How many of your customers are loyal customers? More importantly do you know why they are loyal customers?

Customer loyalty has been a buzz term in marketing for some time and with good reason. Estimates suggest it can cost 5 times as much to get a new customer as it does to keep an existing one.

Think about your business as having a bucket of customers. The customers you lose leak out a hole in the bottom of the bucket. Understanding how big the hole is for your business is the crucial first step to improving your customer loyalty. The second step is understanding why some customers stay and why others leave. Here's a simple way to measure the size of the hole in your bucket.

Take the number of customers who bought from you last year. Then take the number that bought from you this year. The difference between the two figures is your net gain/loss of customers. So if last year the number was 5,000 and this year it's 4,600 your net loss is 400 customers. If you know the value of a customer each year then you can work out what the lost revenue is. Coming back to the customer bucket the hole is big enough to leak 400 customers a year. So why are they leaving?

Common reasons customers leave include:

- bad service
- perceived indifference
- better offer elsewhere
- no longer need your product or service

Some reasons you can do something about, some you can't. When you know a customer is leaving or they haven't bought from you for a while see if you can find out why by asking them. Try an open ended question like 'thanks for being our customer, so we can continue to improve our service can I ask why you are leaving'. Not everyone will respond and that's OK. But those that do may give you valuable insights into things you can improve about your business. Take action on what you find.

You should also be asking your loyal customers why they stay with you. You might be surprised by the answers you get. Often people stay for simple reasons. I get coffee from some places because the staff are friendly even though there is better coffee elsewhere. The friendly service makes the coffee taste better than it actually is. Have you had an experience like this?

So make it your mission to find out why customers stay with you or leave you. When you see patterns that make people stay keep doing it. when you see common reasons people leave fix them. Good luck.

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