Monitor Small Business Customer Loyalty - dummies

By Barbara Findlay Schenck

As a small business owner, you must constantly monitor your customers’ loyalty to your business, and do everything you can to maintain it. Customer loyalty is cultivated through every interaction your customer has with your small business.

Customers vote with their wallets, and your cash register is their ballot box. If your sales-per-customer and repeat business rates are increasing, you’re doing something right. If they’re declining, it’s time to go into repair mode.

Your business is on the right track if it has

  • A growing number of new customers coming through the door

  • A declining number of customers defecting after one or two purchases

  • An increase in the expenditure per sales transaction

Good marketers consider the customer their boss. As you monitor customer satisfaction, ask yourself, “Is my boss giving me a raise?”

Develop the loyalty of your small business customer

The first step toward developing loyalty is to get real about the current satisfaction levels of those who buy from your small business. Each of your customers falls into one of the following three categories:

  • Satisfied customers find their relationship with your business acceptable. They have no complaints about the promptness with which they’re served, the accuracy of their transactions, the responsiveness of your service, or the effectiveness and friendliness of your staff. But neither are they amazed by their dealings with your business, and for that reason they’re susceptible to better offers from competitors.

  • Dissatisfied customers believe that their value and service expectations were not met. Perhaps they received outright poor service. More likely they received mediocre service based on how they were greeted, the time it took to help them, the way their complaints were handled, or the quality of the service or product they received.

    After customers reach dissatisfaction, they’ll make an immediate or gradual departure from your business. Most pay their final bill politely and say thank you on the way out the door, and 94 out of 100 leave without a word of complaint to your business.

    But they won’t remain silent. They’ll personally share their dissatisfaction in conversations with anywhere from 5 to 20 other people, and they’ll tell countless others if they choose to post word of their discontent on the Internet.

  • Loyal customers are the only customers safe from defection. They reduce the cost side of your profit and loss statement while benefiting the revenue side by costing less, spending more, and spreading the word better than others who buy from your business.

Customer Loyalty Prescriptions
Customer Type Customer Mind-set Service Prescription
Dissatisfied customers Service expectations have not been met. Establish rapport. Learn and address concerns. The damage may
be done, but try anyway.
Satisfied customers Find your service acceptable but aren’t overwhelmed.
They’ll leave for a better price, offer, convenience, or
Treat them like VIPs. Demonstrate appreciation. Do them favors.
Offer added value. Bend your rules. Anticipate their needs. Win
their trust.
Loyal customers Safe from defection so long as their sky-high service
expectations are met.
Treat them like valuable assets. Follow the service
prescriptions for satisfied customers but double the dosage.
Don’t take them for granted, burden them with your problems,
or test their patience while you court new customers.

Close the quality gap in your small business customer’s mind

A quality gap occurs when there’s a difference between a customer’s service expectation and the perceived level of service received. The quality gap exists entirely in the customer’s mind. Whether service is satisfactory depends completely on your customer’s opinion. The litmus test is simply whether the customer’s perception of your service exceeded or fell short of the customer’s expectations.

Because it’s impossible to read your customers’ minds, the best route to assessing how you’re doing against customer service expectations is to understand the variables that affect customer satisfaction and to reach for optimal performance in each area.

To eliminate the possibility of a quality gap and to build customer loyalty, expect your customers to have high service expectations and then exceed them with each customer encounter.

Build loyalty to your small business through service

To walk into a business and be greeted by name is a customer luxury.

To check into a hotel and be welcomed as a frequent guest is a pleasure.

To be walked to your favorite table in a restaurant, to have your voice recognized in a phone call to a small business, to have a record of your purchases on file for easy reference — these are the kinds of conveniences and service indicators that move satisfied customers into the loyal customer category.

To develop loyalty, never make a frequent guest feel like a first-time guest, and always aim to make even a first-time guest feel like a longtime friend.

The 80/20 rule of small business customer loyalty

The 80/20 rule maintains that 20 percent of your consumers account for 80 percent of your sales. Conversely, 80 percent of your problems come from 20 percent of your customers. The concept actually has a title, Pareto’s Law, named after the economist who developed the theory formally known as the law of misdistribution.

Your goal: To acquire customers in the trouble-free, highly profitable 20 percent group without being derailed by the problematic 20 percent who will gladly consume your time instead.

The approach: Listen to discontented customers and do what you can to right the wrongs they cite. But don’t allow your energy to be consumed by those who may never be entirely happy with you or your business — or any other business, for that matter.

Tip the marketing odds in favor of your business by focusing on your most content and profitable customers. Plan your marketing program to cater to their wants and needs, telegraph their satisfactions to your market, and let them serve as a magnet to attract more people just like them to your business.