Why is Loyalty Important

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Why is Loyalty Important?

Why are loyal customers so important? The answers are familiar but worth repeating.
Loyal customers:

Purchase your products and services again and again over time
Increase the volume of their purchases
Buy beyond traditional purchases, across product lines
Refer your company's products and services to others
Become immune to the pull of the competition
Give your company the benefit of the doubt when something goes wrong.

Why does investing in loyalty management, customer satisfaction and retention make such sound business sense and produce measurable bottom-line results? Here are just some of the reasons why:

It costs 7-10 times more to recruit a new customer than to keep an existing one.
A gain in customer loyalty of only 5% can lift lifetime profits per customer by as much as 95%
An increase in loyalty of just 2% is, in some sectors, equivalent to a 10% cost reduction.

The numbers are similar when it comes to the importance of increasing employee loyalty. For example, an increase of 5% in employee retention can yield profit increases of 25% or more. To put this in context, consider a company of 1,000 employees with $200 million in annual revenue that experiences an attrition rate of 20% year. The cost of attrition will be roughly $4 million per year and the potential negative gross margin impact will be $30 million. Yet 91% of companies never measure the cost of employee turnover!

Learn more about the importance of a loyalty management strategy by listening to a brief Sky Radio interview with Omega.

As shown above, there are many “customer touch points” that exist in most companies today. Customer perceptions of you are based on experiences at every point in the circle, not just one area; so it’s vital that your company takes a wide angle view and considers the quality of service and support devoted to every touch point.

In the course of Omega's work, we send out “Action Alerts” when we encounter a customer whose experience is so strongly positive -- or negative -- that we feel you need to be made aware of the situation immediately. That way you can take appropriate steps to capitalize on the good news – or initiate damage control to keep things from getting any worse. Either way, customers appreciate your responsiveness and attention to their needs.

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