BrainTrust Query: Customer Loyalty for Small Businesses

Discussion
Feb 28, 2011
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Unlike larger entities,
smaller companies have the unique ability to nurture more personal relationships
when implementing loyalty strategies. They can engage, listen to and empower
the customer — the cornerstone of effective loyalty strategies for businesses
of any size. Instead of focusing on offering rebates and/or reduced pricing
(non-value based selling), they can commit to provide value, strong customer
service and responsive voice-of-the-customer driven communication — all of which
work together to drive engagement and greater loyalty.

Many successful small businesses
also focus on "in the moment" loyalty
initiatives, partly because their employees can have a greater impact. They can
manage their training and buy-in more effectively than larger entities, since
the locus of control is much smaller. They have the ability to be more nimble
and, if they are truly committed and have a full-time employee (FTE) to put against
the initiatives, the ability for them to glean actionable insight. The goal of
all loyalty initiatives is to get back to the "corner store mentality" and
engagement levels of the early mom-and-pop stores — a time when the proprietor
knew more about the interests, attitudes and opinions of their customers than
they know today. The chance for small businesses to be "in the moment" is
quite important.

Lastly, smaller companies that have more control of their programs
can use value propositions that are easier to understand and resonate better
with their customers. Because of their smaller customer base, smaller companies
do not have to develop programs that have to appeal to more diverse communities.

The
challenge to smaller companies around driving loyalty programs lies not in
their interest, but the willingness to dedicate an FTE or even half an FTE
is hard given the productivity issues in small America. For example, I was
recently talking with leaders of a small sized construction company who ruefully
acknowledged to me that they had no one on staff to run a loyalty initiative.
In their efforts to hire someone for this capacity, they discovered that because
loyalty marketing is such a complicated field, bringing someone on board can
be very challenging.

The complexity of loyalty and engagement initiatives has
increased, but the returns of effective administration of these programs is
larger than ever before.

Discussion Questions: What advantages may smaller firms have over larger ones in driving customer loyalty? Especially given the more limited resources for smaller businesses, how may loyalty initiatives have to be structured differently than larger entities? How essential is it for smaller stores to put dedicated personal behind loyalty programs?

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15 Comments on "BrainTrust Query: Customer Loyalty for Small Businesses"


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Max Goldberg
Guest
10 years 2 months ago

Factors that build loyalty are similar between large and small retailers. Great customer service and value should be prevalent. An attitude of caring should be present. Small firms may have an advantage if they are family owned and operated but beyond that, these ideals can be offered at retailers large or small.

Roger Saunders
Guest
10 years 2 months ago

Well run, small firms have a distinct advantage in that they can foster a “relationship” with their best customers. Consumers, no matter where we are are traveling, are seeking common themes from retailers–quality, location, price, selection, speed, customer service, knowledgeable associates, simplicity/decisiveness, unique products/services, etc.

Retailers have to run to their strengths, and manage their weaknesses. If location and price don’t fall into the area of strengths, so be it. Find the piece(s) of value that your best customers are seeking, and build that bit of treasure into the loyalty program. Keep it simple. If location or price is still an issue and a threat, ask yourself if there is a way to ‘manage’ that weakness–perhaps via delivery, dating (if your and their financials are strong enough), or some other means.

Bill Emerson
Guest
Bill Emerson
10 years 2 months ago

A retail customer is loyal if the following simple questions are answered yes:
– Did the retailer have what I was looking for?
– Did they have things I didn’t know I needed?
– Was there help if I needed it?
– Was the environment pleasing?
– If I had a problem, was it resolved quickly and fairly?
– Was the pricing reasonable?

This is not something that can be achieved by assigning responsibility to an FTE, regardless of how competent and/or dedicated they may be or even how large or small the company. Indeed, assigning responsibility to an individual can actually be a negative as it can lead to a “Oh, that’s his/her job, not mine” mentality among the other associates. Building customer loyalty must be an integral and pervasive part of the company culture. Put differently, responsibility for building customer loyalty ultimately belongs to the president/owner, who must relentlessly work to get all the associates to take responsibility for customer loyalty.

Gene Hoffman
Guest
Gene Hoffman
10 years 2 months ago

Many people like and support a store where they can interface with another pleasant human being; a store that has the products and service they seek; and where value is convincingly apparent to justify any price differential with larger competitors. In addition, capitalizing on another topic in today’s RetailWire, people enjoy a store that smells fresh and good, which can be accomplished more easily by a smaller retailer.

Richard J. George, Ph.D.
Guest
10 years 2 months ago

As stated in earlier posts I am not a fan of the concept of customer loyalty. Customers pay with their money and time and sellers reciprocate by providing value in return. However, if we want to insure continuity of purpose we need to address the following questions for a customer in our store: Relevancy – Is this product for me? Clarity – What am I buying? Simplicity – Does it save me time? Enjoyable – Is it a pleasant experience? Value – Are the benefits received greater than the burdens endured?

All associates need to be able to address each of these questions. It is not an issue of FTE, but of developing a culture in which every associate is focusing on “delighting” the customer. That is what will bring them back!

Ed Rosenbaum
Guest
10 years 2 months ago

This discussion takes me back to the Tom Hanks, Meg Ryan movie, “You’ve Got Mail.” Certainly the mega store chains can put the small business model out of business simply by using the lower price and “some service” model. The small, not necessarily ‘Mom & Pop’, stores have the large advantage of better customer service and knowing their customers. Larger chains simply do not train employees to meet and greet with sincerity. Smaller chains get my business because they know my name when I walk in. That level of service is priceless.

Hopefully we are beginning to see the evolution of bigger chains giving way to the smaller businesses where service comes before price. Don’t misunderstand me; price is always important. But you can be competitive on price while still offering superior customer service and experiences.

Gerry Lawler
Guest
Gerry Lawler
10 years 2 months ago

I’m very interested in this topic as my business is all about helping smaller retailers implement effective loyalty programmes. Yes it is true that smaller companies can operate a loyalty program more effectively but they generally don’t have the resources, mostly due to their employee profile. Sales people are generally not tech savvy and while they are keen to do the work they may not have the expertise.

Small companies should consider outsourcing the technical side and let their sales people SELL! I have found that the most enthusiastic sellers are also the people who drive loyalty from the ground up. In short, they are the people who get the customer engaged with the program and who, if properly incentivised will bring business back to he small retailer.

Ed Dennis
Guest
Ed Dennis
10 years 2 months ago

The source of contacts for small business marketing should be their customer list (if they have one). Many small businesses, especially retail, do not maintain a customer list. Setting up a procedure to capture customer information should be a top priority. This can often be jump started with a sweepstakes or contest that requires the consumer to enter address and email information. Care should be taken with this list as many consumers will be turned off by too much communication.

Mark Plona
Guest
Mark Plona
10 years 2 months ago

Not to echo the article but…consumers are indeed trained to only be loyal because of a reward or benefit of some kind.

There is no more actionable insight than one astute associate can obtain from someone than from an actual human conversation. Which of course is the very foundation of great customer service. An intimate knowledge of each of their regular customers. It gives each of us that “concierge” feeling of hey someone cares about my satisfaction with this transaction which too is a reward in and of itself, and no card required.

So loyalty and great customer service are not necessarily synonymous with each other.

So yes, small businesses certainly would have the edge, because its easier and more exacting to personally communicate a feeling or understanding of a particular customer, person to person rather than it is for a large company to draft a written policy left for misinterpretation. Let alone multiple policies that make it impossible to give that high level of service while remaining efficient and productive.

Doug Stephens
Guest
Doug Stephens
10 years 2 months ago

The most powerful loyalty program a small retailer can implement is the effect of being an absolutely outstanding shopping experience. No loyalty card, frequent purchase program or point scheme that can hold a candle to the power of being awesome.

Richard Gordon
Guest
Richard Gordon
10 years 2 months ago
The real truth of the “customer loyalty” concept is making sure your customers understand that you are “loyal to them.” Large businesses may need more complex management of customer loyalty programs, because they are NOT close to their customer. Small businesses need to understand first and foremost that customer loyalty must be earned by your business first through you customer service and overall company brand. The small retailer does not need to get complex software or people assigned to customer loyalty. A small retailer can keep it nice, simple and cheap by giving a loyal customer a special gift on the spot when they make a purchase, or least expect it. It may come in the store or though the mail in the form of, “We thank you for your business.” Show your appreciation in unexpected ways and get to know your customer. It’s really all about getting to know your customers better so that you can better cater to them via customer service and through their needs. If a small retailer has the money… Read more »
Jonathan Marek
Guest
10 years 2 months ago

Doug said it well. The best way a small retailer can create a base of loyal customers is to provide outstanding service “at the coal face.” Small retailers are uniquely suited to pull this off.

Ironically, the best “small retailer” service I’m receiving today isn’t from a small retailer at all. It’s from one particular Starbucks near my office. They know my name. They know my drink and are making it before I get to the counter. Yes, they have their rewards program, emails, and payment on my Blackberry. But none of those are as strong a driver as the feeling of great service.

Ted Hurlbut
Guest
Ted Hurlbut
10 years 2 months ago
What drives loyalty? I was in a client’s office the end of last week, and noticed this tacked up on the bulletin board, from Stores Magazines, June 2007 (I’m glad I wrote it down in my notes because I can’t find it on the web.): What Drives Customer’s Crazy? The leaders in customers response (by percentage of customers who mentioned each item): Employees don’t know/care – 21%Understaffed – 21%Bad customer service – 20%Rude employees – 19%Staff no help – 19%Cannot find help – 15% I don’t think it’s any mystery what drives customer loyalty. It goes far beyond price or the latest promotion or today’s deal. Customer loyalty is nothing more than customer preference. Where do they turn first for whatever they might need or want? Yes for commodities, price is a factor, but it really comes down to where they’ve had the best experience. Do smaller retailers have an advantage when it comes to customer loyalty. If the item is a commodity and the driving factor is price, then the (larger) price leader will… Read more »
Odonna Mathews
Guest
Odonna Mathews
10 years 2 months ago

What is the value of a customer? Once you can attach a price tag to a customer, tell your employees how important they are in keeping each and every customer. Loyalty programs must be kept “alive” by offering new marketing initiatives. But remember to keep them simple, or consumers will lose interest. This is true for large and small businesses.

Ralph Jacobson
Guest
10 years 2 months ago

I think we are going down the wrong path if we suggest loyalty is all that different for small or large companies. The size of the company has less to do with the ability to manage a true loyalty program than the corporate commitment to the program does. Corporate culture dictates how well an organization can execute the strategies of the leadership. If the loyalty program processes are articulated well, then the individual employees can act upon their directives, regardless of how many or how few employees are actually in the store. This needn’t be a full-time effort, so to speak. It should be part of everyone’s job. In this case, size doesn’t matter.

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