Loyalty Creates Money

Customer loyalty creates money. We usually think of business endeavors in the same way we think of an athletic event: One team wins and the other team loses. One team gets the trophy or the prize and the losing team gets nothing.

In commerce we think of one business as getting the sale or the contract and the losing business as getting nothing. If one wins, then the other one must lose. This is not true when you consider customer loyalty. In the game of customer loyalty, when one business gains a loyal customer it is at no expense to the other company. Remember, the only time you can make a profit is when the customer returns to buy from you a second, third, or fourth time. If a customer is always buying from different businesses, there is no loyalty. No one is benefiting from repeat buying by making a profit from the customer. The customer is forever a new customer as he changes from one business to another. The customer doesn't even win, because he is not getting enough satisfaction out of any transaction or relationship to come back to buy from that business again.

However, when a company learns to give a customer what he wants, the customer becomes loyal. He buys on a repeat basis and creates profit where no profit existed before. This profit is not at the expense of the competition; it comes from the savings and other benefits derived from selling to a loyal customer—everyone wins. The competition is no longer losing money on the unfaithful customer. The business that has the customer's loyalty is now making a profit, which did not exist before. The customer is pleased enough with the transaction, relationship, products, or services to become a loyal customer. And that loyalty creates money.

The five principles that create customer loyalty are:

1. People do business with people.

2. Differentiation.

3. Value and assurance.

4. Effective communication.

5. Focus.

We will examine each of these five principles separately in the following chapters. You will learn that each of these principles can immediately affect your business; however, the most dramatic impact will come when you use all the principles together.

The five principles that create customer loyalty are supported by interpersonal skills. I don't want to spoil all the surprises that lie ahead for you in Chapter 3, but "people do business with people" is a selfdescriptive phrase. People doing business with people is an interpersonal transaction. You will not have to become a psychologist to master this principle; however, you will benefit from remembering how this principle can be used to increase loyalty in your clientele. Each of the principles offers the opportunity to increase loyalty. A novice or the most experienced business leader can master each of the principles: No one is exempt from the benefits of creating loyalty and no one is exempt from the mastery of these principles. It is the choice of every business whether or not to create customer loyalty.