This blog post corresponds to the following episode of The WealthBuilders Podcast: How to Build Customer Loyalty: 4 Key Tips

Every business owner wants a loyal customer base. Retaining business is just as important as new business, and consumers tend to purchase from companies that have earned their loyalty. However, knowing how to build customer loyalty takes strategy.

In an article in The Harvard Business Review, Frederick Reichheld writes, “Building a highly loyal customer base cannot be done as an add-on. It must be integral to a company’s basic business strategy.”

You earn customer loyalty by consistently providing superior value. If you want to learn how to build customer loyalty into your business, there are four key areas to pay attention to:


1. Customers

Everyone is not your customer. Business owners need to hone their focus and target the right customers What generates loyalty in one person may not generate loyalty in the next. As the saying goes, you can’t be everything to everybody. Your ideal customers are the ones you are most equipped to serve. They are also called your customer segments, or your target audience.

Once you determine who you are delivering your products and services to, you can create a value proposition. Your value proposition describes the value your business will offer to a specific customer segment. Having a clear idea of who your customers are will help you market effectively.

The mistake that most people make when choosing a customer segment is that they take too broad of an approach. For instance, if they are Christian business owners, they might deem every Christian as their audience. A local company that sells hiking gear might claim the entire state of Colorado as their customer segment. The secret sauce is to find a customer segment that is niche, yet broad enough to be relevant.

Case Study: USAA does a great job of focusing on a niche, yet popular, customer segment. Their target audience includes military members and military families who are searching for financial services and insurance.


2. Product and Service Offerings

If you want to grow your business, at some point you’ll have to extend your list of product and service offerings. This involves analyzing new potential customer bases or looking at what you need to do to keep and meet the needs of an existing customer base.

Case Study: A few years ago, Entenmann’s Bakery noticed that they were losing sales. So, they did some research to figure out why. They came to find that their target audience and loyal customer base were in the older age range. As they got older, they had to reduce the sugar and fat in their diet. So, they couldn’t enjoy as many Entenmann’s products anymore! Now, Entenmann’s could have let their older customer base fall away and sought to target the younger generation. However, they decided to create a new product that met their existing customer bases’ needs… new products that contained lower cholesterol and fat.


3. Employees

Customer loyalty is related to employee loyalty. When you have long-term employees, they are more likely to connect with customers and generate relationships that have longevity. Other than product quality, relationships are one of the key factors to customer loyalty. And let’s face it–customer relationships aren’t usually with executives. Customers are loyal to employees. See the value in your existing employees and honor them accordingly.

Case Study: Olive Garden created a program to reward long-term employees. They realized that the longer they retained their wait staff, cooks, etc., the higher level of service their employees provided. The corporate team at Olive Garden recognized that customers would come in partially because they liked a certain waiter or waitress. The familiarity enhanced their customers’ dining experience, so they took measures to expand that company culture.


4. Measurement Systems

You can’t manage what you don’t measure. Keeping track of key performance indicators, such as your revenue streams and website traffic, will help you measure the growth that matters to you the most. You have to understand which customers bring you a profit, which ones do not, and why. Then, you can incentivize and reward customer loyalty with exclusive perks and benefits.

Case Study: Through the data they gathered, State Farm Insurance recognized the value in creating family-oriented services. They noticed that they had built brand loyalty within families, as children were prone to stick with the same insurance carriers as their parents. So, State Farm now provides multiple products and services within a family. The more products that a family buys, the better rates they receive. In addition, State Farm rewards high schoolers who get good grades with lower insurance premiums.

So, what is at the center of how to build customer loyalty? Creating customer value.Don’t put the cart before the horse. Maximizing profits and shareholder value shouldn’t be your priority if you want to learn how to build customer loyalty. Rather, creating customer value should be the center of your business strategy. When you put customers first, profits will follow.


6 Bible Verses about Loyalty


Ruth 1:16

But Ruth said, “Do not urge me to leave you or to return from following you. For where you go I will go, and where you lodge I will lodge. Your people shall be my people, and your God my God.”


Proverbs 3:3

“Let not steadfast love and faithfulness forsake you;

bind them around your neck;

write them on the tablet of your heart.”


Proverbs 20:6

“Many will say they are loyal friends, but who can find one who is truly reliable?”


Hosea 6:6

“For I desire steadfast love and not sacrifice,

the knowledge of God rather than burnt offerings.”


John 13:34-35

“A new commandment I give to you, that you love one another: just as I have loved you, you also are to love one another. By this all people will know that you are my disciples, if you have love for one another.”


Hebrews 13:5

“Keep your lives free from the love of money and be content with what you have, because God has said, “Never will I leave you; never will I forsake you.”