Building Customer Loyalty on a Small Budget
Small business owners know that their primary advantage against the big guys is the personalized service that they can offer their smaller customer base.
But the service downfall of many small businesses is that they become afraid that they won’t be able to offer amazing service on a limited budget. Or, on the other end of the spectrum, they get in over their heads and build a business that customers love but is drowning in expenses.
How can you address these concerns? Look to the science that reveals the kinds of things that make people really happy when dealing with businesses.
Research shows that when it comes to great service, it really is the thought that counts. In fact, psychologist Norbert Schwarz showed us that as little as 10 cents could change someone’s mood and make them have more favorable opinions of another person or brand.
These findings are supported by Help Scout’s concept of “frugal wows”— dazzling your customers with an incredible experience that is focused on your intentions and actions, not on how much you spend.
How Can Frugal WOWs Earn New Customers?
There are plenty of brands going above and beyond to do nice things for prospective customers, but few stories resonate like the tale of Sweetgreen’s fantastic way of brightening people’s day:
“To keep their brand aligned, Sweetgreen likes to hire people who don’t necessarily have experience but are super passionate. One of those employees came up with what the company calls ‘Random Acts of Sweetness.’”
At first glance this advice may seem foolish, but you’ll soon see that it’s backed by proven psychological research as well as one of the most memorable case studies of all time.
Sweetgreen’s street team randomly hands out gift cards to recognize other people doing good in the community.
When it rains, they’ll put a shower cap over bike seats with a gift certificate tucked underneath. They’ve even been known to slip gift cards on car windshields alongside a city-issued ticket to offset the downer of returning to find a parking violation.
These random acts of kindness may seem like a shot in the dark, but the sheer goodness demonstrated by this business practice triggers a psychological effect in customers, creating feelings of reciprocity for their future dealings with the business.
Still not convinced? Sweetgreen’s methods have fostered sales numbers that tell a prosperous tale of the return on their do-good investments:
Business has grown 300 percent year-over-year since the inception with revenues now reaching $10 to $15 million.”
It’s hard not to love the example of Sweetgreen and just how “sweet” they are in courting new customers.
- The takeaway
- From customer retention to new customer acquisition, the thing that you must NOT mess up when doling out frugal wows is the importance of personalization!
The Psychology of Personalization
When it comes to effective customer service, small changes can have a big impact.
Making your customer feel like they’ve made the right choice—both immediately before and after their purchase—goes a long way toward developing your relationship with them.
In this regard, there’s a lot to learn from waiters, a service position that interacts directly with customers. Research has found that their post- purchase follow-up actions can greatly affect customers’ perceptions of their service, and, accordingly, the tips they are left.
The Power of … Mints?
Of all the things that waiters could do to increase tips, how much importance would you place on the token gesture of giving out mints?
As it turns out, the process whereby mints are given to customers has the potential to increase the tip amount by up to 23 percent!
In a study published in the Journal of Applied Social Psychology, researchers tested the effects that mints had against a control group (where no mints were given) in order to measure their effectiveness in increasing tips.
The results were quite surprising:
- The first group studied had waiters giving mints along with the check, but making no mention of the mints themselves. This increased tips by around 3 percent against the control group.
- The second group had waiters bring out two mints per person by hand (separate from the check), and then mention to the table, “Would anyone like some mints before they leave?” This saw tips increase by about 14 percent against the control group.
- The last group had waiters bring out the check along with a few initial mints. A short time later, the waiter came back with another set of mints, letting customers know that they had brought out more mints, just in case they wanted extras. In this third test, waiters saw a 23 percent increase in tips versus the control group.
At first glance, the last two groups seem very similar: Two mints per person were brought out, and in each instance the waiter made mention of the mints.
So what accounted for a 9 percent difference in tips?
Personalization is Powerful
In the third test, the notable difference was that the waiter brought out the second set of mints after some time had passed from the first offering and mentioned that they had done so as an additional courtesy.
Researchers concluded that this personalization aspect of waiting tables (even if the waiter did this for every customer) was the catalyst for increased tips.
This post-purchase follow-up appeared as genuine concern for customers’ needs, instigating a connection with customers much deeper than you would think possible from a few additional mints.
The means for making these types of connections is widely available to many businesses, even those outside of restaurants. It was the surprise element of the waiter’s willingness to follow up post-purchase that made customers so happy.
- Bottom line
- When it comes to building customer loyalty on a small budget, it really is the thought that counts! Spending time creating a personalized experience for customers and surprising them with frugal wows goes a long way—without breaking the bank.