Chapter 1: Why Customer Loyalty?

American business can be fickle. People change their preferences. People change their minds. Technology, the Internet, and overnight delivery to anywhere in the country has changed the rules of competition. Mom-and-pop corner stores must now compete with businesses a thousand miles away.

Getting customers to come back again and again is the most important endeavor of every business. No business can be successful by continually dealing with new customers. Repeat customers are the source of all profit, and profit allows a business to grow and prosper.

Chuck E. Cheese's Learns the Value of Repeat Customers

In 1977, Nolan Bushnell, the inventor and founder of the Atari video game company sold his company for a fortune. Bushnell opened a new business called Chuck E. Cheese's. The restaurants are indoor mini-amusement parks that sell pizza. Located in shopping malls, they are equipped with video and other games. Do you remember that at one time, these restaurants were part of a national chain and Bushnell was the franchiser? The restaurant's target audience was birthday parties and other special events. Every kid that lived near a Chuck E. Cheese's wanted to have his or her birthday party there: Kids loved the restaurants. Parents hosted their kid's birthday parties at these restaurants, but the parents hated it.

Back when the franchises were becoming increasingly popular, the pizzas were terrible and the service was worse. Bushnell admitted that the pizzas they were serving were mediocre at best, but he had no plans for improving them. He said it didn't matter because he didn't care if anyone ever came back to his restaurants. He thought he could base the success of his restaurant on an endless stream of onetime customers. His plan was flawed because word of poor service and terrible pizza traveled quickly. Despite the pleas from their children parents refused to be subjected to Chuck E. Cheese's.

Instead of an endless stream of new customers, every customer that visited Chuck E. Cheese's told others about their terrible experience. Bushnell's dream collapsed shortly after it began: Negative wordof-mouth advertising ended his ability to franchise these restaurants.

Every business depends on loyal customers coming back again and again. Some of Chuck E. Cheese's franchisees continued their operations, independent of Bushnell, with a philosophy of building a repeat customer trade. Many of these businesses have prospered by depending on loyal customers. Businesses cannot prosper or even exist without repeat customers. The Chuck E. Cheese's establishments that adapted and made a commitment to repeat business are thriving today. Today, kids love having their birthday party at a Chuck E. Cheese's and their parents love it, too.

The value of customer loyalty is not situational or temporary. Loyal customers are always valuable. Customer loyalty is never the problem; it is always the solution. Customer loyalty levels the playing field; it is the ultimate competitive advantage.

Customer loyalty is an activity; it is not an emotion or an opinion. When customers buy from you again and again and tell the world why everyone else should buy from you, they are demonstrating loyalty. Customer loyalty is the specific activity of buying from you or recommending you to others on a repeat basis.