Customer loyalty is the ultimate goal for many retail and service-oriented local businesses. Repetitive, reliable customers you can count on to come back again and again are the basis of healthy profitability and ongoing success.
To that end, let’s explore how you can build customer loyalty and reap the commercial benefits—like improved customer relationships and brand reputation—that follow.
The impact of customer loyalty on local small business success
No matter what your company sells, services, or does for its customers, improving their loyalty to your brand can lead to:
Increased revenue and profitability
Improving customer loyalty leads to higher revenue gains than you may think: simply increasing client retention by 5% can bolster your profits by 24% to 29%.
Enhanced customer relationships
Seeing the same people on a routine basis allows you to develop strong relationships, learn about their personal lives, and know them as both a friend and local business owner—all the while increasing their loyalty to your brand even further.
Stronger brand advocacy and reputation
Loyal customers will advocate for your local small business and spread the word about your unique excellence. According to Forbes, 77% of clients recommend local businesses to their friends and families after a positive customer experience.
Measuring customer loyalty
Customer loyalty isn’t just seeing the same faces in your local small business day in and day out. It’s a quantifiable, verifiable metric of success that can be measured through the following:
Customer satisfaction surveys
Circulate short, anonymous surveys asking your base to evaluate their happiness with your local small business. While satisfaction rates vary across industries, a benchmark of 75% to 85% positive reviews indicates your company is highly regarded amongst your clientele.
Net Promoter Score (NPS)
Net Promoter Score (NPS) is another key measure of customer satisfaction. To calculate NPS, ask your customers one question: On a scale of one to ten, how likely are you to recommend (your company) to a friend or colleague?
Ideally, the majority of your clients will give you a nine or ten—indicating they’re avid promoters who are ready to advocate for your brand.
Customer Retention Rate
Customer retention rate is a measure of how many customers have continually patronized your brand over the course of a given period. To calculate it, use this formula:
- Customer Retention Rate = [(Customers at the end of the period) - (New customers)] / (Customers at the start of the period)
Ensure your t you a rate as close to one as possible as this indicates no customers have fallen off from your brand.
Repeat purchase rate
Repeat purchase rate tracks how many customers return to buy from your local business more than once. To work it out, divide the number of returning customers by your total number of customers.
A total close to one shows a large percentage of your base is comprised of returning customers. This indicates that your company enjoys a high degree of brand loyalty.
Benefits of high customer loyalty
Having a base of loyal, repeat customers does more than bolster your brand’s revenue and reputation. It can also lead to:
Higher lifetime value of customers
Customer lifetime value (CLV) is a measure of how much money a singular customer spends at your local business over the course of your relationship. Loyal customers buy from you again and again, increasing their CLV with each purchase.
Competitive advantage in the market
In a world where 63% of consumers are willing to leave a brand after a singular negative experience, having a loyal customer base gives you a leg up over companies with casual clientele.
Zoopla, a new real estate appraisal app, was just starting out on the path to building a loyal customer base when it partnered with Nextdoor. It spread the word through video and static ads on neighbors’ feeds to get a competitive advantage over other appraisal companies. And the strategy worked: more than twice the anticipated benchmark of neighbors clicked through to their page and discovered more about their services.
Key strategies to enhance customer loyalty
After learning about these exceptional benefits, you’re probably wondering how to increase customer loyalty for your local small business. To draw in more customers and keep them continually coming back, try these customer engagement strategies that connect personally and meaningfully with your audience:
Personalization techniques
Loyal customers aren’t nameless walk-ins—they’re the same people you’ve been seeing for years on end. Treat them as such by personalizing interactions with their names, locations, and other pertinent information. Building customer loyalty through tailored interactions not only enhances the customer experience but also reinforces their connection to your brand.
Follow Made Renovation’s approach and use Nextdoor’s unique dynamic local substitution feature to swap in specific city and neighborhood names in your ad copy. This feature gained them twice as many clicks as anticipated and allowed them to acquire new, qualified leads at 63% less cost than expected.
Quality customer service
Developing strong relationships with your loyal customers allows you to serve them better. In fact, after building rapport, you’re able to apply those small customer service touches that clients appreciate, such as:
- Greeting them by name
- Remembering specifics about their life and personality
- Recommending products you know they’re likely to enjoy based on past purchases
These personal touches are crucial for enhancing customer engagement.
Reward systems and incentives
If you’re curious about how to increase customer loyalty, look no further than rewards or loyalty programs and similar incentives. As per Forbes:
- 77% of consumers are likely to stick with brands that offer a customer loyalty program
- 70% are more likely to recommend such companies
- 63% will even change their spending habits to earn more rewards from such initiatives
Meet new neighbors and earn their loyalty with Nextdoor Ads Manager
If you’re pondering how to build customer loyalty, start by treating your clients with respect, personalizing your interactions, and offering incentives for those who patronize you on a regular basis. After all, loyal customers not only mean increased potential for future revenue—they likewise enhance your brand’s reputation, are more likely to recommend your services, and spend more money at your business than one-off buyers.
Nextdoor Ads Manager allows you to build strong relationships with real neighbors in your area. That’s because Nextdoor Ads Manager makes it simple to target based on age, gender, and other factors so the neighbors who see your ads are the ones most likely to appreciate your brand.
Sign up now and begin building customer relationships that will last a lifetime.
Sources:
- Forbes. The Value Of Investing In Loyal Customers. https://www.forbes.com/
- HubSpot. What Is Customer Satisfaction Score (CSAT) and How to Measure It?. https://blog.hubspot.com/
- Qualtrics. Net Promoter Score (NPS): The Ultimate Guide. https://www.qualtrics.com/
- HubSpot. 10 Customer Retention Metrics & How to Measure Them. https://blog.hubspot.com/
- Wall Street Prep. Repeat Purchase Rate | Formula + Calculator. https://www.wallstreetprep.com/
- Qualtrics. What is customer lifetime value (CLV) and how can you increase it?. https://www.qualtrics.com/
- Business Wire. 86 Percent of Consumers Will Leave a Brand They Trusted After Only Two Poor Customer Experiences. https://www.businesswire.com/
