Sep 20, 2020
3 Steps to Build a Loyal Customer Base
No, it doesn’t include “asking” them to trust you.
Do you think it is important to have a loyal community for your brand?
Before you answer that, let’s understand the difference between a loyal fan and a random customer.
The primary difference between the two is that a loyal fan understands your brand, has used your products/services, and looks forward to their next purchase.
You would have to ‘sell’ less to a loyal fan because they already know you so well and they would even spread the word about your brand to their friends/family.
Now, a random customer might visit your website, purchase a product/service, and never come back.
So, should you only focus on loyal fans and ignore random customers?
Of course not.
A random customer is a potential loyal fan!
So how can you build and nurture a loyal community that sings your praises (and might be your biggest critics at the same time) and uses your products/services regularly?
It is a simple 4 step plan:
Step 1 — Goal Gradient & Endowed Progress Effect
One of the tried, tested, and trusted ways to ensure a customer keeps coming back to you is to have a rewards program.
The feeling of achieving something (points, discount, etc.) only because they made a purchase with you is rewarding.
There are two types of rewards program that you can adopt:
- Fixed Rewards
In this type, you can have a fixed system — Purchase for $100, get 50 points. This way, the customer knows exactly what they will receive if they shop for $100.
Note — The rewards in this case should come often so that there is reinforcement, at the same time it shouldn’t be too easy either.
For example:
- Fly for 5000 miles, get 1flight ticket free
- Fly for 100 miles, get 1 flight ticket free
The customer won’t value the second option because they wouldn’t have to put in much effort to achieve the reward.
2. Variable Rewards
When you send an emailer with an exclusive discount voucher to a loyal customer, they feel valued.
In this case, the discount coupon (reward) would be a surprise and the customer wouldn’t be expecting it.
Although they would value it, they wouldn’t know when they will get the next coupon. Hence, it will be harder to build loyalty with this method.
Fixed rewards can be implemented in two interesting ways:
a) Goal oriented
In the goal oriented approach, the customers are working (purchasing) towards a fixed goal.
b) Endowed Progress
In this approach, you can give the customers a few bonus points when they sign up for the rewards program. This nudge would give the customers the necessary motivation to start collecting more reward points.
A/B Test of Goal oriented & Endowed progress:
Test A: A coffee shop in Manhattan gave a coffee card with 10 slots to customers. Every time they made a purchase, 1 slot would get a smiley stamp.
Test B: The same coffee shop included 2 additional slots on the card (12 slots in total) but pre-filled 2 slots with smiley stamps.
In both tests, the prize remained the same — 1 blueberry muffin on the house.
Results:
In Test A, they noticed that customers end up visiting more frequently as they were closer to the end (slot 8).
In Test B, they noticed that the pace was much faster than test A because 2 slots were pre-filled, people felt that they had already achieved it and needed to only put in little effort to achieve the muffin.
If you noticed, the coffee shop’s policy didn’t change in the tests (they wanted to sell 10 coffees before giving a free muffin to the customer in both cases).
Step 2 — Constant Motivation
To ensure that the rewards program is a success, you need to motivate the customer. This can be done in 3 easy ways:
- Progress
Create an interface wherein the customer can track their progress regularly. This way, the customer knows how far they have come and how far they have to go for the next badge/reward.
This is akin to tracking your progress when you’re taking a course.
2. Start from zero
It is demotivating to start from zero. Add a few bonus points to the customer’s account to help them get started (remember the endowed progress effect?)
3. Be Fair
Ensure that you have the same rules for everyone and don’t change the rules out of the blue. This can be very frustrating for the customer and they may even go to the extent of ruining your brand’s image online.
For example, Starbucks had this program wherein the customers had to collect x points in a year to get a free drink.
All customers’ accounts who didn’t reach that number in a year were reset and they had to start from scratch the next year.
A lot of customers who were only 2–3 points away from that number were frustrated and Starbucks faced a lot of backlash for the same.
Step 3 — Slip Up
To err is human.
It is okay if you mess something up and the customer ends up having a bad experience.
A simple sorry goes a long way in helping to get back in good terms with the customer.
Test Time
A researcher went into Starbucks and offered customers a small fee for taking a quick survey. The catch was that he would give them extra money on purpose and ask them to return the money if they found that he had given them a few extra dollars.
Scenario 1 — He takes up only 5 minutes of their time
Result — Most of the individuals returned the extra money
Scenario 2- Researcher does the same experiment but in the middle of the survey, attends a call from his girlfriend and makes dinner plans. After the call, he resumes the survey without apologising or giving an explanation.
Result — In this case, most people didn’t pay the extra money back
Scenario 3 — Same as scenario 2 but the researcher apologises this time for making the individual wait.
Result — Majority of the people returned the extra money
Yes, a simple sorry — not accusing the customer, not defending yourself but just admitting the mistake and offering a reward or compensation to the customer (if it was actually your fault) goes a long way in building a long term relationship.
One of my favorite quotes from the TV Series, Suits is:
Loyalty is a two-way street. If I’m asking for it from you then you’re getting it from me.
If you expect your customers to be loyal to your brand, make sure you’re doing the right things to make that happen :)
These lessons are explained in detail in CXL Institute’s Digital Psychology & Persuasion Minidegree. The lessons are crafted nicely with tons of additional reading material that enabled me to understand the concepts in depth.
