or a one-person service firm, your customers are very valuable because they are your business. However, let’s make a distinction between satisfied customers and loyal customers. When customers were asked in a survey about their previous supplier, 60% to 70% of them responded that they were 'satisfied' or 'very satisfied.' Yet, they still switched suppliers! On the other hand, loyal customers are those who keep coming back, spending more, and bringing you new customers. Now, which would you rather have — satisfied or loyal customers?
And what happens when you lose those 'satisfied' customers? It’s like a leaky bucket. As a company loses customers from the leak in the bottom of the bucket, they need to keep adding new customers (an expensive process) to the top of the bucket. If the company can even partially plug the leak, the bucket stays fuller. It then takes fewer new customers added to the top of the bucket to achieve the same level of profitability.
It’s far less expensive and more profitable to keep those customers already in the bucket! How profitable? Research shows that retaining just 5% more customers can boost profits from 25% to 95%.
Need more convincing? Take a look at this Top 10 list (from my book, The Saturn Difference: Creating Customer Loyalty In Your Company):
TOP 10 REASONS TO CREATE CUSTOMER LOYALTY
- Loyal customers will spend more with you. Profit margins will increase.
- Loyal customers tend to understand and appreciate value, and are less likely to price-shop.
- Loyal customers mean repeat, long-term business (and those dollars add up!).
- Loyal customers serve as a fantastic marketing force, providing the best kind of advertising available: word-of-mouth.
- Loyal customers stick with you through difficult times.
- Loyal customers can deliver a blow to your competition, because if customers are loyal to you, it means that your competition isn’t getting their business!
- Loyal customers are your cheerleaders and will go to bat for you.
- Loyal customers tend to tell you what they like and dislike (yes, this is good — you want to know both).
- Creating an atmosphere of customer-loyalty within your company can be a great recruiting tool, and help the right employees come to you. Customer loyalty can boost employee morale and reduce turnover.
- It just plain feels good when you treat people right, which is a key ingredient for creating loyal customers.
Reason #10 sounds pretty basic, doesn’t it? But it’s actually the key to creating customer loyalty. Think about your experiences as a customer. I’m sure we all have plenty of stories to tell about how we’ve been mistreated as a customer. Like the time you waited at the counter, and waited, and waited. You could see the clerks back there, but they seemed intent only on ignoring you.
Or the time they messed up your invoice, and month after month after month, they kept promising to straighten it out — but didn’t. Or maybe it was the time you phoned for assistance and went from one person to another, only to end up with another person’s voice mail.
In other words, we feel we weren’t treated right — so we take our business elsewhere.
Don’t give your customers reasons to take their business elsewhere. Begin to plug that leaky bucket by recognizing that each transaction offers an opportunity to create customer loyalty, and not just a one-time sale.