Every company has often experienced that customers, even long-term existing customers, cancel their contracts, no longer want to purchase products or services. The customers migrate to a competitor company. In times of globalization, the customer can always get a better offer. Especially for companies with a small market position, this can be decisive for the success of the company. In this article, we will tell you how to promote the loyalty of your customers and how to attract customers to your company.
“Loyalty is the fuel that drives financial success”
What is customer loyalty - A definition
Customer loyalty is the voluntary commitment of the customer to the company. The customer is very satisfied with the company and the product or service, even though there are other, possibly better alternatives on the market.
Why is customer loyalty so important?
Customer loyalty is very profitable for companies. It takes less effort to retain a customer than it does to acquire new customers. In addition, they may act as a marketing tool by telling others favorably about their positive experience with the company, thus attracting potential new customers. In addition, satisfied existing customers who are already familiar with the company are more likely to buy additional products than new customers who first need to be convinced. Communication is also easier, as the shared history means that the customer's needs and requirements are better known and more easily understood, and a solution can be initiated more quickly. As this example shows, existing customers are also more willing to accept a price increase.
Why is customer loyalty declining?
Loyal customers have become a rarity in recent years. The countless offers on the market mean that customers always have the option of looking for an alternative with better conditions. The days when brands held a monopoly position on the market are not over, but many customers manage to find their way to better alternatives more quickly. For many customers, price is the decisive factor at this point. A cheaper alternative can be found quickly with a simple search on the Internet. In addition, customers now regard former unique selling points such as short delivery times, good customer service and bonuses as a given. If you don't like the service or the price/performance ratio, you look elsewhere, which is very straightforward in the age of online retailing. This article from t3n talks about the fact that even if you offer your product on platforms like Amazon, the customer retention rate is 0 percent. The amount of alternatives is simply too large and the effort to find a better product is very low.
Established brands, like Apple, have less to contend with such problems. Their "disciples" or "fans" remain loyal to the brand, owning the products as a status symbol and support for your personality. Most companies, however, do not have this potential and are therefore all the more dependent on loyal customers.
How can you measure customer satisfaction?
One way to measure customer satisfaction is the Net Promoter Score. With this metric, you can determine the extent to which the customer is willing to recommend you to others. The calculation works as follows:
By answering a simple scale question such as "how likely are you to recommend company/brand XY to a friend or colleague?" the customer indicates how likely they are to recommend you. Depending on the answer, you can then assign your customers to the categories promoters and detractors.
Promoters are those customers who answered 9 or 10 to the above question.
Detractors are those customers who gave a 0 to 6 probability to the question. The customers who chose a 7 or 8 as their answer are considered indifferents. They are considered satisfied, but would not necessarily recommend you to others. Since you are perceived as neutral, you are not included in the further calculation.
Then calculate the difference between the percentages of promoters and detractors. NPS= Promoters - Detractors.
Detractors are those customers who give a probability of 0 to 6 to the question. The customers who chose a 7 or 8 as their answer are considered indifferents. They are considered satisfied, but would not necessarily recommend you to others. Since you are perceived as neutral, you are not included in the further calculation.
Then calculate the difference between the percentages of promoters and detractors.
NPS= Promoters - Detractors.
If 50% of your customers answered the question with a 9 or 10 and 20% with a 0 to 6, this gives you an NPS of 30%. In general, all answers in the spectrum from -100 % to 100 % are possible when evaluating the NPS. What can you now do with this result?
The NPS is considered a benchmark for comparison with competing companies. On platforms such as Zenloop, for example, you can compare your NPS with other companies.
It also tells you which customers you should contact to gather more information about customer dissatisfaction. Then, in order to improve customer satisfaction, you initiate appropriate actions.
This method is undoubtedly very straightforward, although the question arises as to how honest customers actually are in this feedback and how meaningful this method ultimately is. You should take this into account when carrying it out and possibly consider other methods for calculating customer satisfaction.
Here's how you can counteract declining customer loyalty
There are many strategies to increase customer satisfaction and thus customer loyalty. To prevent customers from leaving your company, you can improve their experience. For example, this can be done through a good CRM - Customer Relationship Management. With a customer relationship management, strategies are developed to manage all the relationships (potential and existing customers) and interactions of the company. CRM helps you stay connected with your customers, optimize processes and increase sales.
The overall goal is to satisfy the customer, build long-term customer loyalty and furthermore attract new customers through their reference.
However, qmBase's CRM function not only maps all business relationships with customers, suppliers and interested parties. You can also perform customer satisfaction analysis and supplier evaluations. Thus, it is more like an XRM (Extended Relationship Management) system. For more information click here.
Another aspect is complaint management, when customers complain about a product, you have the opportunity to positively influence the customer experience. Complaint management encompasses the measures provided by a company when a customer complains or makes a complaint, as well as the documentation of these. By providing customer-oriented service and efficient complaints, the customer can be positively influenced. You are probably familiar with it: Long waiting times in a telephone hotline, unfriendly employees or an elaborate bureaucracy significantly influence customer satisfaction. Here you can read how to inspire customers with a good complaint management and how to use complaints as an opportunity for your company.
If you would like to learn more about our qmBase app Claim Management directly, click here.
Away from complaints or grievances, good customer service is the ultimate. Give your customers the feeling that they can always turn to you with all their concerns and try to keep waiting times as low as possible. Goodwill and reliability are an important factor in customer loyalty.
Sources:
Thorsten Ebeling, Was ist Kundenloyalität und wie kann ich diese steigern?
Frederick F. Reichheld, Loyalty Rules!: How Today's Leaders Build Lasting Relationships
Frederick F. Reichheld, Die ultimative Frage: mit dem Net-Promotor-Score zu loyalen Kunden und profitablem Wachstum
Maarten W. Krol, The Net Promoter Score – an asset to patient experience surveys?
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