Building customer loyalty

Building customer loyaltyBuilding customer loyalty gives you a high return on the time, effort and money you invest in providing good customer service. Loyal customers buy more, more regularly, and the cost of selling to them is low. And they will frequently recommend your business to others.

Understanding your customers, providing good service, handling complaints well and staying in touch all help improve customer loyalty.

Making customer service a priority

Essentials of customer care

Encouraging customer feedback

Customer communications

Customer loyalty schemes

Employees and customer service

Customer relationship technology

1. Making customer service a priority

Make customer care a key part of your business strategy

  • Effective customer relationship management means organising your business to focus on the needs of customers.
  • Set out the levels of service you plan to offer your different customer types. For example, you might assign key account managers to your most profitable customers.
  • Make sure customer-facing employees have all the information they need to serve customers. Give them powers to make certain decisions independently.
  • Draw up procedures for handling customer contact. For example, standards for speed and courtesy when answering phone calls.

Learn as much about your different customer segments as you can

  • Find out what, when and how customers buy, and use this information to improve your service.
  • Use your database to record information about buying habits so you can tailor your service. For example, a travel agent could send customers information about their favourite resorts at the time they normally book holidays.
  • Generate opportunities for customer feedback.

Develop a consistent brand

  • If customers can identify with your company and feel good about it, they will be more likely to remain loyal.
  • Create a consistent, clearly defined identity for your business or product. Advertise to build brand awareness.
  • Make sure all social media communications are in line with your brand values.
  • Provide consistently high levels of customer service.

Design and deliver a 'customer experience'

  • This addresses how you handle customers whenever they contact your business.
  • For example, do you address customers by their first name, or use a more formal tone?
  • Follow up queries with a 'thank you'.

2. Essentials of customer care

Think of ways to make life easier for customers

  • Try to save the customer inconvenience at every stage of the buying experience. For example, provide a simple procedure for returning unwanted goods.
  • Concentrate on providing quality service in key areas. For example, customers often complain that deliveries fail to arrive on time.

Identify and address weaknesses that could affect customer service

For example:

  • Choose reliable suppliers. Build good relationships so they will help you out in a crisis.
  • Set up a production process that minimises defects, rather than relying on inspection of the finished product.
  • Establish systems and cross-checks to ensure that every order is correctly executed (the right product delivered to the right address on the right date).
  • Make sure you have the capacity to fulfil orders and provide quality service. If necessary, take on extra staff or equipment - or restrict sales until you can afford improvements.

Communicate effectively with customers

Provide a personalised service

  • Personalise all communications and the email addresses of customer-facing employees.
  • If you use computerised telephone systems, give customers the option of talking to an operator at any time.
  • You may want to give top customers more. For example, giving each customer an account manager.

Measure customer service levels

  • Identify key performance indicators (KPIs). For example, the number of complaints you get, how many faulty goods are returned, order-completion times and how regularly you contact each customer.
  • Monitor KPIs regularly and make changes if necessary. For example, if the level of on-time deliveries falls, you need to find out why.
  • Benchmark your service against your competitors. Ask your customers who they think your competitors are and how your service compares.
  • You may want to use 'mystery shoppers' to check standards of service at every point where customers interact with your business.

Give top customers more

A few big customers may be responsible for a large proportion of your profits. Keeping these customers happy is essential.

Reserve a special level of service for key customers

  • Give key customers a named account manager.
  • Give key customers extra benefits which are particularly visible.
  • Only make promises you can keep. If you say you will speed up delivery but then dispatch goods late, your special service will be meaningless.

Make it easier for big customers to buy from you

  • Waive restrictions such as minimum order quantities.
  • Give them first options on new products or discounted stock clearances.

Entertain top customers one-to-one

  • For your most important customers, an occasional lunch or after-work drink can be fitted into most people's schedules.
  • Activities like golf provide a relaxed, non-work environment to get to know people. Find out what your customer's interests are.
  • Check the Bribery Act so that you don't fall foul of regulations regarding customer entertaining.

Let key customers know you value them

  • Ask for their opinions before making significant decisions. For example, discuss your ideas for a new product or a new brochure.
  • Reinforce the idea that they are valued customers in all communication with them.

Invite them to join a club

  • You could give key customers networking opportunities - broadening the scope and value of what you offer them.

3. Encouraging customer feedback

The more you know about customers, the better you can meet their needs.

Provide opportunities for customers to give feedback

  • Ask new customers why they chose you over the competition, and existing customers what you could do better.
  • Set up a customer hotline, and make sure the number is visible on every piece of communication you send out.
  • Get feedback online by encouraging customers to engage on social media.
  • Include an email response form on your website.
  • Encourage customers with a concern to contact you. You may then have a chance to rectify an issue before it has escalated to a complaint.
  • Thank customers for their feedback and let them know if you make changes as a result.

Find out more about your customers

  • Consider making part of your website registration-only to allow you to get more information about customers.
  • Carry out customer satisfaction surveys. Keep the questions brief and specific, and offer an incentive for returning the form.
  • Ask to be sent regular copies of any customer newsletters or other marketing communications so that you are aware of changes to their business, possible threats and new opportunities.
  • Go to events and exhibitions that you think customers will attend.
  • Regularly visit major customers if this is cost-effective, showing them that they are a priority. Getting to know your customers will help to develop a loyal and trusting relationship
  • Think about involving customers in the development of new products or services.

Contact customers who have stopped buying, and find out why

  • Assign a skilled person to this task. Otherwise lapsed customers tend to give easy answers, such as “you are too expensive”, which may hide the real reasons.

Monitor and analyse the contact you have with customers

  • Keep a record of customer feedback to help you identify problem areas.


Unless you listen out for complaints and grumbles, you may be unaware of what you need to improve. Very few dissatisfied customers ever bother to complain directly.

Encourage complaints

  • Ask customers to complete a short questionnaire after making an online purchase or have a dedicated feedback mechanism on your site.

Give your frontline employees the authority to deal with complaints themselves

  • Give anyone dealing with customers a feedback form. This means that if there is a problem it can be corrected quickly.
  • Well-handled complaints are a great way of creating loyal customers.

Deal with them effectively

  • Show sympathy - apologise for the fact that the customer is upset.
  • Listen to what the customer has to say.
  • Establish the facts.
  • Agree what you will do.
  • Give your name, so customers know who is taking responsibility for the problem.
  • Keep the customer informed and deal with the problem promptly and politely.

Listening and sympathising can turn the complainer into a loyal customer

  • Most complainers just want to make a point.
  • If you do not listen - or are defensive - the complaint will escalate. The customer will not buy from you again and may also try to put other people off.

4. Customer communications

Plan your communications

  • Regular interaction helps build trust and loyalty.
  • Be clear about your aims. For example, you might want to turn your best customers into advocates who recommend you. Your communications might aim to keep them informed, rather than sell.

Focus on customer needs

  • Give unbiased advice, even if it means no immediate sale for you. Nothing builds trust more effectively.
  • Suggest products which will complement what they have already bought.
  • Ideally, you should anticipate when they need to re-order.

Use every channel available to talk to your customers

  • You might phone or email customers regularly with useful information. Make sure you have permission to contact them in this way.
  • Consider sending regular e-newsletters.
  • Use social media such as Facebook, Instagram and Twitter to provide updates on business developments, new product launches, achievements and awards.
  • Respond to customer contact quickly and efficiently. This will make them feel their feedback is appreciated and acted upon.

Use positive body language with customers

  • Show your customers you are pleased to see them. Learn their names, and use them.
  • Be polite, friendly and positive. Smile, make eye contact and look and sound enthusiastic. Speak clearly.
  • Use physical contact. Shake hands when appropriate.
  • Show a personal interest. There is almost always time to discuss non-business matters. Be a good listener.

Make customer communication part of your after-sales service

  • Explain what level of service is provided - and any cost - at the time of the sale.
  • Follow up with a courtesy email or call to check that everything is all right.

Comply with your legal obligations to keep customers informed

  • Consumers are entitled to clear and honest information before they buy.
  • Additional regulations apply if you sell at a distance (eg online) or offer consumer credit.

5. Customer loyalty schemes

A successful loyalty scheme pays for itself by encouraging more frequent purchases. The most common loyalty schemes are based on offering rewards to loyal customers.

You can offer cumulative discounts

  • A cumulative (or 'retrospective') discount gives customers money back whenever they reach specified spending targets.
  • Retail businesses can offer loyalty cards which work this way.
  • You may need to track customers' purchasing activity to flag discounts as they are earned. If customers have to ask for the discount, the scheme will be less effective.

Some schemes offer customers a discount off their next purchase

  • If the discount is only valid for a limited time, you encourage prompt action.
  • Discounts may cheapen your product in the eyes of the customer. For this reason, businesses often prefer to make offers such as “20% extra free”.
  • If the customer would have made the purchase anyway, you may be wasting money.

You can relate your marketing to a local or national cause

  • For example, offering to donate part of any money spent with you to support a local good cause.

6. Employees and customer service

Make sure everyone gets customer care training

  • Staff who have regular contact with customers should receive training on customer care. They are at the front line of your business and need to give an efficient, professional image at all times.
  • Sales people should be trained to listen to the customer, so they sell intelligently, not aggressively.
  • Everyone in the company should be taught how to handle calls and take basic enquiries.
  • Make sure all staff understand how it will affect customers if they do not do their job properly. For example, production errors could delay the completion of an order.

Lead by example and care for your employees

Encourage staff to work together to meet customer needs

  • Avoid a 'blame culture' where people blame other employees to explain problems to customers.
  • Ask employees for ideas on how your customer service could be improved. Reward good ideas.

Keep employees informed about your customer strategy

  • Involving everyone in the business helps them to understand your aims and objectives, as does keeping them up to date with customer needs and changing demands.

7. Customer relationship technology

The tech you use could improve customer relationships

Develop an effective customer database

  • A good database or CRM system can help you to record, plan and manage contact with your customers.
  • CRM allows you to analyse your customer base and identify the characteristics of the most profitable ones. You can plan marketing campaigns to target these and other potential clients - and track their success.
  • Remember that your database is only as good as the information on it - your data must be kept up to date.

Examine other ways to use technology to boost customer service

  • Integrating IT systems could provide tighter stock control, allowing more efficient ordering and delivery for your customers while reducing your costs.
  • You could set up a secure extranet to allow customers to access key information such as pricing and stock levels, make repeat orders, give feedback or access manuals or other documents.
  • Social media and website analytics can help you understand more about customers.
  • It may be possible to link your technology to that of both your customers and suppliers. Bringing the supply chain together in this way can produce more efficient order processing and financial administration.

Make sure you comply with relevant legislation

  • If you hold information about your customers you must comply with the Data Protection Act. You may need to notify the Information Commissioner's Office of the information you are collecting, and for which purpose.
  • If you send marketing emails, you must make sure recipients have opted in to receiving them.