Is a Repeat Customer a Loyal Customer?
Aren’t Repeat Clients the Same as Loyal Clients? – Most definitely not! What’s the difference?
Suppose you lived in an urban area where there were multiple stores. About a block from where you live there is a dry cleaning business. It’s convenient because it’s so close. The people there are fairly friendly and their prices are ok. So you bring your dry cleaning to their business.
But then one day another dry cleaning place moves in down the street, another block away, so it’s not as convenient. And they charge a dollar more. However, they use all natural organic cleaning chemicals and it’s important to you that you support natural organic processes. You believe in a sustainable planet and are happy to frequent a business that believes that as well. So you change dry cleaners. You want to give your business to someone who believes what you believe. It’s easy to leave the last place.
But then a few months later another dry cleaner opens. This is even a few more blocks away. They charge more than the last place you went. They also use organic products in their cleaning process so they share your mission to create a sustainable world. However, they go a step further. Every time you go in, you feel like you just came into a party where you are the guest of honor. They know your name, they remember the special things you want done to the special outfits you have. They adjust their schedule to meet yours. They introduce you to other people who come into the shop. They care and really listen when they ask about your pets, kids, vacations, holiday plans. They consider you special and unique. They are happy and upbeat. Every time you go there, you leave feeling like they just made your day and your stress level has been lowered. You tell all your neighbors about this new place and how wonderful it is to go there. You want the business to do well so it sticks around. You care about their success and become a raving fan loyal client.
At the first dry cleaner, it was convenient and nothing was wrong. It just wasn’t engaging enough for you to become a raving fan. Another competitor easily attracted your business. At the second place you shared their vision and you were more invested in how they were accomplishing the outcome. In the third place on top of clean clothes and sharing a vision of a clean planet, you were able to connect human to human in a caring and empathetic way. It was these other segments of the customer experience that made you into a raving fan and promoter of their business. It turned you from a repeat client to loyal client.
What does this mean for your business?
Loyal customers are the back bone of your company. Even an increase in only 5% in customer loyalty can drop more that 25% to your bottom line (for more information on why this is true, download my free report at http://danceofbusiness.com/drivingir/freebies )
How can you distinguish if your repeat clients and customers are just repeaters or actually loyal raving fans? You can ask them.
The ‘ultimate question’ identified by Frederick Reichheld (author “The Loyalty Effect” and “The Ultimate Question”) is:
‘On a scale of 1-10, how likely is it that you would recommend us to a friend?’
This yields a net promoter score (NPS). A score of 9 or 10 identifies a loyal client or ‘promoter’ customer. A score of 7-8 is considered a ‘passive’ client, probably a repeat client and but can still be taken away by astute competition. A score of 6 or below is considered a ‘detractor’ and has no loyalty at all. He’s just buying from you occasionally because of convenience. The NPS is calculated by subtracting the percentage of detractors from the percentage of promoters.
Bain & Company, the originators of the NPS system say on their website. “Companies that achieve long-term profitable growth—have Net Promoter scores (NPS) two times higher than the average company. And Net Promoter System® leaders on average grow at more than twice the rate of competitors.”
Many businesses ask their clients on a regular basis different forms of the ultimate question. Some send a committee from their business or hire a third party to ask their clients this question and others such as:
What areas can our company improve in? What would it take to bring it to a 10?
What companies do you buy from that do score a 10? Even those providing different products and services? What do you value about the way they do things that causes you to rate them a 10?
How can we anticipate your needs so that we’re ready with 10-level service when you need us? How can we partner? Where can communication be improved at all levels?
Have you had an experience where you switched vendors because one vendor was merely convenient and the other made you into a raving fan? Please tell us about your experience and what made the difference for you.