Knowledge Center: The New Rules Of Building Customer Loyalty

Tuesday, May 24, 2011

The New Rules Of Building Customer Loyalty

Want your customers to stick to you like glue? Today it takes more than a punch-card or priority line.

If you give a discount to your most loyal customers, you might be doing something wrong. At least you're not doing all you can to reward your best customers, and keep them coming back. Experts say there are some rules to follow to make your customers feel like kings from the very first moment they encounter your product or service. Do it right, and you'll not only score a lifelong customer, but also an advocate for your brand—and that's a lot more valuable. In order to bring you up to speed, Inc.com has compiled seven of the most innovative and ingenious tips from articles, guides, and interviews in Inc. and Inc.com over the past year. These are the new rules of building customer loyalty.

1. Create Enlightening Experiences
Whether it's selling bikes in his Connecticut store or filling orders for corporate rewards programs, Chris Zane knows a successful business is about more than just selling stuff. Instead, he's selling experiences. More than a decade ago, he used that concept to launch a business filling orders for custom-fitted Trek bikes geared for corporate rewards programs, Gina Pace reports. Zane's Cycles builds the bikes to specification, and all the recipients have to do is attach the front wheel, using the included instructions. The end goal: Creating experiences that will make customers feel good about the reward product—and not irritated that they have to spend hours putting something together. Early on, he decided he wouldn't nickel-and-dime customers and stopped charging for any add-on that would cost less than a dollar. He installed a mahogany coffee bar in his shop and gives away free drinks. "We're looking at the lifetime value of the customer," Zane says. "Why ostracize someone over one or two things that might cost us money when understanding the lifetime value gives us the ability to justify it?"

2. When You Do Wrong, Make it Right
Resolving customer complaints is among the best ways to earn loyalty. Lengthy apologies give customers the chance to connect emotionally. Leonardo Inghilleri, co-author of Exceptional Service, Exceptional Profit: The Secrets of Building a Five-Star Customer Service Organization, observes that money is not always the best remedy. That goes particularly for customers who are not buying on price, he said, companies should consider a thoughtful present or service.

3. Reward Customers With Games
A handful of luxury brands have for decades used promises of status to encourage customers to spend more through loyalty to their brands. Today, brands of all stripes are experimenting with the psychology of status and power in rewarding customers. A generation raised on video games is wired to love incentives—and that doesn't just mean freebies. Gaming reinforces players through positive feelings generated by achievements, which are perceived through points, badges, discounts, or any award—tangible or not. Game mechanics are, simply, ways of generating those positive feelings. And it can be good for you: Giving customers something positive encourages additional interaction with your brand, service, or product. For this very purpose, LinkedIn added a progress bar that documents user-profile completion.

4. Quantify Customers' Love
Ask the opinions of your valued customers. It can be something small, say, simply appending short surveys to receipts. To help improve the response rate, use the strategy of making a small donation to a charity for every survey completed. It should start with an overall rating, followed by a drill-down into specific aspects of the visit. "Start out with the two questions that really matter: Will you come back? and Will you refer your friends?" says Micah Solomon, co-author of Exceptional Service, Exceptional Profit: The Secrets of Building a Five-Star Customer Service Organization. A rating is also a defense against attacks on sites like Yelp. The ability to assert, "On a scale of 1 to 5, 97 percent of customers gave us a 5" is powerful ammunition. Read more.

5. Make an App for That
You know loyalty cards. They might be punch cards, or plastic fobs dangling from countless key rings. They may soon fade into history, pushed out by smartphone apps that do more than just offer a high-tech alternative—they also provide businesses with a trove of useful information about their customers, Issie Lapowsky reports. Several start-ups have recently launched loyalty-card apps—check out Cardstar, Checkout, PlacePop, and Cardagin—to help businesses attract customers and reward their regular fans. At the same time, these apps ferret out marketing data, giving even the smallest shop access to high-powered analysis.

6. Do Rewards Better
Companies spend more than $2 billion on loyalty programs a year, and statistics show the average American household belongs to about 14 different rewards programs, even if they're only active in six, Tim Donnelly reports. "They want to protect the customer relationship," says Chris Cottle, vice president of marketing and products at Allegiance, which has provided customer feedback services to 1-800-CONTACTS and several banks. "It's so easy for customers who are price-sensitive to slip away or go to a competitor. One of the ways you can make your customer relationship more sticky is through a well-planned and well-executed reward program." Consider ways to integrate social media, tangible gifts, or a memorable experience. Just be sure to go beyond a simple discount. Physical prizes or earned bonuses like frequent flyer trips resonate much more, says Bob Konsewicz, a strategic consultant for Maritz Loyalty, which has worked with AT&T, Bank of America and General Motors. "If you get a discount, it's kind of over and done with," he says. consider new platforms for rewards, too. The Brooklyn Museum, for example, will award a free yearlong membership to the "mayor" (the person with the most check-ins at that location) on certain days.

7. Build a Giant Relationship
Russ Stanley, who is in charge of client relations for the Giants, explains to Inc. that the organization has introduced programs to help season ticket holders sell their seats for games they cannot attend, and assigned specific representatives to make sure these fans are happy with their ballpark experience.You read that right: Each season ticket holder has the name and phone number of a team official who will field questions or handle requests immediately. This approach, borrowed from major casinos that assign a concierge to important gamblers, builds bonds that cannot be created without such a personal connection, John Gerzema reports. "We give them the name, phone number, and e-mail address of a real person who is responsible to them," explains Stanley. "We deal with problems immediately. If a person says they had trouble with a ticket that didn't scan at the entrance and they missed an inning or two, I give them an invitation to another game.