186. The 3 Ways to Build Customer Loyalty, Pt 1
186. The 3 Ways to Build Customer Loyalty, Pt 1
You think your customers are loyal. Too bad you're wrong.
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There’s a grocery store right down the street from me. I go there 4 to 6 times per week to buy stuff.
I’m that type of person - the one that would rather do frequent, smaller purchases at the market. It makes me feel like a real chef.
I’ve spent tens of thousands of dollars at this market over the years. I know the names of the employees and they know me and my family.
They’ve seen my daughter grow up.
Whenever I walk in, a few employees always go out of their way to say hello and ask how I’m doing.
Would you consider me a loyal customer of the grocery store?
Well, I’m not.
And this is exactly why you have to rethink how you perceive your loyal customers.
Repeat vs Loyal
Simon Sinek is one of my favorite leadership minds. He wrote a book called “Start With Why” that you probably should read. He’s also got one of the most watched TedTalks in history (59M views) that you probably should watch.
To paraphrase Simon:
A REPEAT customer is someone who buys from you multiple times.
A LOYAL customer is someone who will turn down a better product or better price to remain with you.
This is a very important distinction because you’re more likely to make more money from a loyal customer than from a repeat customer.
There are two problems though:
People often mistake repeat customers for loyal customers
It’s not always easy to understand who is loyal and who isn’t
Here’s something to keep in mind:
Loyal customers are always repeat customers.
Repeat customers are not always loyal customers.
How can this happen? How can repeat customers not be loyal? It’s pretty easy.
In fact, I would reckon that most of your repeat customers are, in fact, not loyal to you.
Here are four reasons why a repeat customer would not be a loyal one.
1. Proximity
Location can cause repeat purchases without loyalty.
Take me and the market, for instance. There are other grocery stores that are better. There are other grocery stores I’d rather shop in more frequently. The other grocery stores are not in walking distance.
Given the time, I will always go to the other markets. Heck, if a better market moved closer to me, even if it had higher prices, I’d drop my local market in a hot second. They are very nice people, but I have absolutely no loyalty.
I’m a repeat customer simply because I can walk there when I need something in a pinch.
2. Ease of Use
Sometimes a solution (especially a website) gets customers just because it’s easier to use than the competition. That can create repeat users without any sort of loyalty.
As an example, I periodically hire contract workers to help with random tasks. There are two main companies that own this market: Upwork and Fiverr.
I’ve used both. They both offer a similar service in a similar way. But most of the time I use Fiverr. Why? Because I prefer their user interface. It’s got more pictures.
If Upwork improved its user experience, I’d move back to that one.
It doesn’t matter to me. I have no loyalty either way.
3. Price
The lowest price solution often gets repeat customers because…. (do I really have to finish that sentence?)
Rarely does a company build loyalty when their sole value proposition is “low-priced leader.” Granted, there are some massive exceptions to this rule, not the least of which is Wal-Mart.
The Walton family aside, the reason low-price leaders have a tough time building loyalty is because they are catering to a market that is, by definition, not loyal. The consumer is just looking for the lowest price, they aren’t looking for a brand relationship.
I caution any early stage company that is focused on being the lowest price offering in your market. It’s a no-win game. You may get an influx of customers, but as competition catches on, it will be a price race to the bottom and your the product will get commoditized.
Loyalty doesn’t matter with commoditized products.
4. The Challenge of Change
Change can be frustrating. Sometimes it’s easier to maintain the status quo than to switch to a better solution.
For instance, I’ve worked with many companies that use Salesforce. Many of them are frustrated by the complexities of it. But leaving the Salesforce ecosystem is difficult. Especially after years of investment. It takes a lot of time and a lot of effort.
For many companies, it is easier to deal with their Salesforce frustrations year over year than it is to disrupt their business in order to move platforms.
This has nothing to do with loyalty.
How To Create Loyalty
Now that we’ve established the difference between repeat customers and loyal customers, it’s important to figure out how to create loyal customers.
As I said, loyal customers will spend more money than repeat customers. Loyal customers will tell more people about your brand than repeats. Loyal customers will stand by you when you need them to.
As life would have it, there are three ways to turn repeat customers into loyal customers.
But, alas, I’ve talked too much today. Stay tuned for my next newsletter where we’ll discuss:
The 3 Ways to Create Customer Loyalty
In the meantime, start exploring your data.
What percentage of your customers are one-time only?
How many are repeat customers?
How many are loyal?
Understanding this funnel is key.
A Somewhat Relevant Quote
“Customer satisfaction is worthless. Customer loyalty is priceless."
Related Tidbits
Psych. The psychological difference between repeat and loyal (loyalty is blind)
Sinek. The golden circle explained (abridged version)
Market Size. The loyalty management market is massive (and growing)
Another Useless Website. it doesn’t translate to the web (childhood)