Don't Mistake a Frequent Customer With a Loyal Customer A customer who has made a genuine connection with your business won't dump you when they find somebody slightly cheaper.
By William Bauer Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
I have just two kinds of friends.
The first, I refer to them as my "common denominators". For example, we would spend time together during calculus class sending silly iMessages back and forth to unhinge the boredom and subsequently studying together with the hopes of garnering A's. Or, we would live together because it was the economically prudent choice in order to have a residence near campus. In these two of seemingly an infinite number of examples of "friends" I have, there is a unifying theme: the existence of a mutually beneficial solution bridging us together. Once the problematic variable is taken out of the equation or comes to its inevitably, finite closure – whether it's the semester over or a study abroad opportunity arises – the friendship ephemerally fades in consequence.
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That friendship concept is juxtaposed against the Nicolette's, Adeline's, Colin's, Danyal's, Haider's, and Radu's of my world, friends who share an emotional connection with me that vastly supersedes the limited utility attained from mutual convenience and merely being stuck together in the same place at the same time. For example, John took me to the hospital late at night, despite having an important linguistics exam the next morning. Or Roshni bailed me out of the police station when I inadvertently drove with a suspended license, despite her having to trek halfway across the city. Even when there was a lack of mutual convenience or advancement, I have never questioned the faithfulness of these aforementioned friends.
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It is this dichotomy that parallels the distinction between customer retention and loyalty.
A customer who recurrently patronizes your business is not necessarily loyal. Instead, loyalty only manifests itself when a customer sustains an emotional connection with your business, thereby remaining allegiant to you in the face of pragmatism, such as the switching costs becoming negated.
Small businesses like mine cannot afford to simply retain customers. This was my father's Achilles heel. He had department store customers who bought from him for myriad reasons, none of which were a result of loyalty. At the time, he was the only leather monogramming service in Manhattan, providing a high level of convenience for a luxury audience that valued convenience. However, my father mistook their continued patronage for loyalty, not realizing its temporary status. Once competing manufacturing firms could meet the department stores' same needs and conceded slightly on price, those customers moved on and my father lost his market share precipitously.
Admittedly, it is easy for me to put his naïveté under the microscope in hindsight, but it is a valuable lesson nonetheless.
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At ROYCE, we do not compete on price, convenience or any of the other variables that compel customers to switch amongst leather brands. I have already surrendered to that losing battle and have relegated such methods of business to my father's era. Instead, we empower our customer care team with the money and solutions to forge emotional connections with our customers and secure a loyal friendship. Examples include sending a surprise care package to a customer going to Manila to take care of his family after their home was ravaged by a typhoon, personally driving monogrammed gifts to a company retirement party after a retailer mismanaged the order, and spending two hours on the phone with a recently widowed woman who honestly just wanted someone to talk to.
The moment we stopped measuring customer interaction in terms of profitability in favor of establishing emotional connections with no tangible net present value, that is when I began to have faith in the long-term sustainability of our company.
