Customer Loyalty: The Most Important Indicator

LoyaltyIf you are like most business owners, by now you have undoubtedly done some type of “customer satisfaction” survey in order to learn more about how your customers feel about you and what you can do to make improvements.

But let me ask you this…

Aside from gathering anecdotal information, what have you done with the information that you have gathered? Were you able to use it as an objective measure with regards to the growth of your business? Did you find information that was “interesting” but didn’t really give you something tangible to latch on to. Or, like many other business owners, are those comment cards sitting in a pile somewhere waiting for the data to be correlated because you are simply too busy with operating your business?

What if instead of putting together a survey with a bunch of different questions (that many people won’t even take the time to fill out), there were another way to really know that you have developed a loyal relationship with your customers?

According to research conducted by Frederick Reichheld (Harvard Business Review), there is one single indicator, that above all other factors and questions that could be asked, that can truly tell you how much your customers love you.

It all comes down to whether or not they want to tell others about you and recommend your services or products. There is extreme power in one single question…

“How likely is it that you would recommend our company (business, service…) to a friend or colleague?”

Or taking it a major step further, the willingness to make a public declaration by writing an online review…

“Hey, would you mind taking a few minutes to write us a review?”

Why is someone's willingness to promote and tell other people about your business or company such a powerful indicator of loyalty?

Quote 1

Because when consumers make a recommendation about your business or service, they are literally putting their own personal reputation on the line. When they tell others about the experience that they had with you, they trust that you will give their friends and family the same treatment.

And if a customer takes time and makes the effort to leave you a positive online review, they have enough faith in you to make their recommendation public.

Customer Service is Key in Building Brand Loyalty

Here at WOMO, we have some pretty sharp business owners. Recently we asked “What do you think is most important for winning customers' loyalty?” and the overwhelming response was customer service (63%). And 57% of you knew that providing better products and a doing a superior job are also an important part of keeping customers happy.

According to the Clickfox Brand Loyalty survey, 72% of customers report that customer service is a major factor when it comes to developing brand loyalty (2nd only to “Quality” which received 88%). This is some pretty strong evidence for the importance of customer service when you consider the fact that only 50% of people considered price to be a driving factor for why they are loyal to a company or business. Let’s take a look at some more supporting data;

  • 55% of people say that they have recommended a business because of the customer service that they received. (Source: The Church of the Customer)
  • 70% of customers report that they continue to do business with companies because of the way they have been treated and the way the business makes them feel. (Source: McKinsey)
  • Customers who have a problem that is effectively resolved will tell an average of 4 to 6 people about their experience. (Source: White House Office of Consumer Affairs)
  • Numerous studies show that people are willing to spend more money with businesses and companies they believe deliver great service. This includes going out of their way to get to those businesses even when there may be another that is closer or with lower prices. 

How do customers show their loyalty?

Repeat business is an obvious way that your customers will show their loyalty, but believe it or not, there is something that loyal consumers will do that is even more powerful than spending money. They will tell other people about you!

When asked, “How do you show your loyalty?” 78% of the respondents in the Clickfox survey said that they demonstrate their loyalty by spreading the word and telling others. For a base of comparison, “I buy more” only received 69% of the votes.

When customers are truly happy about how they were treated and/or with the quality of your product or service, they can become outspoken promoters for your company. Positive emotions, and the willingness to tell others about their experience with a business, can be such a powerful marketing tool that as much 65% of new business can come directly from referrals — without you spending a dime (Source: The New York Times).

Providing Quality Customer Service Nurtures Loyal Customers

Customers are truly thrilled about their experience with your product or service, are much more likely to become outspoken promoters for your business. “Word of mouth is what makes loving customers an outstanding marketing tool.”

When it comes to where you should spend your time, efforts and money, making sure that you provide top quality customer service needs to be at the top of the list. This includes making sure that all of your employees are trained well in how to handle problems whenever they arise. Things will not always go perfectly but believe it or not, studies show that dissatisfied customers whose complaints are taken care of are more likely to remain loyal, and even become advocates, than people who are “just” customers.

Quote 2Financially speaking, focusing on customer loyalty and retaining your current customers, especially the ones who are most likely to recommend you and spread the word about your business, may be one of the smartest things that you can do for your business. Research shows that just a 5% increase in customer retention can increase profitability by a whopping 75%!

So the next time you want to know how loyal your customers, don’t forget to ask them to write you a review!

>> Want tools to help you encourage reviews? <<
>> Click here to find out more about the Happy Customers Program


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