Customer loyalty: 3 simple strategies you can start today
September 19, 2013
It stinks when clients leave you. All that effort to win them over, and then, unexpectedly, they give their next project to someone else. We’ve all experienced that. It’s normal to lose some clients, but some hard lessons over the years as well as a recent conversation with Rajat Paharia, author of the bestseller Loyalty 3.0, have taught me some powerful ways to help make sure you keep as many clients as possible for the long-term.
One hard lesson happened a few years ago. I had been trying to land a software start-up as a client because I was interested in their business concept and saw potential for us to grow together. But, after weeks of coffee chats and night-time Skypes they still hadn’t made a decision. In an effort to try and move things forward I thought my best bet was to lowball my prices.
It worked and I got the go-ahead for an initial project. They were pleased with the work and I was looking forward to working with them again, but when their next project came up, they shopped it around. Somebody underbid me, and they got the next round of business. That hurt.
That whole experience opened my eyes to the perils of competing on price. I started to notice that the more I made price a determining factor in deciding to work with me, the more likely I was to lose the client eventually. Not good. But typical, according to Rajat, who told me in a recent conversation that competing on price often leads to poor customer loyalty.
It’s a mistake that a lot of businesses make, even the big ones. They’ll win customers over with a points or rewards program. But that’s a mercenary loyalty to the lowest price, not to the company—leaving the company vulnerable to another organization coming out with a customer loyalty program that offers better savings. Rajat calls that Loyalty 1.0—it worked twenty years ago only because not everyone had discount programs.
As Rajat put it, true customer loyalty is something that occurs when you graduate from a transactional relationship to one in which your clients are engaged with you—which means motivating clients, not with discounts or pricing, but by creating meaningful relationships.
I had always considered myself someone who focussed on building strong client relationships, but my talk with Rajat hit home for me that the kind of approach I’d taken with the start-up had set me up for a transactional relationship—a one-time deal because the price was right. The irony is, I thought I was starting to build good relationships by catering to my prospects’ price consciousness. In a sense, I thought they’d like me more because I gave them a discount. Instead, I simply encouraged them to define me more by my price than by what I offered them. And, as I discovered, when you make it about price, you’re replaceable.
What I didn’t really do with the start-up is set the standard from day one for building a meaningful relationship. After talking with Rajat and reading his book I realized there was stuff I should have done differently with my start-up client. Three of his customer loyalty strategies from Loyalty 3.0 resonated with me. They’re things I’ve tried to do to some extent over the years, but also things that I could do even more of moving forward.
Three simple customer loyalty strategies that work
1. Recognition and acknowledgment/appreciation
This one’s all about going above and beyond simple thank yous and looking for ways to create memorable customer experiences. For me, one of the most effective ways to set myself apart is also one of the simplest. I share our success.
I make a point of connecting with clients regularly—not just when there’s a problem—but to share what’s going well. For instance, when a discussion with a client leads me to later find a new solution to a tough business planning issue, I’ll call to explain how they helped and to thank them for their role in the breakthrough. It makes them feel part of the solution. It’s not rocket surgery—but I find clients are a lot more interested in a long-term relationship when they associate my call with good news.
2. Early and exclusive access
Another thing that works great is to find ways to give your clients something their competitors cannot get. So, this could be as simple as time that you put aside just for them on a regular basis, or services you agree to offer only to them.
That’s why I have one or two clients in each sector that I have regular meetings with to share what I learned that month. They love the fact they’re getting the jump on their rivals and getting a sort of ‘business-behind-the-scenes’ opportunity that others can’t.
3. Prosocial incentives
This last lever is a big phrase that simply means giving your clients things to share with their network that makes them look good. The trick to making this work is to take the time to expand your conversations with your clients beyond just what’s necessary to get the job done.
Even if we’re not working on their business plans, I always try to ask about what my clients are really trying to do. What do they ultimately want? Then I look to add value that helps them get there. I might introduce them to an expert they need, or send them a helpful article or a book.
The last word
I could have done all these things with the start-up, but I didn’t. And one reason I didn’t was because I hadn’t really given myself the margin to do these extras. When I was low-balling I was often too focussed on trying to get other clients to keep cash coming in. One thing I learned was that I could start doing some of these relationship-building strategies even before the prospect became a client. I would start introducing prospects to people in my network or help them in other ways. When proposal time came, price was less of an issue because we had already started building a valuable relationship that they wanted to keep going.
Editor’s note: As Andy’s article has shown, how you price your services can affect your business in many ways. If you haven’t read it already, you might appreciate reading Breaking the Time Barrier for some great advice on how to set prices that will help you grow a profitable business. It’s free to download and will take you about an hour to read. You’ll be joining over 100,000 other small business owners who have already downloaded the book.