Customer loyalty and good client retention are some of the most crucial elements of a successful service-based business. One-off customers do not provide the long term revenue you need to keep your business running smoothly. This is why it’s important to actively build customer loyalty and keep them coming back to your business.
Service businesses and tradies can use the three R’s of customer loyalty to build customer retention. These are Rewards, Relevance and Recognition. Once your business is ticking off all three R’s, you’re on your way to having a fourth: repeat loyal customers.
If you are ready to grow your local business and build strong customer relationships, you’ve come to the right place. This article contains the top tips you should consider to gain loyal repeat customers who actively promote your business in the community.
What Is a Customer Loyalty Strategy?
A customer loyalty strategy is a plan that encourages customers and clients to do business with you over and over again. It introduces techniques to gain repeat customers and focuses on customer retention (keeping customers) rather than acquisition (finding new ones).
Common customer loyalty strategies generally aim to strengthen client relationships or encourage certain behaviour (for instance, repeat bookings and purchases). There are a wide range of tactics businesses can use to get more loyal customers, and it isn’t something that’s limited to big companies, either.
Even small or family businesses can take steps to build customer loyalty – in fact, the personal approach that tradies bring to their business means great potential to build genuine relationships. Taking steps to reward and engage with your local clients really pays off when it comes to customer lifetime value.
Why Is Customer Loyalty Important?
At its core, customer loyalty is important because repeat customers are less costly to serve and generate sustained growth for your business. Overall, attracting new clients will cost you five times more than retaining existing customers.
Loyal customers can bring so much value to your company, so don’t underestimate their power. Returning customers require little to no push to reuse your services which cuts back on marketing and advertising costs. Loyal customers are also less price-sensitive and more likely to refer your business to others. This leads to overall higher returns for your business.
Companies often spend a lot of time and money on marketing at the beginning of their business venture to attract new customers. Driving new customers to your business and convincing them to use your service is a huge business expense. That is why it is crucial to turn as many customers as possible into repeat, loyal clients.
It’s like saying g’day to someone – it is easier to greet a mate you already know than to approach a stranger and introduce yourself. It takes less time and effort to deal with a repeat client, and for a business, that means a higher profit margin on that job.
If this isn’t enough to convince you, let’s look at the numbers:
- Harvard Business Review says getting new customers costs anywhere from 5% to 25% more than retaining existing customers.
- Inc. Magazine also claims that existing customers bring 67% more profit to a company than new customers.
- Marketing advice company Brandongaille even found that 12% to 15% of a customer base contributes to 55% to 70% of company sales – these are your top fans and top spenders.
- Similarly, the Gartner Group says that 80% of its revenue usually comes from the top 20% most loyal customers.
- An Australian study on customer loyalty found the majority of customers like life-improving rewards or rewards with a social impact – 80% would like to get rewards for recycling and 71% would like rewards for healthy behaviour. Additionally, 68% feel that loyalty programs and rewards make their brand experience better.
When launching a new business, attracting new customers will always be the top priority. But once you already have bookings flowing in, customer retention should become a bigger and bigger priority. Customer loyalty is what will keep your business afloat and thriving for years to come
Examples of Great Customer Loyalty Strategies
Big brands remain big because of customer loyalty. Even small businesses can learn some great strategies by looking at major Aussie brands that generate a lot of loyal fans.
Looking at Australia’s top-performing brands, they’ve all invested in developing excellent customer loyalty strategies using rewards, relevance, and recognition. Your strategies don’t have to be as big as Flybuys or Everyday Rewards, though! A personalised customer experience and quality service can be enough for your small business to attract a loyal community. However, it is always good to take a leaf out of the big brands’ books and apply some of these lessons in your local business.
Here are two examples of excellent customer loyalty in Australia:
E-commerce giant eBay has ticked a lot of boxes with eBay Plus, a loyalty program that grants free delivery, special deals, and access to exclusive experiences and events to members. eBay took the fantastic step of doing their research when putting this program in place. One of their most popular initiatives, free delivery on eBay Plus items, is the result of the company’s insight into their client base. Their studies showed free delivery was the most important reason eBay members would want to upgrade to a Plus membership.
Liquor chain Dan Murphy’s also has a very successful customer loyalty program in Australia. Unlike a lot of other Aussie loyalty programs, Dan Murphy’s focuses on soft benefits (perks) rather than hard benefits (discounts). Members of myDan’s loyalty program can access exclusive offers, monthly competitions, and invitations to events like new product releases, tastings, and exclusive pre-orders. Their customer loyalty strategy is all about the experience, which has resulted in a great return on investment.
What Are the Three Rs of Customer Loyalty?
The 3 Rs of customer loyalty are rewards, relevance, and recognition. These terms were coined by Paulo Claussen, a marketing executive, to help companies and service providers increase return customers.
Rewards are the benefits or incentives you give your customers for being loyal to your business. A reward is essentially a thank you gift designed to improve customer relationships or encourage their next purchase, such as a loyalty card.
Examples of this in the service industry are tradies giving customers a discount or credit for their fifth service or call-out. Online e-commerce stores often offer free delivery or a free gift when customers spend over a certain amount. One of the most commonly issued rewards is a discount for returning customers, which may be activated if the customer hasn’t purchased for a while.
A study by The Point of Loyalty into Australian customer loyalty programs suggests the most appealing rewards are the following:
- Rewards to reduce the cost of a service (eg. a birthday discount voucher)
- Rewards for healthy behaviours or recycling (eg. discount when returning empty packaging)
- Rewards from a catalogue (eg. Flybuys points redemption)
Brands are getting more and more creative with rewards and their loyalty programs because they understand the value of customer retention. After all, businesses profit much more from repeat customers than new ones, so rewards are a worthwhile investment.
Relevance refers to service personalisation. Once a customer has chosen your business, you don’t want them to feel like just a number. To give them the feeling that they are valued, you can personalise your rewards and services based on their previous experience.
Understanding your customers and their activities or purchasing behaviour can help you make your services and rewards more relevant, as well as personalised to each customer.
For example, if you’re a power tools company with a primarily male client base, don’t reward your customers with a voucher for beauty services. If you’re in the service industry and rely on regular bookings, it might be better to offer a discount to repeat customers than provide a token gift.
If you can hit two birds with one stone, make your rewards relevant not only to your clients, but also to your business branding. For instance, if your business is family-oriented, this can influence how you go about building that client relationship with families you assist. Emphasise that your business is a great match for their needs and their values, and you’ll give these customers a great reason to be loyal.
Recognition is acknowledging your customers or clients, showing gratitude and appreciation for their business. This can be as simple as a thank you message, a social media shoutout, or soft or hard benefits. VIP memberships are another popular way of giving loyal customers special recognition.
A soft benefit is an indirect benefit or incentive, usually in the form of actual recognition, status, or services. Your thank-you message could be accompanied by a complimentary upgrade or add-ons, birthday gift, or VIP treatment.
Hard benefits, on the other hand, are more quantifiable perks. They’re more the tangible rewards in a loyalty program, like discounts and buy-one-get-one deals.
You should look at recognition as rewards matching the customer’s level of loyalty to your business. If your client spends $500 on your product or service, a $5 discount might be too small. Maybe you can offer a free call-out and, on top of that, give them early access to your neighbourhood pop-up event happening at the end of the month. Get creative!
How to Create Loyal Repeat Customers: 7 Strategies for Success
There are so many creative and innovative strategies to create loyal, repeat customers. Most of them touch on the three R’s of customer loyalty: rewards, relevance, and recognition. The best part about these relationship-building tips is that they are usually a win-win scenario for the business and the customer.
Here are eight strategies that your small business can use to increase customer loyalty:
1. Respond to All Comments and Feedback
Responding to comments and feedback or customer engagement is essential for three big reasons. Engagement recognises your customers personally, allows you to resolve any issues, and strengthens that all-important customer relationship.
Whether you get a positive or negative comment, you need to acknowledge your customer’s feelings. It’s always important to make customers feel heard, even if you don’t agree with what they’re saying. Customers will appreciate a quick response and appreciate that you are making an effort to talk with them.
If you respond to comments and feedback, especially on your social media channels, it also helps build user-generated content which can drive traffic to your business. This can make your online presence more visible and helps to attract new customers.
2. Set Up a Referral Incentive for Your Promoters
Creating a referral program is another way to reward loyal repeat customers. By giving a discount or other gift for a successful referral, you can encourage your client base to champion your brand. These enthusiastic clients can be considered your ‘promoters’, who go out of their way to recommend your service.
This is a fantastic strategy which benefits customers and your own pocket – rewarding customers for referrals makes them feel a personal bond with your business. Of course, word-of-mouth marketing is a fantastic and cost-effective method of promotion, even when factoring in the cost of the incentive.
Be warned, though – you’ll need to make sure your service really is high-quality and consistent. Even with a reward system in place, most people won’t recommend a service to friends or family if they aren’t confident of the quality. If you plan to offer a referral program, make sure your service is well worth recommending!
3. Give Discounts to Return Customers
Giving discounts to returning customers is one of the most reliable customer loyalty strategies. The tactic behind your favourite coffee shop’s loyalty cards can actually be highly effective for service businesses as well, as long as it’s tailored to suit the service.
What many service businesses do is offer first-time customers a discount on their next call-out. Encouraging the people to choose your service at their next opportunity helps set up a habit that can turn into a long-term customer relationship. Because they already have a voucher on hand, it’s most likely they’ll call you for their next repair or maintenance service.
Discount offers can also be tied into referral programs, where the existing customer and the referral both get a discount on your services. Birthday vouchers and exclusive promotions for email subscribers are other examples of discounts used to strengthen customer loyalty.
4. Offer Flexible Payment Methods & Plans
With so many payment options currently available, your business must be flexible when it comes to payment methods. Making payments quick, easy and convenient for customers is a way of prioritising their needs and valuing their time.
For this reason, consider offering a few payment options, including major credit cards and mobile payments like Apple Pay. If you’re performing a lot of small jobs, like one-off repairs, having a mobile tap-and-go payment system is a great investment. The most important thing is to listen to your client base and find out which methods they most prefer.
As a bonus, you’ll find that streamlining your payment process helps reduce the chance of late payments and time spent chasing up unpaid invoices. Taking payment through a convenient point of sale system like Square makes your finances more predictable as well.
Another great way to strengthen customer relationships is to offer ‘buy now pay later’ options. With more and more finance brands entering the market, there are now options to suit even small family businesses and tradespeople.
Alternatively, you can choose to offer payment plans or staged payments for larger services, like renovations. Whatever option you choose, catering to customers’ needs when it comes to payments is a great way to win their appreciation.
5. Use Social Media to Connect Daily
Social media is not just about advertising your business – it’s a powerful tool for customer engagement and retention. Social media also gives you a chance to interact with your customer base outside the transaction, and unlike email marketing, the communication goes both ways.
There are plenty of ways that small businesses can use social media to boost customer loyalty. For one, being active on social media tells people that your business is alive and well – a strong social media presence speaks to the success of your business. If you create an online community where your customers feel like they’re talking to real people who care and not just a faceless business, then they are more likely to stick around.
When it comes to customer loyalty, encouraging customers to communicate with you is just as important as what you post on your Facebook feed. Aim to gather both reviews and informal feedback from your social media, helping to strengthen your brand’s image online. Interaction on your Facebook and Instagram posts also helps your business be seen by more users.
On the whole, social media allows you to create a community around your business, keeping them in the loop before and after their bookings. A great approach is to offer ongoing value to your social media followers in the form of tips and advice. If you’re helping them out even when you aren’t being paid for it, customers will feel more fondly towards your business – and they’re more likely to call you when they do need a service.
6. Personalise the Experience for Your Customer
When it comes to the three Rs of customer loyalty, personalisation is a major way to put ‘relevance’ into action. Loyal customers aren’t made to feel like a number or a dollar value – they feel like a person your business actually cares about.
One of the benefits of running a small business is the extra level of attention and care you can give each client. This may be as simple as remembering clients’ names and details about their job or family each time you talk to them. For this reason, it can help to have the same staff service a customer each time to strengthen the relationship.
Practical ways to personalise your service include taking note of the way a customer likes their house cleaned, or how they prefer to be contacted with updates. Addressing customers by name in text or email marketing is a simple and effective way to make your communications less generic and more personal.
Giving clients options in the way their service is delivered is great for relationship-building, so if you’re struggling to retain loyal customers, consider how your standard service can be personalised to offer extra value.
7. Never Take Your Loyal Customers For Granted
Of course, doing outstanding work is the top way to ensure your customers come back over and over again! No matter what rewards and incentives you offer, you won’t have a loyal client base if your product or service is not up to scratch.
A business relationship is just like a friendship – it grows with every emotional investment. This means that every interaction you have with a client can help strengthen (or weaken) the bond they feel. That’s why consistency is so important when it comes to earning the long-term loyalty of your customer base.
Customer loyalty is something that’s built over time, and if you’re keeping clients satisfied, they’re more likely to choose you than risk an unknown new competitor. If you do good, honest work, you’re likely to keep that client for the long term.
That’s why it’s so important not to take loyal customers for granted. Even if their past experiences with you have been positive, avoid giving your clients a reason to try an alternative. If you’re delivering a great customer experience and have their trust, promotions and deals from competitors are much less tempting
Ensure they can always count on you for consistent quality, trusted advice and dedicated customer service. That’s what customers will keep coming back for again and again.
Do Rewards Really Build Loyalty?
Yes, rewards do really build loyalty! Bain & Company’s research notes that 66% of customers say that earning rewards changes their spending behaviour. Rewards and incentives encourage customer loyalty, both by making them feel appreciated and incentivising them to choose your business in future.
What Is Customer Churn?
Customer churn is a metric referring to the number of regular customers a business loses. It’s always inevitable that a certain number of customers may be tempted by a competitor’s offer, move away from the area, or no longer need your service. However, active customer retention strategies can help you reduce customer churn and keep your clients for the long term.
Can a CRM Help Build Customer Loyalty?
A customer relationship management (CRM) system is a fantastic tool to manage the loyalty-building process. CRM systems will give insight into consumer behaviour, which you can tap into to develop customer loyalty strategies. Keeping track of customer data also helps you implement rewards and incentives, from birthday discounts to reminders when their next service is due.