Is there a loyalty in business?

riskLoyalty and recommendations have a direct effect on image and sales

Customer loyalty increases Added value, because loyal customers buy more often, they buy more, they are usually less price-sensitive. And they help to save advertising costs. But that is not all. A thoroughly loyal customer not only comes back again and again, they also pass on their positive experiences (“word-of-mouth”). The consumer is most profitable not as a regular customer, but as an active recommender. This is how most of the money is made. Those who win the loyalty of their buyers and can maintain them permanently secure more sales and at the same time reduce their costs. The savings can in turn be invested in a way that promotes loyalty: in high-revenue innovations, in customer-focused employees, in good service and in loyalty-oriented marketing. How to create a Loyalty spiralthat keeps turning upwards.

Studies and observations confirm - with a few exceptions - the following with loyal customers time and again:

  • higher repurchase rates: Loyal customers buy more often and concentrate their purchasing power on a few providers. This also promotes the planning and budgeting of sales trends.
  • Additional sales: Loyal customers buy more because they are more familiar with the complete range. In addition, they also buy higher quality.
  • lower price sensitivity: Loyal buyers are more generous. The role of price is put into perspective, they compare less often.
  • longer residence time: Loyal customers are immune to other providers or comparable services and resistant to poaching attempts.
  • free seller: Recommendations bring a leap of faith and thus a faster willingness to buy from those who receive the recommendation. As ardent admirers, recommenders defend their favorite brand against any kind of attack.
  • more homogeneous customer mix: People of the same kind stick together. This promotes specialization in desired customer groups.
  • Increased sales through innovation impulses from loyal buyers: The customer becomes an idea generator and free management consultant.

Save costs through customer loyalty

Studies and observations also confirm:

  • lower acquisition costs: Loyalty is cheaper than acquiring new customers. Regular customers need less classic advertising.
  • optimized use of advertising material: By concentrating all activities on the most loyal target groups and addressing them more specifically, there is less wastage.
  • Reduction of business risks: Fewer debtor problems because loyal customers pay better.
  • reduced process costs: Planned repurchase behavior benefits purchasing, logistics and warehousing and leads to optimized process times. Process routines that save money and / or time are created, since buyers and employees are well acquainted with one another.
  • less employee turnover: Employee loyalty increases. This creates an employee-buyer relationship. Your own employer is becoming increasingly attractive.
  • decreasing costs for the acquisition of new employees: Loyal employees recruit new, suitable employees through positive word of mouth.
  • lower complaint costs: Loyal customers are more tolerant of mistakes and more generous in correcting errors.
  • Free employee and management coaching by committed buyers: This reduces the costs for external consultants and leads to continuous improvement processes.

Companies only realize how high the cost advantages are from loyal customers when they begin to divide them up between new and existing customers, depending on the cause. The accounting department must therefore align its measurement instruments and performance indicators more closely to aspects of loyalty.

Develop loyalty-based metrics

The acquisition of new customers is completely exhausted in many industries. The markets are saturated. First-time users are becoming increasingly rare. The growth is now only at the expense of competition. But if you listen to the shouting of discounts from companies, the only way to get rid of customers seems to be based on price. This leads to a margin situation that makes short-term new business hardly profitable. Loyal existing customers however, they offer a potential that is often still underestimated, very productive and inexpensive to work on. Especially where the start-up costs of acquiring new customers are high, the expansion of profitable business with regular customers - coupled with systematic recommendation marketing - is highly desirable.