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Return Customers Are Often The Most Profitable. Here's How To Foster Loyalty In Your Brand, No Matter The Size Of Your Business.

Erica Sweeney, Business Insider
Freelance Writer

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With the economy on shaky ground and unemployment growing, consumers have reined in their spending. This is putting businesses in a tough spot, but marketing experts said fostering customer loyalty can help owners and leaders weather the current storm. 

Customer loyalty centers on repeat business, but it actually goes much deeper, said Chris Groening, associate professor of marketing at Kent State University.

“Would your customers inconvenience themselves?” he said. “That means, would they pay more for your product than for a similar product from another company? If so, then they’re being loyal. Would they drive further passing the competitors store to buy the product? If so, then that’s loyalty.”

As more than a third of businesses are in danger of permanently closing because of pandemic disruption, according to McKinsey & Company estimates, keeping customers coming back is a must for survival. Here’s how to do it.

Build trust with existing customers by creating emotional connections

Retaining existing customers is more cost-effective than acquiring new ones — these days, there may be fewer customers to acquire anyway — and building and maintaining trust equates to customer loyalty and retention, said Raji Srinivasan, marketing professor and associate dean of diversity and inclusion at the University of Texas at Austin McCombs School of Business.

“Companies should take the long view of customers — [creating] customers for life — instead of a more short-term view of customers with a focus on this period’s sales,” she said.  

According to the Edelman “Trust Barometer Special Report: Brand Trust in 2020,” more than half of consumers said that besides price, “whether you trust the company that owns the brand or brand that makes the product” was the most important factor in deciding what to purchase. And 70% said trusting a brand is more important now than in the past.

Trust and customer loyalty have been especially important for the restaurant industry, among the hardest hit by the pandemic.

“Given changing demographics and the availability of convenient food choices — meal kits, grocery stores, ghost kitchens, and food trucks — the competition for guests’ dining-out business has intensified,” said Mark Mears, chief marketing officer for Saladworks, a casual build-your-own salad restaurant franchise.  

The company has lately focused on creating emotional connections with customers by promoting relevant services, like digital and easier takeout ordering, he said. This lets customers know that the company cares about their needs during the crisis and has boosted sales, now up more than 20% over last year, with digital sales growing to account for 30% of sales overall, Mears said.

“For any brand, the key to maintaining loyalty will always come down to trust and performance,” Mears said, adding that the most loyal customers tend to be the most profitable ones in the long run.

Meet customers’ evolving needs with stellar customer service and online offerings

The pandemic has changed how people shop and what they buy. According to a McKinsey & Co. survey conducted in August, nearly 80% of Americans said the pandemic led them to try a new shopping behavior, such as trying a new shopping method or brands or visiting new places.  

How companies and brands address customers’ new habits and circumstances fosters loyalty, Srinivasan said. “Can your company help customers navigate their lives better in some way?” Srinivasan said. “Can your product portfolio be modified to address customers’ immediate needs?”

Westhaven Power, a northern California-based provider of solar energy products, battery storage, and generators, has worked to meet the rising consumer demand for reliable energy as more people are working and studying from home — especially in high-risk areas like the West Coast, where wildfires and blackouts are common, said Brett Joerger, the company’s CEO. 

In March, the company released a blog post explaining its essential service status and the steps it had taken to protect the health and safety of its team and customers, and started conducting services virtually and promoted the ability to install most systems within a day.

Westhaven Power also began offering free home energy risk assessments by phone to help homeowners optimize their energy efficiency, offered $1,000 discounts to homeowners who bundled solar and battery storage, and launched a new home backup product to maximize energy efficiency, Joerger said.

Recently, he said more than 75% of the company’s revenue has come from existing customers, including referrals.

“Businesses rely on customer loyalty to generate a revenue stream during times of uncertainty,” he said. “Where stay-at-home orders are still enforced and jobs furloughed, customers are less likely to spend with businesses they do not trust, who are not consistent on service, or cannot offer online or non-store sales.”

Communicate your mission and how it aligns with societal issues

From the pandemic and economic crisis to ongoing political divisiveness and Black Lives Matter protests for equality and against police brutality, so much is going on these days. Businesses and brands are sharing their stances on these issues and taking action, a move that’s resonating with customers.

Edelman’s brand trust survey found that more than 80% of consumers want brands to solve their and society’s problems, and 90% want brands to protect their own employees amid the pandemic, even if it means taking a financial hit.

A business’ charitable giving also influences more than 70% of consumer buying, according to a 2018 Mintel report. Half of consumers would switch to a brand that supports the causes they believe in, a sentiment that’s higher among millennials and Gen Zers.

Saladworks recently involved customers in fundraising drives for No Kid Hungry and to feed frontline healthcare workers, Mears said. The restaurants donated a portion of sales and offered free meal coupons to customers who made a donation. 

“This deeper level of engagement provides a tremendous level of pride and satisfaction among our guests, team members, and the communities we serve,” he said.

Delight, don’t just satisfy

Connecting with consumers emotionally is one of the most effective ways to cultivate loyalty, Groening said. Companies can do this by creating a sense of community or belonging among their customers and making sure their product or service delights customers.

“I’m a Mac person, or I drink Coca-Cola, that sort of thing,” Groening said. “If you can somehow get to that level where it’s hard [for people] to imagine life without this brand, it makes [customers] feel emotionally attached. When you have that emotional attachment, people will stick with you.”

Customers feel more attached to companies that “delight” rather than simply satisfy, Groening said. “Delight is that surprise, that unexpected interaction, and when it’s a surprise, it breaks you out of the normal routine interaction with that company,” he said. For example, remembering customers’ names or their regular orders, offering free items, or checking in with them after a purchase.

“The brands who focus on delivering a unique and differentiated guest experience will stand out from the sea of sameness and provide reasons for their guests to come back again and again,” Mears said.

This article was written by Erica Sweeney from Business Insider and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to legal@industrydive.com.

Erica Sweeney is a freelance journalist who has written for The New York Times, HuffPost, Teen Vogue, Parade, Fast Company, Money, and more.