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Loyal Customers Have The Added Value of 10 Sales


What is the value of a happy customer? Is that something that can even be measured, let alone easily? Perhaps the best way to measure the value of customer happiness is by understanding how happy customers actually behave. If all they do is smile when they’re standing in the checkout line, that still has some value, since it’s likely to leave other customers with the impression that, yes, this is a good place to do business.

But there are other, more tangible ways of measuring the actions of satisfied customers. Consider this statistic (courtesy of the White House Office of Consumer Affairs, Washington, DC): On the average, customers who are happy about the resolution of a problem will tell 4 to 6 people about their experience.

Free advertising is always good, of course, and in this case, the quality of the free advertising is first-rate. For most people, a first-hand testimonial form a friend or even an acquaintance carries considerably more weight than any kind of paid advertisement.

And the message conveyed by such word-of-mouth testimony is valuable in its own right: “This is a business that will listen to you, that will take your concerns seriously, and that will go out of its way to set things right when something goes wrong.”

That is the kind of message that is likely to have a much greater payoff (by several orders of magnitude) than something like, “I dug around in a bargain bin and found a 10 mm socket for half price!”

According to Ruby Newell-Legner, in “Understanding Customers,” customer loyalty is typically worth about 10 times the price of a single purchase. In other words, each loyal customer has the added value of approximately 10 sales.

That’s an excellent return on investment. In effect, it means that a store can do the equivalent of doubling its sales just by turning 10% of its casual customers into loyal, happy customers.

And what is the cost of this loyalty? For the most part, it comes down to increased awareness of customer needs, increased responsiveness, and improved customer service. These are not high-ticket items; their price is negligible compared to the cost of putting a ferris wheel and a circus tent in a store’s parking lot for the weekend.

But too many business owners would rather rent a carnival than do the basic work required to build customer loyalty. Why? Largely because they don’t know where to start, or how the process works, or how to carry it through. It’s too easy to hold meetings or customer service training workshops with little or nothing to show when it comes to results.

But businesses shouldn’t need to reinvent the wheel when it comes to building customer loyalty, and they don’t need to. A basic program for customer retention and increased loyalty can start with a system that includes customer surveys, analysis, and store-level manager accountability. In their own way, these are as clearly definable and tangible as that parking-lot ferris wheel, with a much longer-lasting payoff.

If you would like to know more about how the ASK LISTEN RETAIN System or how it can help create customer retention and loyalty, please contact us.