Small Business

3 Ways To Get Customer Loyalty Wrong

Carol Roth, Guest Columnist

Guest columnist Carol Roth explains three things business owners might overlook when they are trying to build customer loyalty.

Customer loyalty is a topic that is more important than ever, as technology has created more consumer fragmentation, as well as creating message and brand overwhelm.

While it’s a critical strategic endeavor for every company, even some of the largest brands in the world make significant customer loyalty mistakes. As a small business, you may have even more at stake.

Here are three key ways that companies get their customer loyalty efforts backwards.

Not Respecting Your Existing Customer: As a company or brand, your existing customers are your most valuable asset. However, in the quest for business growth, many businesses are so focused on new customers that they often forget how important their existing customers are to their business. This means that you should never offer a mass-marketed special to new customers that existing customers don’t have access to (think the cable companies who offer great rates if you switch, but won’t honor them if you are already a subscriber).

This has become more pervasive of an issue with social media, as agencies that are paid to create a Facebook or other social media campaign are often not focused on the bigger picture of customer loyalty. This means that certain campaigns meant to get more “likes” or “followers” make existing customers jump through hoops to get benefits or even to purchase products, ignoring the pre-existing relationship with the customer. When we design customer loyalty programs for clients at my firm Intercap, we always place a tremendous value on existing customer relationships and work any social media and other tactics around that.

Focus instead on getting the most from your existing raving fans. This could include selling more products or services to meet their needs, giving them a perk for introducing a new customer or giving them exclusive access to products or services before you make them available to the masses.

Rewarding Spenders but Not Senders: Another way that companies miss the mark on customer loyalty is by designing programs and strategies that reward spenders, but not senders. Spenders — those who spend a large amount of money with the company directly — are obviously valuable and programs that grant rewards by the amount that a customer spends are fairly easy to implement. But that misses the value of another critical segment of your customer base, which is the senders, otherwise known as influencers and mavens who are raving fans and let others know about your brand. They may not spend as much money directly, but indirectly, they are critical customers that spread the word to other customers. This means that in the aggregate, a sender may be just as valuable as a spender, if not more so. Understanding who these senders are and finding ways to reward them is critical to a strong loyalty effort, particularly given the amplifying effects of social media.

Creating a Loyalty Program vs. Brand Loyalty: Whether it’s a formal program (like get one point per dollar spent) or a singular campaign (buy two and get the third free on a specific item), many customer loyalty strategies and tactics forget to focus on linking loyalty to the brand or company in question. When you forget to do that, you end up creating loyalty to a program, which is effectively the same as competing on price. If your loyalty driver is a rewards program, you are vulnerable to customers switching if another competitor offers a superior program. For example, if you offer buy 9 and get the 10th free and another competitor offers buy 7 and get the 8th free, you aren’t creating true loyalty to your company and risk customers fleeing to get the better discount.

Remember that true loyalty comes from customers feeling that you care about them or that they were treated like a king or queen when dealing with you.

Carol Roth is a business strategist and a  New York Times bestselling author of "The Entrepreneur Equation."