Tried-and-true methods
to build customer loyalty
By Christine Selvig • Bankrate.com

Your company has a single asset that, if properly maintained, could increase your annual revenues by 25 to 100 percent: your existing customer base.

Keeping your existing customers has a much bigger impact on your bottom line than reeling in the new ones. That's because longer business relationships mean bigger sales and it costs less to keep an old customer than to acquire a new one.

How does a small business keep its customers? By making a customer loyalty program a part of your business plan, the experts say. Customer loyalty programs take many forms, but they all do the same thing -- they tell your customers, "Thank you."

"Whether it's a magnetically striped frequent-flier card or a stamp-it-yourself, buy-10-get-one-free card, it all boils down to the same thing: We want to reward our customers for coming back," says Ted Kinni, co-author of 1,001 Ways to Keep Your Customers Coming Back. He and co-author Donna Greiner also run a business-to-business bookseller based in Williamsburg, Va.

A good customer loyalty program should recognize your customers and thank them for their continued business. "Two-thirds of all customers that leave a business, leave because they feel ignored," Kinni says.

Many small businesses have found creative and inexpensive ways to keep their customers coming back.

To get them coming back, some investment is required: Spring for a cup of coffee, says Beverly Koser, a Minneapolis marketing professional. A small business owner can learn a lot, she says, by simply sitting down with a customer over coffee.

Koser suggests asking 10 top customers what your company can do to make their lives easier.

"Put muffins with the coffee and they always talk."

Then, craft a plan -- within your budget. Here, in rising order of cost and complexity, are some ideas that will keep your customers coming through your door.

No-cost options
Don't underrate your potential gifts.

• Forward the freebies. In the course of his work, Kinni receives free advance copies of business books. He forwards them to the firm's good customers.
• Invite them back. If you buy a kayak at Adventure Times Kayak and Unique Getaways in North Palm Beach, Fla., you're invited to launch your float at any of the company's three launch sites.
• Bring them together. Hawley-Cooke Booksellers hosts reading groups, children's activities, book signings and local speakers on a variety of subjects.

Low-cost options
Give where it hurts the least and does the most.

• Thank weekend customers with a certificate for a free second meal or product discount when they stop back on a specified low-volume night.
• Develop a customer database by starting a birthday month promotion. Ask for the customer's name, e-mail and street addresses, and birth month. Then send a birthday card and invitation to celebrate by taking 20 percent off anything purchased in the store during the month.
• Put together a frequent-buyer program. A 2-inch by 3-inch card and a rubber stamp will get you started on a simple reward program. Buy-10-get-one-free cards work in all kinds of stores -- bookstores, restaurants, pet supply stores or even small manufacturing firms. There's nothing magic about the number 10, by the way -- your get-one-free number may be higher or lower, depending on your product or service.
• Offer discounts on supplies related to any product you sell. Batteries, cartridges, equipment cleaning and repairs could be included in this category.

Fulfill a need
Business-to-business loyalty programs are not always based on discounts, dating and coupons. Sometimes giving customers something unexpected results in increased business and a healthier bottom line for both parties.

• McKenna Professional Imaging has built up a loyal customer base by providing a series of regional management and accounting seminars for the mom and pop photography studios that make up the bulk of its customer base. The company also provides its customers with marketing packages for major selling opportunities throughout the year.
• Distribution companies sometimes invite qualifying customers to join them on a cruise or trip to some exotic destination. Costs for this type of freebie can be curbed by first inviting your suppliers to pitch in and then carefully weighing sales increases necessary to fund such an adventure. This is a great way to reward customers who have increased their business over the course of a year. It also provides a tremendous opportunity to get to know your customers on a different level. Travel incentive companies can help orchestrate the details of such trips.

Technify ...
The Internet opens the door for all kinds of communication with your customers. A business bookstore, for example, sends its customers an e-mail roundup of newly published books each month.

e-mail also provides an affordable means of providing your customers with regular newsletters, special pricing and event information.

You can both give information to and get information from your customers on your business Web site. Invite their comments and you're bound to get a wealth of useful advice and information about what you can do to better serve your customers needs.

What lies ahead
If the future follows the past, it won't be long before the sophisticated software used by national marketing companies to predict, produce and administer national brand loyalty programs will be affordable for small businesses too.

When that day comes, you'll be able to predict your customers responses to proposed loyalty reward programs, e-mail notices when their favorite products go on sale and tell them exactly where they stand on your company's latest frequent-buyer program. Selecting and notifying ideal candidates for special offers and mailings will be a breeze. And, a tap of the computer key will produce a detailed record of how your customers' business increases from year to year.

No doubt even in those high tech times, a cup of coffee and a muffin will still provide the glue that keeps a customer loyal to a company.

-- Updated: Sept. 23, 2002