In a world where your competitors are only a click away, customer loyalty really is the new marketing. Today’s customers have access to an endless amount of information about your business, and research shows that they’re ready and willing to stop dating around and stick with companies who go above and beyond to create a fantastic customer experience.
When customers feel taken care of they are more inclined to buy from you again.
Since studies have shown that it costs 6 to 7 times more to acquire a new customer than keep an old one, outpacing your competition depends upon having a loyal community of happy customers.
This guide will look at how the most beloved brands are able to instill the kind of legendary loyalty that keeps them ahead of the pack.
You’ll walk away understanding why customer loyalty is important, what you can do to increase loyalty with new and existing customers, and how to create measurable systems to track your service efforts.
Ready to get started?
On average, loyal customers are worth up to 10 times as much as their first purchase.
White House Office of Consumer Affairs
Is great customer service really worth the effort?
It might seem like a no-brainer, but many entrepreneurs struggle with this question. It’s not as clear-cut as simply looking at a sales chart to see if your service quality is in the black.
To answer this question, we’ll analyze data (not hunches) from both ends of the spectrum. Specifically, we need to look at:
1. What are the rewards for providing great service?
2. What are the costs and punishments for providing bad service?
In the following section and throughout the rest of this guide we will utilize academic studies, consumer reports and proven statistics to shed light on the pros and cons of running a customer-centric business.
A variety of research shows that today’s customers place a priority on receiving great service.
A 2011 report published by American express revealed that 3 out of 5 customers were willing to give up a former favorite brand in order to have a better service experience.
Even more telling are the results of the 2010 RightNow Customer Experience Impact report, which revealed that 9 in 10 Americans are willing to spend more with companies they believe provide excellent customer service.
Eighty percent of respondents shared the belief that smaller companies place a greater emphasis on service than larger companies, meaning ...
small business success is highly dependent on the satisfied customer.
The way that small business owners can beat out big-box stores isn’t to compete with them on the things they are good at (e.g., low prices, logistics, etc.); it’s far more important to out-support your competition by providing a level of service that they just can’t match.
As this guide will show, great service is the bedrock for creating customer loyalty, and it can come back to haunt you if your business isn’t making it a priority.
News of bad customer service reaches more than twice as many ears as praise for a good service experience.White House Office of Consumer Affairs
Will bad service really scare customers away from your business? The data presents a strong case for a resounding “yes.”
Consumer Reports surveys have shown that nearly 91 percent of customers will not do business with you a second time if you botch the first encounter. It was even uncovered that two-thirds of customers have walked out of a store when they felt the service was subpar.
The amount of customers willing to immediately abandon a business reached nearly 70 percent when it came to poor service on the phone, conclusively showing that customers are willing to shut you out if you don’t provide the quality of service they expect.
The worst part: You may not know how much of an impact your poor quality of service is having before it’s too late.
The White House Office of Consumer Affairs revealed a startling statistic on how service can silently affect your bottom line:
For every customer who bothers to complain, nearly 26 others remain silent.
If you continue to provide subpar service, you may start losing customers without warning.
By now you’ve seen that building loyalty among your customer base is more important than ever before.
Your sales team will continue to have less control in informing and guiding customers through a sales purchase. Given the “always on” nature of the web, product information, reviews, and even access to your competitors are all just clicks away from a prospective customer’s fingertips.
Top-notch companies see this as an opportunity, not a dilemma. Recent consumer data from a Peppers & Rogers study showcases how leading business are also leading the charge for great service:
81% of companies with strong capabilities and competencies for delivering an excellent customer experience are outperforming their competition.
Will you be among them?
If you’d like to be, read the rest of this guide to find out how you can stop wishing you provided a better customer experience and start building one.
Do you ever feel like customers are ignoring your brand’s message?
It’s a frustrating feeling to have, especially when you know that your business is truly offering something of value to customers.
How can you build brand loyalty if nobody is paying attention to you?
The advent of social media has created the belief that you must constantly engage customers or risk losing the sale, but the data says that just isn’t true.
So how do you connect with customers that want limited engagement?
Read on, because we’ll be covering research that points to a tested way to increase customer loyalty, and it’s closely tied to how you position yourself among the competition, not how many interactions you force on prospective customers.
Many marketing campaigns are designed entirely around moving products. What if instead they were designed around moving people?
A Corporate executive Board (CeB) study published by the Harvard Business Review, which included 7,000 consumers across the United States, United Kingdom and Australia, showed that loyalty to brands is almost impossible to achieve without one key element:
Of those consumers who said that they had a strong brand relationship, 64% cited shared values as the primary reason.
Shared values are by far the largest driver of brand loyalty.
According to the CeB, who researched the topic of brand loyalty for more than a year, consumers everywhere stated that they were loyal “not to companies, but to beliefs.”
Most customers aren’t particularly loyal to any one business, but they are loyal to what the business stands for.
“We saw that emotional attachments to brands certainly do exist, but that connection typically starts with a ‘shared value’ that consumers believe they hold in common with the brand.”Aaron Lottonn, CEB
Connecting with your customers on a personal level is crucial for growing a small business that willretain their loyalty.
Since a majority of your customers don’t care about having a close relationship with your brand, it makes sense that those who do care more deeply about the things you stand for than how often you engage with them.
The only thing that is going to enhance this type of relationship is the knowledge that your business is on the same team as them. These customers will want to see that you share their beliefs and that you incorporate those beliefs into how you conduct business.
The most beloved brands have developed their cult following through a strong stance on issues both withinand outside of their industry.
What your company stands for doesn’t have to be lofty or grandiose, but you do have to plant your flag somewhere that matters.
Here at Help Scout, we believe that customer service shouldn’t be viewed as a necessary cost that begrudgingly makes it way onto an expense spreadsheet; it should be viewed as your biggest marketing opportunity.
Clearly, communicating your brand’s higher purpose outside of making money is the way to create a genuine connection with customers. In fact, research shows that it’s the only method of creating brand loyalty that truly sticks.
There is one other element you should note: In addition to being known for a strong stance on issues that matter to them, all of the most admired brands became legendary by doing something a bit out of the ordinary: they made an enemy.
The quest for brand loyalty doesn’t end once you’ve found a cause to rally for. Now, it might make sense for you to make an enemy.
At first glance this advice may seem foolish, but you’ll soon see that it’s backed by proven psychological research as well as one of the most memorable case studies of all time.
Consider Apple Inc.’s notorious 1984 advertisement. You may remember the clear picture that Apple painted of Windows’ users—they were unhip, corporate drones that loved boring beige-shaded boxes and excel spreadsheets.
Conversely, Apple was the cool product for young people doing creative work and fighting the system. The rivalry portrayed played a huge role in Apple’s subsequent branding strategy and even its more recent Mac vs. PC campaign.
Given the fiercely loyal reputation of many Apple customers, you may not be surprised to hear that the “Cult of Apple” isn’t just a mocking turn of phrase. Recent neuroscience research has found that the same areas that light up in the brain when thinking about religion also light up for Apple fans when they’re thinking about Apple products.
This loyalty is spurred in large part by the division Apple creates between itself and competitors.
In social psychologist Henri Tajfel’s study “Social Categorization and Inter- Group Behavior,” Tajfel and his team sought to understand what it takes to create division between random groups.
His findings were shocking, to say the least.
Tajfel discovered that when subjects who did not previously know each other were divided into groups (even by the most arbitrary of distinctions) they would actively discriminate against other groups and favor their own in-group when it came time to dole out real rewards.
Tajfel’s intergroup research revealed that the mere illusion of division (spurred on by meaningless choices, such as a coin toss) is enough to get people to favor their in-group over other “outsiders.”
His complementary work on social identity also shows us why groups naturally form across all cultures and types of people.
Social identity theory suggests that people identify with groups in such a way as to maximize positive distinctiveness.
Groups offer both identity (they tell us who we are) and self-esteem (they make us feel good about ourselves).
Tajfel’s social categorization study shows that group formation is done more quickly and elicits stronger bonds when the group has identified a common enemy. This is why sports fans become so close-knit when their team is going up against a rival.
Can your business create the same effect? How can you go about making an enemy without hurting your reputation?
But do not worry about having to go toe-to-toe with a competitor like Apple or Microsoft; you don’t haveto make an enemy of a brand, just with an idea or a belief. Instead of rallying cries that criticize Company XYZ,you should clearly position your company against something that your ideal customers are likely to shun as well.
For example: Our friends at Moz villainize snake oil salesmen in the search industry, denouncing their use of shady “black hat” tactics that muddy up the web and give legitimate search engine marketers a bad name.
So how do you position yourself against an idea to make it your enemy?
These three tips will ensure that the enemy you choose won’t backfire on you and hurt your sterling reputation:
So who or what is your company’s enemy?
Small business owners know that their primary advantage against the big guys is the personalized service that they can offer their smaller customer base.
But the service downfall of many small businesses is that they become afraid that they won’t be able to offer amazing service on a limited budget. Or, on the other end of the spectrum, they get in over their heads and build a business that customers love but is drowning in expenses.
How can you address these concerns? Look to the science that reveals the kinds of things that make people really happy when dealing with businesses.
Research shows that when it comes to great service, it really is the thought that counts. In fact, psychologist Norbert Schwarz showed us that as little as 10 cents could change someone’s mood and make them have more favorable opinions of another person or brand.
These findings are supported by Help Scout’s concept of “frugal wows”— dazzling your customers with an incredible experience that is focused on your intentions and actions, not on how much you spend.
There are plenty of brands going above and beyond to do nice things for prospective customers, but few stories resonate like the tale of Sweetgreen’s fantastic way of brightening people’s day:
“To keep their brand aligned, Sweetgreen likes to hire people who don’t necessarily have experience but are super passionate. One of those employees came up with what the company calls ‘Random Acts of Sweetness.’”
At first glance this advice may seem foolish, but you’ll soon see that it’s backed by proven psychological research as well as one of the most memorable case studies of all time.
Sweetgreen’s street team randomly hands out gift cards to recognize other people doing good in the community.
When it rains, they’ll put a shower cap over bike seats with a gift certificate tucked underneath. They’ve even been known to slip gift cards on car windshields alongside a city-issued ticket to offset the downer of returning to find a parking violation.
These random acts of kindness may seem like a shot in the dark, but the sheer goodness demonstrated by this business practice triggers a psychological effect in customers, creating feelings of reciprocity for their future dealings with the business.
Still not convinced? Sweetgreen’s methods have fostered sales numbers that tell a prosperous tale of the return on their do-good investments:
Business has grown 300 percent year-over-year since the inception with revenues now reaching $10 to $15 million.”
It’s hard not to love the example of Sweetgreen and just how “sweet” they are in courting new customers.
When it comes to effective customer service, small changes can have a big impact.
Making your customer feel like they’ve made the right choice—both immediately before and after their purchase—goes a long way toward developing your relationship with them.
In this regard, there’s a lot to learn from waiters, a service position that interacts directly with customers. Research has found that their post- purchase follow-up actions can greatly affect customers’ perceptions of their service, and, accordingly, the tips they are left.
Of all the things that waiters could do to increase tips, how much importance would you place on the token gesture of giving out mints?
As it turns out, the process whereby mints are given to customers has the potential to increase the tip amount by up to 23 percent.
In a study published in the Journal of Applied Social Psychology, researchers tested the effects that mints had against a control group (where no mints were given) in order to measure their effectiveness in increasing tips.
The results were pretty surprising:
At first glance, the last two groups seem very similar: Two mints per person were brought out, and in each instance the waiter made mention of the mints.
So what accounted for a 9 percent difference in tips?
In the third test, the notable difference was that the waiter brought out the second set of mints after some time had passed from the first offering and mentioned that they had done so as an additional courtesy.
Researchers concluded that this personalization aspect of waiting tables (even if the waiter did this for every customer) was the catalyst for increased tips.
This post-purchase follow-up appeared as genuine concern for customers’ needs, instigating a connection with customers much deeper than you would think possible from a few additional mints.
The means for making these types of connections is widely available to many businesses, even those outside of restaurants. It was the surprise element of the waiter’s willingness to follow up post-purchase that made customers so happy.
What is the definition of great customer service? What sort of service creates reciprocity and inspires loyalty in new customers? Is it really all about getting customers in and out as quickly as possible?
Although speed is an important part of the customer service process — no surprise there — research shows that there are times when speed can hurt customer loyalty and satisfaction.
For many businesses, obsessing about the amount of time spent with customers can start to affect the quality of service being provided. In fact, a variety of research shows that the primary concerns of customers are how competent and inviting their service felt;
Customers say they are more than willing to forgo a speedy exit to receive this level of support.
Furthermore, in analyzing consumer data on why customers abandon companies, the most likely culprit is shown to be service quality—not annoyances such as slow response times.
Let’s take a deeper look at these research findings to see how they apply to your business.
A customer interactions study conducted by the Gallup Group analyzed the roles speed and overall service quality play in creating brand engagement, which is a necessary element for maintaining customer loyalty.
Gallup’s findings show an expected outcome: Customers who felt that they received quick, responsive service were six times more likely to be rated as “engaged” (in support of the brand).
However, speed was not the largest driver for customer loyalty. Customers were nine times more likely to be engaged with the brand when they evaluated the service as “courteous, willing, and helpful.”
Speed is certainly an important factor in the customer experience, but the study shows crystal-clear conclusions on what matters to customers while receiving assistance. Businesses can expect to be rewarded with more engagement if they encourage their employees to take the necessary time to deliver an outstanding experience.
But the evidence doesn’t end here.
Many of us would assume that slow service must be the most influential factor producing disgruntled customers. Nobody likes being put on hold, so that has to be the primary source of frustration that leads to brand abandonment, right?
Keep reading—the research says otherwise.
According to an insightful customer experience report published by Rightnow, the number one reason customers stop doing business with a company is a poor customer service experience.
But what factors lead a customer to describe a service experience as “poor?”
The data shows that manners, incompetency and slow service define unsatisfactory customer service:
This candid feedback from unhappy customers again shows us that competent, helpful support is more important than service speed.
What psychological factors are at work here? Why are customers so concerned with service quality when many of us have the “let’s get this over with” mentality when we contact support?
The book Sway, authored by the Brafman brothers, analyzed how convicted felons felt about the fairness of their trial, focusing on which factors impacted their evaluation of fairness.
(Convicted felons? Trust us, there’s a point to be made here.)
Unsurprisingly, the length of the sentence given was a major predictor in the felons’ fairness rating.
What was surprising was that the time each felon spent with their lawyer was just as important to their perception of fairness as the trial itself. The felons who had more face-to-face time with their lawyers unanimously rated the entire legal process as fairer than the felons who had a similar sentencing outcome but less time with their lawyer.
The Brafmans noted:
“...although the outcome might be exactly the same [in length of sentence], when we don’t get to voice our concerns, we perceive the overall fairness of the experience quite differently.”
Does this research broadly translate to other customer experiences?
Do we really value the feeling of being looked after enough to overlook lackluster service?
Despite your best efforts, mistakes are bound to happen when dealing with customers. Faulty orders, delays ... there are plenty of small hiccups that may make their way into your service provision. The good news: They won’t alter your sterling reputation unless they become the norm.
But what about serious service errors? Will customers forgive a massive oversight? If so, why?
This is an important question to ask, not because you are planning on making huge mistakes, but because it’s important to understand the thought processes and associated actions of dissatisfied customers.
In Malcolm Gladwell’s book Blink he reveals data showing that most people who suffer an injury due to a doctor’s negligence do not sue their doctor.
Research gathered from interviews of patients injured by doctor negligence shows a common factor among those who chose to sue their doctor. The patients who felt like they didn’t get enough quality time with their doctor were more likely to pursue legal action.
Many of the litigious patients described their interaction with their physician as “rushed, ignored, or poorly diagnosed.” As strange as it may seem, this fascinating medical case study actually mirrors more commonplace service mistakes. Data from Lee Resources (published by Florida State University) shows that 95 percent of complaining customers are willing to forgive a major service mishap if you resolve the problem in the next interaction.
But these customers are only willing to give you a single second chance— they believe that if you can’t fix things the first time they bring them up, you obviously aren’t giving them the attention they deserve (and they’re right).
So far we’ve been focusing on high-level information on why slowing things down is the right thing to do for a customer. Now, let’s take a look at an actual case study—from a widely known entrepreneur—on how slow service can actually be a good thing.
Derek Sivers, founder of CD Baby (which he later sold for $22 million), has some pretty strong opinions on why getting customers out the door should not be the priority of your service representatives.
In fact, Sivers used to train his employees to take extra time finding out key things about a customer before getting back to them.
“I used to request all my employees intentionally take a little longer on customers’ calls. I would ask them to pull up customers’ albums and catalogues; have a look at their pictures and gears to learn a bit about them.
Imagine how powerful it is for a customer to know that he is listening to somebody who is a musician that gets him, than something like, ‘Thank you customer 4325. How may I quickly handle your problem?’”
And CD Baby is not the only company who subscribes to this stance on comprehensive service. Zappos has become notorious for its dedication to customers—no matter how long it takes to deliver service. They even set a company record for a 10-hour phone call with a customer, who was perfectly satisfied with the service they received.
We’re not encouraging you to keep customers on hold or waiting for your email response longer than they have to. But hopefully this research and case study resonates with you and positively impacts your service practices. Slowing down can be a good thing when it comes to building customer loyalty.
The fundamentals of providing great service are the same for brick-and-mortar and online shops. The main difference is the channels of communication. Knowing this, you have to ask yourself two important questions:
1. How can you improve your online service by focusing on the channels that matter?
2. What sort of customer service skills should you and your employees focus on?
The answers to these questions will lay the foundation for a service game plan that improves upon your current interactions with customers and addresses methods for offering a superior customer experience in the online world.
In this chapter, we’ll take a look at how you can accomplish both. To get started, focus your energy on one very important question...
One of the vital things to consider for delivering online customer service is the type of questions frequently posed to your support team.
Let’s use website hosting companies as an example.
Users typically only need to contact someone in support when their site goes down. Of course, if a site goes down there’s usually a sense of urgency at hand. These customers do not want to get sent through a ticket system or to a forum; they’re looking for an immediate response.
So for customers shopping for web hosting services live chat is seen as an essential offering in their online customer service toolkit. Hosting companies with stellar live-chat reputations will undoubtedly have the edge in attracting new customers.
In other instances, a different channel may be a more important focus. Wistia, an online video hosting company, provides a stellar example of taking stock of their customers’ support needs and making service changes based on these findings.
After careful consideration of their team’s limited resources and the time vacuum they were experiencing with phone support, Wistia chose to remove their phone number from their website.
The staff discovered that without juggling phone support they were better able to provide their renowned exceptional support.
How did they manage to do that?
Since Wistia’s product does not lend itself to the urgent situations often faced by hosting companies, they were able to shift their support focus to personalized emails. Their customers had no issues with resolving questions over email, affirming that Wistia’s read on their customers’ needs was spot-on.
Wistia’s incoming email volume increased, but this method was much easier to scale than phone support. It also enabled them to deliver far more wow moments to customers, which can be difficult to achieve over the phone. Small businesses should take note of the Wistia case study. To succeed with a small team you must focus on identifying and using the support channels your customers rely upon and prefer to use.
Why would you ever want to get out of the way of your customers?
There are a myriad of opportunities to remove your support staff from the service process without negatively impacting the customer experience. You might even be surprised by how this removal can enhance the overall customer experience.
The idea of providing content as customer service is one that many businesses can benefit from. One of the best current examples of this practice can be found at WooThemes.
The Woo team offers WordPress themes for website owners, many of whom are beginners in the website-building space. even on a relatively simple platform like WordPress, newbies experience a multitude of headaches and questions as they take their first steps.
How should the Woo support team meet the needs of beginners? If the team had to personally handle every customer question they’d have zero time to focus on making themes.
Woo has created a library of content that responds to common questions, ranging from video tutorials to tip sheets on best practices. In checking out the support section on Woo’s site (pictured below), you’ll see that the first three options for customers are all content- based forms of customer support:
Woo’s users find just as much (and maybe more) value in these robust content offerings as they do in interacting with the support team. After all, they don’t want to get stuck in a support forum or have to email the staff with every little question!
Even larger companies in industries notorious for lackluster support have taken an interest in self-service options for customers. A great example is seen in how Comcast rebooted their online self-service system to fulfill customers who wanted more control. Now if only they could get human service right, they might not be one of America’s most hated companies.
We’ve taken the “get out of their way” customer service lesson to heart here at Help Scout. Our team has put in the time investment to create a variety of customer service resources that include free eBooks, webinars and white papers that address our customers’ common questions.
Instead of composing individual replies to each common customer query, we now have a full suite of content pieces to point customers toward. This sort of content is useful for every type of customer, but it is particularly valuable to self-serve customers who would rather figure things out on their own than have to contact your support team.
To begin developing this type of content, simply follow a new customer’s thought process both before and after the sale:
Optimizing your online channels is only step one of this process. now we will take things back to basics and address the customer service skills you need to master to improve your employee-to-customer relationships.
Without these skills, you run the risk of finding your business in an embarrassing customer service train wreck or simply losing customers because your service continually lets people down.
Below, we cover ten must-have skills for every member of your support team.
Being treated with patience is important to customers, who often reach out to you for support when they are confused and frustrated.
Take the time to figure out what their issue is and how you’re capable of resolving it. Quality of service trumps speed here; customers would rather get competent service than be rushed out the door.
The ability to really listen to customers is crucial for providing great service.
Previously, we’ve gone over a few customer feedback systems and discussed in detail why listening to customer feedback is a must for many businesses who are looking to innovate.
It’s important to pay attention to individual customer interactions as well as the feedback you receive at large.
Customers aren’t likely to say, “Please improve your user experience,” but they may say things like, “I can never find the search feature” or “Where is the _____ function at again?”
You’ll have to listen carefully, because most customers won’t spell out their issue for you. Are you attuned to what your customers are telling you?
For all of the mumblers out there, listen up.
You need to be cautious of how your communication habits translate to customers, and it’s best to err on the side of caution when you find yourself questioning an interaction.
For example: When a friend recently went to get work done on his car, an employee told him that if he wanted to get an oil change it would be included in his final bill.
He thought that meant he’d be getting the oil change for free. As it turns out, that wasn’t the case. The employee apologized—and he truly believes it was an accident—but because of the miscommunication he has never returned to that shop.
When it comes to important points that you need to relay to customers, keep your language simple and clear, leaving no room for doubt.
The best forward-facing employees in your company will have a deep knowledge of how your product works. This will come easier for some than others; the non-technical team members at Help Scout make a special daily effort to work on this skill.
This doesn’t mean that every single team member should be able to build your product from scratch, but they should know the ins and outs of how your product works, just like a customer who uses it every day would.
If you aren’t familiar with your product, you won’t be able to effectively help customers when they run into problems.
Language is a very important part of persuasion, and customers create perceptions about you and your company based off of the language that you use.
Small changes to your dialogue that utilize positive language can greatly affect how the customer hears your response. For example:
Without positive language:
“I can’t get you that product until next month; it is back-ordered and unavailable at this time.”
With positive language:
“That product will be available next month. I can place the order for you right now and make sure that it is sent to you as soon as it reaches our warehouse.”
The first example isn’t negative by any means, but the tone it conveys feels abrupt and impersonal and can be taken the wrong way by customers (here’s more advice on how to fix that problem).
The second example states the same thing, but instead focuses on when/how the customer will get to their resolution.
Let’s be honest ... you’re going to come across customers that you’ll never be able to make happy.
Situations outside of your control will sometimes creep into your support queue, such as coming across what the industry refers to as a “barnacle” customer, who isn’t really interested in your business, and simple uses your support team as an outlet to beg for discounts and complain about problems that don’t really exist.
Great customer service representatives should have the basic acting skills necessary to maintain their usual cheery persona in the throes of dealing with people who may just be plain grumpy.
Despite our research-backed take on why you should spend more time with customers, you still need to be concerned with efficiently getting customers what they want.
The trick here is knowing when you are personally not the best fit to help a customer—and getting them over to someone who is the right fit in a timely manner.
You won’t always be able to see customers face-to-face, and nowadays in many instances you won’t even hear a customer’s voice.
That doesn’t exempt you from the need to be able to read the customer’s emotional state and intentions. This skill is essential because you don’t want to lose a customer because of miscommunication.
Wherever possible, look, listen and read for subtle clues about the customer’s current mood, patience level, personality, etc. This will go far toward keeping your customer interactions positive.
To be clear, this skill has nothing to do with “closing” sales.
Being able to close with a customer means ending the conversation assured that the customer feels that their needs have been taken care of (or will be).
The last thing that customers want is to get booted off a customer service call before all of their problems have been addressed, so be sure to take the time to confirm with customers that their every issue has been resolved.
Your willingness to do this shows the customer three very important things:
When you get a customer to the point of, “Yes, I’m all set,” then you know the conversation is over.
Many customer service experts have shown that giving employees unfettered power to wow customers doesn’t always generate the returns that businesses expect to see.
That’s because it leaves employees without goals. Instead, relying on systems like the Net Promoter Score can help businesses come up with guidelines for their employees that allow plenty of freedom to handle customers on a case-to-case basis while also leaving them them with priority solutions and “go-to” fixes for common problems.
Customer loyalty programs can be a gift and a curse.
When done well, they keep customers coming back for repeat purchases, potentially turning a passerby customer into a loyal brand advocate.
When done wrong, they can be a huge waste of time and resources, becoming a tiresome burden for customers who have no interest in getting involved with the program.
But we know that everybody loves free stuff, so how can we get customers to perceive these loyalty programs as valuable? It’s simple:
In the race to win the loyal customer, you should give them a head start.
What if we told you that an academic study has broken the secrets to successful customer loyalty programs wide open, revealing a ridiculously simple technique for improving customer retention and loyalty while reducing churn rates?
You’d be interested in hearing about it, right? Well, keep reading.
“ The Endowed Progress Effect,” a breakthrough piece of consumer research by professors Joseph Nunes and Xavier Drèze, analyzes how artificial advancement affects customer effort when it comes to loyalty programs.
Nunes and Drèze began their study with the assumption that customer loyalty programs could persuade customers to stick around—if customers were given a comparative head start in reaching their “payoff milestones.”
In their first study, the researchers gave 300 loyalty cards to customers at a local car wash. All of the customers were told that each time they returned to have their car washed they would be given a stamp on their card. A clear incentive was laid out for those that got their car washed regularly; upon the completion of their card, they would receive a free car wash.
In truth, two different types of cards were handed out to customers.
The first group received a loyalty card that had eight slots to be stamped before a free car wash was awarded.
The second group received a loyalty card that had 10 slots to be stamped, but this time two of the stamps were already filled out, meaning customers only needed eight more purchases to get their free car wash.
Given such a similar setup, one might expect very similar results. But that definitely wasn’t the case: The second group had a nearly double rate of loyalty card completion.
Only 19 percent of customers in the eight-stamp group (the first group) made enough visits to complete their card. However, 34 percent of the 10-stamp group (the ones given a head start) came back enough times to finish their loyalty cards.
At first glance, the results don’t seem logical. Since the first group had eight stamps to complete and the second group had 10 stamps to complete (but with a two-stamp head start), both groups needed eight purchases before they could get a free car wash.
So why weren’t the results the same?
According to Nunes and Drèze, the head-start loyalty card helped customers mentally reframe the completion process; the fact that they didn’t have to begin something from scratch played a huge role in their motivation to complete the card.
The researchers highlighted other studies in their paper that reinforce their finding that the closer people get to completing a goal, the more effort they exert toward achieving that goal.
This research is useful information to know, but how can we go about putting it into practice?
The creation of a successful loyalty program boils down to three important steps:
Let’s take a closer look at how to complete these steps.
To take advantage of artificial advancement, there must be a clear-cut goal that customers can look forward to and it has to align with a desire of theirs.
Without a finish line (or multiple finish lines) for customers to cross, they will lose interest. For example, the car wash study had a free car wash as the end goal for program users, and this reward was clearly a desire of their customer base.
Remember that loyalty rewards can come in all shapes and sizes; many subscription services offer customers price discounts or an upgraded account (such as additional storage or more features) as the end goal.
Utilizing your own product as a reward for achieving the stated goal is almost always the right path here. It allows you to avoid losing your shirt from too many expenses. Also, presenting your product as a reward is the perfect way to create enticement, the same way a free car wash (in that example, the product) serves as the reward above.
You should know from our article on gamification that we feel this is the step many companies have the potential to get very wrong.
You have to be careful about choosing which behavior you want to reward.
Purchasing more items makes perfect sense for progression and applies widely to many industries, but when some online companies try to force product use as the action they end up creating misaligned motivations with their customers.
To continue with our car wash example, the action customers are taking to pursue the reward is simply the purchase of an individual car wash. If your product is subscription-based, you can get more creative and have a new customer referral be the end goal (such as how Dropbox rewards their users through their refer a friend program).
This type of goal doesn’t hinder their usage of the product and encourages them to promote it to friends to be rewarded—a win-win for both the customer and the business.
Drèze and Nunes found that artificial advancement only had a noticeable effect when there was a clear reason why people were receiving advancement at all. In other words, artificial advancement won’t work as a tactic if you just hand out points for no reason.
But the reason can be quite simple. For example, you could position advancement as a reward for new signups. This works for every customer loyalty program, regardless of the industry. So when new users sign up, a simple message explaining that you’re giving them some bonus points to help get them started is all you need to justify the process.
No matter what you choose to do for advancement, make sure the reason for the bonus is well-defined. People won’t be swayed by artificial advancement if they don’t know why they’ve received the extra boost in the first place.
Nunes has done other interesting studies on customer loyalty. In fact, he discovered that in many instances the reward could be worth nothing and still create the same effect.
According to Nunes, consumers get excited about amassing points—even if the points have no currency value. To reinforce his findings, Nunes looks to points systems on sites like Yahoo Answers and Reddit:
“You can’t exchange these points for real-world goods and services, yet people still spend enormous amounts of time accumulating them just to beat others in a list of top point-getters, or simply to compete with themselves.”
In other words, it’s the competition and the feeling of superiority that is driving the success of many loyalty programs, especially when they aren’t offering a tangible reward.
While this method may work for a social site like Reddit (where the use of the site is the reward, because it’s entertaining), how does this apply to small businesses?
Nunes says that loyalty programs “need to be designed to offer differentiated products and services to customers based on their purchasing patterns and profitability.”
This means most loyalty programs benefit from having different classes.
You’ve likely seen these tiers before: “Gold” members get better deals than the “Silver” class. We are wired to want to maintain our status when we know that we are beating other users. The data from Nunes’ study shows that these premium classes can and do encourage people to spend more.
So if you do decide to implement a multi-class customer loyalty program, be sure to consider your “Platinum” users and how you might differentiate the program to incentivize their spending habits with your business.
Do you know what keeps your customers up at night?
While this is a tough question to answer, knowing your customers as well as they know themselves can put you on the fast track for building a product (and a business) that will keep people coming back time and time again.
Though the debate on the interplay between internal innovation and customer feedback is hotly contested in the business world, no one denies the usefulness of candid, insightful customer feedback.
But how can you get the inside scoop on the minds of your customers?
One-on-one chats with customers are incredibly useful, but they can challenge the limited resources of a small team. In this chapter we’ll cover two tactics that can scale with any business: the use of email feedback and the art of creating valuable customer surveys.
A 2012 study by Ipsos showed that when it comes to online communications, more people prefer email than all of the other social networking sites combined. If your business doesn’t have a smart system set up for organizing and responding to email feedback, you’ll end up outpaced by your competitors.
Here at Help Scout we’ve developed a simple, three-step strategy for keeping track of customer feedback quickly and accurately; this went a long way toward helping us improve our overall email response rates by 340 percent.
Below is a brief overview of how we use Help Scout in conjunction with a few other tools and strategies to handle email support in an efficient, personable manner.
Sorry to say, but if you’re going to handle email support like a pro, you’ll have to say goodbye to Gmail. Whether you use Help Scout or other help desk software, paying a little bit goes a long way. Having a single place for teams to access service request tickets and respond (without duplicates or lost conversations) is a must when doing email support.
Another tip is to set up a group chat program such as Campfire or HipChat that let you receive instant notifications on incoming emails. Help Scout integrates with Campfire, HipChat and a number of other support software options.
This one small move—working smarter to better understand when support questions were coming in—allowed us to subtly adjust our workflow and improve our email response time to customers by more than 340 percent.
|September 1 - October 13:||October 13 - October 26:|
|Average Response Time (hrs)22.5||Average Response Time (hrs)7.5 ↑340%|
|answered within 1 hour38%||answered within 1 hour62% ↑63%|
|answered within 6 hours67%||answered within 6 hours78% ↑16%|
That was the easy part. Next, let’s look into how you can organize all of this information from customers.
Help Scout use a simple workflow system called Trello to manage feature requests and other feedback suggestions.
Trello allows you to create “boards” (lists) and “cards” (elements of the list) to keep tabs on any project you’re working on. For us, it serves as a collaborative way to keep product ideas, features and other feedback organized for easy reference.
Here's a peek at a simple board setup you can use
Dividing feature requests into boards like “Next Up,” “Roadmap,” and “Ideas” keeps things easily searchable for the entire team. The end result: You’ll rarely have to ask, “Are we working on this?”
Through this system, when a feature request comes in from a customer your staff can look to the board to see if it has already been asked about and whether it’s being worked on or just isn’t a fit.
Boards allow the support team to cleanly divvy up requests by category (essentially serving as file folders). But the boards are useless unless you fill them with detailed cards.
On Trello, you can create a list of cards within a board. This allows your team to divide a board labeled as “Product: next Up” into further browsable topics such as Queue/In Progress.
This system lets you easily organize a card around a feature that multiple customers have requested. In fact, when a feature request and corresponding card is in place, we add email addresses for the customers who requested the feature so that they can be the first to know when it’s launched:
You’ll also notice that each card comes with a “Specs” section that states exactly what the feature request is and how it will be implemented. (note: This is a must if you have team members who are inexperienced with product development.)
Sometimes individual feedback is too limited in scope. If that’s the case, the go-to solution for gathering a large number of responses is to create a customer survey.
It’s easy to see why surveys are useful—you can gather a ton of data from a diverse set of customers, and they scale beautifully.
But surveys have a shortcoming: If they aren’t created correctly they can backfire, causing participants to lie or accidentally give inaccurate answers.
According to a joint study between the Gallup Group and SurveyMonkey, there are a number of proven ways you can better your surveys and elicit the kind of responses you need to provide real insights on your customers.
Applying this spin to the traditional KISS principle is incredibly important for assembling a successful survey.
Your biggest concern with surveys should be with brevity, or finding the shortest way to ask a question without losing its intent.
In the same vein, overall survey length is important for keeping abandon rates low. Think about the last time you sat around and completed a 30-minute survey; it's probably never happened.
You need to be ruthless when it comes to cutting unnecessary questions from your surveys.
Every question that you include should have a well-defined purpose for being included. Otherwise, it should be put on the chopping block.
Sometimes, depending on the survey’s purpose, it won’t matter how a customer first came in contact with your site. If that’s the case, then don’t ask. Do you need to know a customer’s name? If not, again, don’t ask.
Although it’s tempting to stick with multiple-choice queries and scales, some of your most insightful feedback will come from open-ended questions that allow customers to spill their real thoughts.
But nothing makes a survey more intimidating than a huge text box connected to the very first question. It’s best to start with brief questions that let respondents create a sense of progress and then give those who make it to the closing questions the opportunity to elaborate on their thoughts.
We’ve all been hit with a series of questions before: “How did you land on our site? Did you understand what our product did as soon as you hit the page? Why or why not?”
If you want quality responses, you need to give people time to think through each individual question.
Bombarding them with multiple points to consider at once leads to half- hearted answers by respondents just looking to get through to the end (if they even stay with the survey at all).
Make things easy by sticking to one main point at a time.
Changing contexts can cause common scales used for surveys to become cumbersome and confusing.
Here’s an example we ran into recently. While answering a survey’s initial questions, we were told to respond by choosing between 1-5, with 1 = “Strongly Disagree” and 5 = “Strongly Agree.”
Later on in the survey, however, we were asked to evaluate the importance of certain items. The problem: now 1 was assigned as “Most Important” ... but we had been using 5 as the agreeable answer to every previous question.
This switch was incredibly confusing. Although we realized what was going on, one can’t help but wonder how many people missed this change and gave inaccurate responses.
Questions that use bias in their phrasing to steer respondents toward a certain answer are not useful for your surveys.
Consider this language:
We have recently upgraded SurveyMonkey’s features to become a first-class tool. What are your thoughts on the new site?
This is a clear example of letting your pride in your product get in the way of asking a usable question. Instead, the more neutral, “What do you think of the recent SurveyMonkey upgrades?” should have been used.
When you are asking a question that has a simple outcome, try to frame the question as a Yes/No option.
The SurveyMonkey study showed that these closed-ended questions make for great starter questions because they are typically easier to quickly evaluate and complete.
These questions can also be used to avoid ego-bias, which is the act of responding to a question to make yourself look good. Instead of asking a question like, “Are you considered an expert in _____?” (many people will want to say yes), instead ask “What level of expertise do you have in _____?”
When you create questions that assume a customer is knowledgeable about certain information, you’re likely to run into problems (unless you are surveying a very targeted subset of customers).
This directive references the language and terminology you use in questions, which is why we’d recommend staying away from industry acronyms like PPC or SaaS; if you don’t know what those are, then we just made our point.
Also, don’t assume that customers will respond with specific examples or reasoning. It’s better to outright ask them to be specific, letting them know you welcome this sort of feedback.
For example: “What do you think about ____? Feel free to get specific, we love detailed feedback.”
Interestingly, the study found that the highest survey open and click-through rates occurred on Monday, Friday and Sunday, respectively.
There was no discernible difference between the response quality gathered on weekdays versus weekends, either, so your best bet is to seek out respondents first thing during a new week or to wait for the weekend.
Perhaps Monday has such high response rates because nobody feels like working.
Offer enticements for customers to take your survey.
A variety of data show that incentives can increase survey response rates by 5 to 20 percent. These incentives could be a discount, a giveaway or an account credit.
A valid fear is that a freebie may detract from the quality of responses, but a few studies show that this isn’t likely to be the case.
Last but not least, to ensure that your giveaways don’t make you lose your shirt, make incentives something you can financially handle, such as the free use of your software for a period of time.
It’s important to keep in mind that not all customer suggestions need to be implemented or acted upon.
As our friends at Intercom put it:
“You wouldn’t propose to someone just because they said they’d date you. So don’t build features just because people said they’d use them.”
Customers don’t always know exactly what they want out of a product, so many requested features are spur-of-the moment ideas rather than pathways to true improvements that will solve major pain points for a majority of your users.
The deck often seems insurmountably stacked against smaller companies, doesn’t it?
It’s hard to go toe-to-toe with the big guys on anything, especially marketing and customer acquisition. While you may not be able to out-spend your competitors, great support is the one competitive advantage that most enterprise companies just can’t copy.
Paul Graham states that small business should do things that don’t scale, particularly when it comes to taking care of customers:
“Your first users should feel that signing up with you was one of the best choices they ever made. And you in turn should be racking your brains to think of new ways to delight them.”
That’s one advantage of being small: you can provide a level of service no big company can.
Why would an investor encourage small tech companies to be so concerned with service?
Paul recognizes that when it comes to competing with big incumbents, you can’t win by playing their game, as they’ll out-spend you every time. You have to find a game that they simply cannot play.
While a few large companies (Amazon, Nordstrom) continually serve as the exception to the rule when it comes to quality service, consumers have shown time and time again that they are very much willing to spend more with a company that provides outstanding service.
This presents an opportunity for your business to view customer service as an ‘offense’, rather than seeing it as just another expense on a spreadsheet.
Graham also realizes that this generation of highly informed customers are no longer ‘boxed in’ to choosing a business because it’s their only option. Thanks to tools like the web, it’s now easier than ever to find practically unlimited alternative options to what you sell.
And when the competition is a click away, what are your competitive advantages to keep people coming back?
This is why scale, user acquisition, and marketing can’t be the only basket in which you keep all your eggs. Marketing may get your name out there, but will people stick around? Will passerby customers turn into loyal, long term advocates?
You’ve seen the data that shows this matters if you want your business to be more than just another statistic, now you need to take what you’ve learned here and use it to create a customer experience that not only delights customers, but also gets them talking about you.
There’s never been a better example in business of a win-win situation. When you take care of customers, they will in turn allow your business to thrive.
As our friend Marie Forleo would say:
“Caring is the most powerful marketing strategy there is.”
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