Customer Satisfaction vs Customer Loyalty

Customer-satisfaction-good

Imagine this scenario: a customer is perusing the aisles of his local grocery store in search of a bottle of remoulade (or remúlaði in Icelandic). After he has located a handful of different brands of this most famous mayo-based pickle-infused hot dog condiment, the customer now faces a dilemma: which one to buy? Should he choose the same old bottle he did the last time, the cheapest one on the shelf, or his childhood favourite? What it all adds up to is how the brand connects with the customer, and how this connection influences his buying behaviour.

Our customer decides to buy the remoulade he remembers from his childhood. He sees the familiar font on the label, and is awash with memories of visits to a favourite hot dog stand touting “the best hot dogs in the world”. He also recalls a time when he posted a question on the brand’s Facebook page on how to make his own remoulade from scratch with the brand’s mayonnaise, and received a timely and thoughtful response accompanied by a delicious recipe. He clutches the bottle, drops it into his basket, and walks to the next item on his list with a smile on his face.

The company that produces his chosen brand has made a very deep connection with him on a subconscious level of which he may not even be aware. This emotional connection is a very powerful tool that all companies should be striving for. According to an article published in the Harvard Business Review, “Customer loyalty is the feeling of attachment to or affection for a company’s people, products or services. These feelings manifest themselves in many forms of customer behaviour. The ultimate measure of loyalty, of course, is share of purchases.”  If you can connect with your customers on this level, then they will show their loyalty not only by repeatedly buying your product on future shopping trips, but they will tell other people about how great your brand is.

According to a Gallup article called Customer Satisfaction Doesn’t Count, pursuing the elusive goal of “customer satisfaction” is for naught; rather, companies should be aiming to establish an emotional connection with customers. If a company can connect with a customer on an emotional level, and hence encourage them to be fully loyal to the brand (maybe even become a brand ambassador to convert others), then that company will have a “fully engaged customer”. This customer is not only satisfied with the product and the brand experience but has also become deeply connected to it. A company’s financial and social success can be a testament to their ability to lasso in a torrent of brand-loving-and-promoting customers.

In the 21st century, there has been a more dizzying level of competition for customers than ever before. With the advent of social media technology, brands have to work doubly hard to capture the attention, let alone loyalty, of customers because the market is flooded with companies all trying to do the same thing. It is simply not enough to produce a good product that people like and continuously buy ̶ satisfied customers defect. Customer loyalty always comes with satisfaction, but satisfaction does not always come with loyalty.

With that in mind, there are some strides you can take to enhance your customers’ experiences with you to promote loyalty. Here are a few:

Put the customer first. This sounds so cliché, but there is sound logic to this idea. If you look beyond your desire to make profit, and focus on giving the customers what they need and want, they will bring you the profit you desire through their loyalty and by sharing their good experiences with your brand with other people – which will lead to more profit. It’s a win-win situation.

Be empathetic. If you know how your customers think and feel, you can better meet their needs. This is especially useful when a customer makes a complaint. Really put yourself in their shoes to understand their grievance, then make the effort to help them overcome the issues they experienced with your brand. This could mean the difference between losing an irate and dissatisfied customer to a competing brand, or retaining a customer who is even happier in the end despite the upset because of how hard you worked to rectify their complaint.

Listen to your customers actively. With social media, it is way easier to show that you are listening to your customers because there are so many different platforms through which you can show that you care about what they think, feel and want. A timely response to a question on a Facebook page or Twitter feed shows that you are present and that you are listening.

These are just a few common-sense strategies you can put into action for your customers and for your business. For more ways to optimise your customers’ experiences with your brand, visit the DalPay blog and follow us on Facebook and Twitter.

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Drop-Shipping: Outsourcing your Shipping and Fulfillment

Drop-shippingSo you’ve decided to start an e-commerce business. You’ve read our articles about the Pros and Cons of Opening a Web Store, How to Choose the Right Payment Methods, and How to Market to Your Target Customers. But there’s still one more challenge to face when entering the online retail industry: shipping and fulfillment.

Navigating this aspect of selling goods over the internet can be complicated, so in order to dispel some of the confusion we’d like to explain some of the finer aspects of shipping and fulfillment. We’re going to begin by explaining a common and simple way for small merchants to taking care of their shipping needs in one fell swoop by outsourcing that aspect of their business. This method is called drop shipping.

Drop shipping makes it simple and affordable to run an online retail store. With drop shipping, once an order has been placed the retailer contacts the wholesaler and has them ship the goods directly to the purchaser. The benefits of drop-shipping include:

  • Lower costs: You don’t need to keep a stock of inventory and to process shipping information, which saves small business owners a sizable amount of labour and overhead costs.
  • Low risk: In order to keep an inventory of your products, you need to purchase those goods. But what happens if the products don’t sell? You have no way to recover the initial investment you made on them. With drop shipping, you don’t need to purchase the products until a customer has ordered them.
  • Testing the market: Since there’s no risk of lost investment on stocking goods, you can test out more new product offerings. If you find that there is no market for them, you can simply delist them without having any leftover stock to go to waste.
  • Higher selection: With drop shipping, you’re not limited to the total amount of stock that you can fit in your storage facility, so it is easier for you to offer a wider range of products for your customers.
  • No shipping issues: Even for a small business, handling the logistics of shipping and fulfillment, from packing boxes to buying insurance and contacting couriers, is a full time job. If your business is still small and you can’t yet afford to hire additional staff, drop shipping allows you to fulfill your orders and begin to grow.

But don’t start drop shipping just yet – while it’s an ideal solution for many small retailers, especially those just entering the e-commerce business,there are two major disadvantages that mean that, depending on the nature of your business, it may not be the right fit for you.

Drawback #1: Slim Profit Margins

The main drawbackto drop shipping is that absorbing less risk always comes at a cost and in this case that cost is a lower profit margin. In some cases, retailers may find that their wholesale drop ship costs are as high as their competitors’ prices, leaving them no room to make a profit.

There are two main reasons why drop shipping results in much slimmer profit margins. The first is that wholesalers themselves don’t make much of a profit on individual products, they make their money by selling in bulk to retailers. When you drop ship, you aren’t paying the bulk price, you’re paying the wholesaler’s much higher per-item price for each individual product sold.

The second reason is the drop-ship fee. This is the wholesaler’s handling charge for taking all of your shipping and inventory management off of your hands. They handle storage, packaging, labelling, tracking software and working with couriers. This is a perfectly normal industry practice – wholesalers who choose to offer drop shipping services need to recover those expenses and turn a profit somehow.

Market research, as usual, is the key to finding out whether you can drop ship for a profit. While pretty much any type of good could be shipped using this method, some products may be too expensive to make it worth your while. For instance, in industries where your competitors have huge economies of scale, the expenses associated with drop shipping might make it impossible for you to compete with their value.

Drawback #2: Customer Service

Outsourcing any aspect of your business is going to have a unique negative effect on your customer experience. Many consumers, in choosing which businesses to offer their loyalty to, are looking for a personalised experience. With drop shipping, customer service becomes more challenging since shipping and fulfillment is completely out of your hands.

When you handle your shipping in-house, you can ensure that every order is filled accurately, packaged adequately, and shipped out in a timely manner. When outsourcing your shipping, you are still the one who customers are going to blame if your product arrives broken or doesn’t arrive at all.

And that’s not the only way drop shipping can harm your customers’ loyalty. In general, consumers prefer to do business with companies that they feel have a hands-on, personalised approach. They want to feel like the products are coming directly from whom theypurchased. Outsourcing the delivery process can limityour ability to offer a personalised customer experience and discourage some of your customers from returning to your webstore.

In choosing a drop shipping provider, you should test their services by placing an order from them and seeing in what condition and timeframe your purchase arrives, and by calling their customer service to ensure that they are friendly, helpful, and that their order tracking services are adequate.

Despite its drawbacks, drop shipping is an excellent way for a small business to build a clientele, especially before you can afford the staff to do it yourself. But even as you grow, drop shipping can be still be a boon for your business, whether using it for all your fulfillment or to manage specific bulky or hard-to-store products while you keep your most popular goods in-house.

Next week we’re going to take a closer look at handling your shipping and fulfillment in-house, whether you’re just starting out or are ready to make the transition from drop shipping to managing your own inventory. Subscribe to the DalPay Blog for notification about this and other upcoming articles about online retail, and follow us on Facebook and Twitter for the latest news from around the e-commerce industry.

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