How You Can Cultivate the One Thing Customers Truly Want
Loyalty is a tricky thing -- not to mention expensive when you’re trying to create it from scratch.
Everyone’s heard the oft-cited statistic that it costs five to seven times as much to bring in a new customer as retain a current one. And that may be a modest estimate: The Harvard Business Review found across a range of studies that the cost of acquiring a new customer can be as much as 25 times more costly than keeping an existing one.
Marketing Metrics, meanwhile, determined that companies have up to a 70 percent chance of making a sale to a current customer, but -- at best -- a 20 percent chance of selling to a prospect.
What's more, the financial effect of loyalty can be seen beyond sales. In Leading on the Edge of Chaos, Emmett Murphy and Mark Murphy noted that a 2 percent boost in customer retention has the same impact on a company as a 10 percent reduction in costs. The implication, then, is that keeping customers around is crucial, yet many companies seem to be failing to do so -- despite putting extra money and energy into developing better products and services.
Why this disconnect? It turns out that products and services may matter a lot less to customers than community, and that’s something most companies neglect to build.
Communities create ownership and belonging.
Community, examined from the strictest business perspective, enables companies to create branding opportunities that bring consumers into the fold. For consumers, communities provide outlets to get information, learn from others’ experiences and gain a sense of belonging. Customers who don’t feel a sense of ownership or camaraderie with a brand or its fans have no true investment in the brand’s success and are more likely to take their business elsewhere.
Brands’ experiences with corporate social responsibility programs have borne this out. Many companies with corporate social responsibility (CSR) initiatives have launched communities alongside them, engaging those who hold the same values. Indeed, a study published in Procedia looked at companies' CSR efforts and their communities, finding that those communities increased customer satisfaction and enhanced customer-company identification.
Customers felt that their ideals and the company’s were closely aligned.
Harvard Law School research determined that these initiatives delivered multifaceted value to customers, particularly when viewed through the lens of experience. These communities enabled interactions between a brand and its consumers, creating something new that hadn't existed previously and spurring benefits in terms of joy, pride and ethical and spiritual lifts.
Forrester has found that when customers feel “valued,” the majority are willing to not only maintain their existing relationship with a brand, but also become advocates for it.
While the success of CSR initiatives is evident, businesses can build communities around any facet of their operations. Here are a few ways your company can focus in on your target audiences to spark engagement and long-term loyalty.
1. Create online forums.
Online forums provide a convenient way for consumers to interact with your brand and its fans from anywhere at any time, making them a smart bet for continued engagement. Another benefit to online forums is that a conversation can be started either by your brand or by consumers, allowing topics to surface that accommodate the community's needs.
MDR, the education division of Dun & Bradstreet, created WeAreTeachers.com, an online forum that caters to a specific core audience: educators. The forum is positioned to serve as both a useful community resource for educators and a place they can seek humor, understanding and connection beyond their own school districts.
The forum also enables stakeholders from different industries to take part in the conversation surrounding education. In the business realm, American Express’s OPEN Forum provides small businesses with advice and insights gleaned from others’ experiences, as well as member-exclusive resources to help them scale.
2. Host events.
While online forums tackle the educational aspect of community, events address the fun-loving side. They create a temporary experience that communicates a brand’s values, tone and passion to engage consumers and leave them with a story of their own. Events are also short-term opportunities to foster long-term engagement, simply through a heightened interaction that pulls on all five senses.
Anthropologie, for instance, hosted Locally Yours Pop-Up Markets, city-specific markets that operated for one day to re-create the farmers market experience while introducing the retailer's customers to local products and vendors. These events helped Anthropologie connect with customers beyond its stores; they also helped the company connect with new local brands it might enter into subsequent partnerships with.
BarkShop created a similar event, BarkShop Live, with a twist: Its specially designed retail experience allowed dogs to do the shopping. Technology at the event tracked dogs’ behaviors, enabling consumers to figure out what their dogs would play with before they paid for that item -- and giving the brand more data to work with.
3. Unite customers around shared values.
A company’s core values are important to consumers, and underscoring them can push advocates to espouse them, creating synchronicity between a brand and its fans, and drawing more in. Edelman found that nearly 60 percent of consumers it surveyed buy based on their beliefs, meaning that loyalty and community can easily be founded on the very thing that makes consumers pull out their wallets.
TOMS’ One for One business model (sell a pair of shoes; donate a pair of shoes) attracts consumers who want to get high-quality shoes while ensuring others don’t go without.
The effort drew so much interest from consumers -- fueling 35 million pairs of donated shoes -- that TOMS expanded its efforts to also provide eyeglasses, clean water and safe birthing services to those in need.
Patagonia expressed its own values by resisting President Donald Trump’s order to reduce the acreage of national monuments in Utah, issuing public statements and replacing its usual homepage with a headline declaring, “The president stole your land.” The brand offered resources to help people protest and ultimately sued the President itself. While these moves likely alienated some, they almost certainly drew in those who shared the brand’s views.
While innovative products and excellent customer service will keep customers coming back, their relationship with the brand will remain on a transactional level. Establishing a community in addition will help build ownership among consumers, creating deep roots that will make it hard for them to go anywhere else.