The Customer Loyalty Loop

An Introduction

“So, you wanna start a business. How do you start? What do you need? Well, first of all, you need a building. And secondly, you need supply. You need something to sell. Now this could be anything. It could be... a... thingamajig. Or a.... whosi-whatsi. Or... [pulls out a candy bar] a Whatchamacallit [throws bar]. Now, you need to sell those in order to have a PayDay [takes out a PayDay, throws it]. And, if you sell enough of them, you will make a 100 Grand [throws 100 Grand bar]. [pulls out a Snickers] Satisfied?”

Michael Scott, Regional Manager
Scranton Branch, Dunder Mifflin Paper Co. 1

What makes a successful business? What do you need? Unlike the views expressed by business ‘savant’ character Michael Scott from ‘The Office’, there are a couple fundamental things each business needs to do to stay in business and be successful. These may not be the thoughts that are on the top of your mind, but chances are if you’re the owner, entrepreneur, or management team of your business you inherently know them, and are instinctively driven by them.

To be successful in business we need to create outstanding customer experiences and outcomes by solving real customer problems and creating delighted customers. When you continually deliver on these fundamental concepts, just about everything else in business - from profits, to growth, to brand reputation - is downstream. And it doesn’t matter what type of business you own or operate. If your business does not continually deliver great customer experiences, you’re not likely to be in business for very long. For those of us that do focus on delivering great customer experiences, we’re typically rewarded with repeat customers, growing numbers of customers, and loyal customers who behave as ambassadors of our brand, promoting our business to others. These businesses enter and stay in the so-called ‘customer loyalty loop’.

Photo by Anna Dziubinska on Unsplash

Delivering great customer experiences positions your business to develop loyal customers. But why are loyal customers important? Loyal customers tend to be the most profitable customers, requiring less effort and expense to support. Loyal customers tend to buy more from you, and as an existing customer each incremental sale requires little to no extra expense (again contributing to increased profit). And lastly, yet arguably most importantly, loyal customers can be your best (and lowest cost) way to promote your business and brand to others. Research conducted by the father of Net Promoter Score, Frederick Reichheld of Bain & Company, shows an increase in customer retention rates of just 5% can increase profits by more than 25%2! Keeping customers in this loyalty loop pays dividends. So how is this done?

Creating great customer outcomes and delivering great experiences are business skills and processes that can be easily formed by any business. Regardless of whether your business is large, small, established, a startup, service-oriented, product-oriented, traditional ‘brick & mortar’, or 100% online, this paper aims to educate you as to the methods by which you can employ processes to deliver outstanding customer experiences and build your own customer loyalty loop.

Although Michael Scott missed the importance of creating great customer experiences in his business discussion during the hysterical episode “Business School” from the The Office, if you employ the practices discussed in this paper and help your customers enter and stay in your customer loyalty loop, you too will enjoy a “PayDay”.

1 “Business School.” The Office. 5 February 2007. Season 3, Episode 16. Television.

2 Reichheld, Fred. “Prescription for cutting costs.” Bain & Company Inc.

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