7 secrets of customer loyalty for a product business
How do you secure repeat business and create a loyal customer following? Here are seven sure-fire ways that could make a big difference
Few businesses can survive long without establishing a core of regularly returning customers.
The economics are simple. Customer acquisition is expensive in terms of the time and money you spend on marketing and advertising. However, once a customer has made an initial purchase, at the very least you will be on his or her radar – that makes a return visit, and a repeat purchase, much more likely.
And from there you can begin to build a long-term relationship. If you’re lucky, over a period of months or years, your brand and your products will become part of that customer’s life.
But you can’t simply expect it to happen. In a competitive marketplace it’s important to take proactive action to build a loyal customer base.
So what does that mean in practice?
1. Understand what your customer wants
From the customer perspective, that very first purchase is likely be something of an experiment. Let’s say the product in question is a premium shaving kit, with razors, brushes and cream, all arriving in a neatly-branded package.
Perhaps the customer has found it via Google and likes the branding or is acting on a friend’s recommendation. Whatever the reason, it’s enough to trigger a purchase. However, before returning for a second time he will try the product and decide whether it’s something that fits a stubble-shaped gap in his life.
After all, they can easily spend their money elsewhere. And the problem is that a great product will only be successful if your target customers respond positively.
So research is vital. For instance, talk to potential customers in advance and find out if what you’re offering fills a gap in their lives. Talking to them and letting them try samples is a great way to start.
That was the approach taken by Andy Stephenson, founder of Weekendbox.co.uk, a company providing activity boxes for children on a fortnightly basis. The premise behind the company is that parents want to spend quality time with their children at weekends. By signing up to Weekendbox, subscribers receive a regular supply of hands-on craft materials, which become a focus for interaction between parents and children.
But as Stephenson explains, the first step was to establish whether this was something that parents would actually want week after week. “You start off with the assumption that there is a market for the product, but you have to test those assumptions. The way we did that was to talk to customers.”
2. Source quality products
Of course, the crucial parallel step is to ensure that the product quality meets the expectations of customers. There are a lot of factors to consider here. In the case of manufactured products, the aesthetic appeal, the build quality, functionality and durability and design, to name but four.
Equally if you’re selling in the food market, taste is all important. “The only way to build loyalty is to sell a great tasting product,” says Jonny Shimmin, co- founder of healthy cereal company Spooncereal.
As such, one of the keys to customer loyalty is ensuring from day one that your suppliers are giving you quality products that will appeal to those carefully researched customers.
This is relatively easy if you’re buying pre-made goods from a wholesaler. You simply ask to see a sample and if it’s in line with what you want, you order a first batch. It’s trickier when you’re having goods manufactured, although trade assurance – a form of payment protection – can provide a bit of a safety net when you use a B2B marketplace such as Alibaba.com.
You will need to define all the specifications and materials. And before pulling the trigger on production, you may need to look at several generations of samples before the product is absolutely right.
You also need a reliable supplier. “In the early days you need someone who is prepared to provide small amounts but who can also guarantee consistency,” says Shimmin.
3. Offer complementary products
Some purchases are effectively one-offs. Let’s say your customer buys a set of cereal bowls. No matter how nice they are, the likelihood is that his or her cereal bowl requirement has been fulfilled for many years to come.
Not much chance of repeat business. If, however, you also sell plates, mugs and coffee jars, the satisfied customer could well come back. In other words, the more complementary products you sell, the more likely it is that you’ll win repeat business.
Equally, you can boost sales and win repeat business by constantly innovating with new designs around a basic product. For instance, you might start with a small range of t-shirts with witty slogans and expand the range over time. This not only widens the appeal but gives old customers something new to buy.
And in some sectors, customers require variety. Not everyone, for example wants to eat the same cereal every day. “You do need to offer a range of products to build a broad customer base,” says Shimmin. “We currently have two SKUs but we know we need to extend that.”
4. Run a referral scheme
One way of building loyalty is to design a business model where long-term relationships are a factor. As a subscription service, the Weekendbox model is predicated on repeat orders, but Stephenson has created an additional driver through a referral scheme.
For instance, Weekendbox’s existing customers are invited to recommend the service to friends in return for a discount. “Around 33% of our business comes from referrals,” he says.
And as he explains, the willingness of customers to recommend Weekendbox is a reflection of customer loyalty. “We have always aimed to sell a product that people love rather than one they simply like,” he says. “And because they love the product they are prepared to recommend it to others.
5. Build a community
Social media provides a means to grow your loyal customer base. By building up fans and followers on Facebook, Twitter, Pinterest and other platforms, you can keep existing customers up-to-date with new products as they come on stream. Equally important, you can encourage your followers to share the news with their friends and thus reach a much wider user base.
Andrew Sherick, founder of high quality milkshake company Mr Sherick’s Shakes sees social media as a vital means to build a community of followers around the brand. “We want to get people to talk about our shakes,” he says. “And social media gives us a way to start that conversation.”
But he stresses the importance of being interactive. “If someone expresses disappointment with one of our shakes we will always get back to them,” he says. “And for those who are well-disposed to the brand but perhaps don’t like a particular flavour or have otherwise had a bad experience, it’s a way of keeping them on board.” In marketing terms it’s a way of turning a negative into a positive by showing you care and offering something back, such as vouchers.
Social media, of course, has its own rules. It’s not enough simply to post product news. You have to give people a reason to share and interact. Spooncereal’s approach is to create content that focuses not only on cereal but also related lifestyle topics, from ceramics and fashion to healthy eating.
6. Improve your back-office functionality
We’ve probably all been in the situation of ordering goods that are clearly marked “in stock” from an online store, only to find that it takes weeks, or even longer for the order to arrive.
The chances are that the problem lies in poor inventory management. Goods are ordered from the supplier and stored but when it comes to the sales process, there aren’t the necessary checks in place to ensure that when a customer places an order the product is actually still in stock.
And this can be hugely damaging and will undermine any customer loyalty that has previously been accrued.
The answer is assign SKUs (stock keeping unit) codes to all products. In tandem with an inventory management system this enables you to keep a track of every product coming into and leaving your warehouse or storage.
More widely, it’s hugely important to offer good service, including rapid delivery, a system for dealing with returns, and effective complaints handling. Shimmin also recommends finding an e-commerce platform – he cites Shopify – that makes it simple for customers to buy.
7. Price competitively
“There are very few businesses that aren’t subject to some degree of price sensitivity,” says Weekendbox’s Stephenson.
That’s not to say that all product businesses should be involved in a ‘pile-high sell cheap’ race to undercut competitors. But what is true is that customers will only remain loyal if they think the prices your charging are attractive
That can mean different things in different segments of the market. If you’re basically selling a commodity product that is indistinguishable from those offered by competitors, price might indeed be the main factor driving loyalty.
If you’re selling something that is unique there is an opportunity to charge more and, thus achieve higher margins but it’s still important to fix a price that customers will feel comfortable about paying.
Shimmin says you have to think carefully about positioning. “We have positioned ourselves as a premium brand but we also emphasise the value of our products,” he says.
Competitor pricing can provide a guide but if you don’t have any direct competitors you might have to think out of the box. “With Weekendbox,” says Stephenson, “we didn’t have any direct competitors so we looked at indirect rivals in the shape of children’s magazines. We estimated our boxes provided twice as much value as children’s magazines and they, on average, cost £4.00 we decided to charge £8.
Building customer loyalty effectively depends on a range of factors. Awareness of the customer, a focus on quality, and a laser focus on service. But it’s not magic. If you have the products and do the work, you will create a loyal community.