With Tesco sales in 2022/2023 and online giant Amazon's staggering sales growth, small retailers need to be more innovative than ever in the battle to entice customers away from big brands.
So with customer loyalty becoming more important than ever before, how can small retailers compete? It all comes down to the 80/20 rule. Also known as the Pareto principle, the idea is that 80% of your sales come from just 20% of your customers. With that in mind, utilising the unique selling points of your small business could be vital to keeping this segment of your customer base happy.
Customer loyalty for small businesses explained
According to the CX network, customer loyalty can be split into two categories:
Earned loyalty: Customers return because of high levels of satisfaction with your product or service and the brand’s values and overall customer experience.
Bought loyalty:equally important, when rewarding a customer’s repeat business through discounts and targeted loyalty promotion encourages them to return.
So how do small retailers go about using emotion to cultivate customer loyalty in a market where big brands dominate?
In this guide, we’ll look at the methods you could adopt to turn customers into brand advocates by exploring different types of loyalty, which retailers are leading the pack, and how you could take influence from some of their tactics to set your small retail business apart.
Develop a brand identity
Why it works
Your brand identity is how customers see your business. It's reflected in all the visual elements of your business like your company’s name, logo, tagline and marketing materials. Brand identity is even reflected in the way you and your employees interact with customers. For customers to advocate for your brand, you want them to have a clear understanding of who you are and what you do. Brand identity helps do just that.
On a practical level, a strong brand identity can:
- Make you stand out by highlighting what makes you different from your competitors.
- Add value by conveying quality, expertise and consistency in what you do.
- Connect with customers by broadcasting an idea, personality and way of doing business that people identify with.
Who’s doing it well
Founded by a husband-and-wife team, Ooni, was born from the founder’s own struggle to find the right oven for making the perfect pizza at home. Since launching the world’s first ever portable wood-fired pizza oven, they've grown into a multi award-winning business selling products all over the world. Through their joyous brand image and genuine passion, they’ve managed to build a growing community of foodies and pizza enthusiasts, uniting customers through great food and experiences.
How your small business can do it
Having a strong brand identity isn’t just important for big businesses. As a small business owner, when customers think about your product or service, you want your brand to be the first thing to pop into their head.
To start building a brand identity, you’ll need to think about:
· Design: The colours, fonts and imagery you’ll use to represent your brand. This could be marketing materials like posters, business cards and social media posts, or the look and feel of your shop or office space.
· Tone of voice: The way you address your customers in writing and in person is really important. Your tone of voice should be professional, easy-to-understand and reflect your brand’s personality.
· Customer journey: Consider how you engage with customers, how they purchase from you and the aftersales experience. The customer journey relates to how your customers find, engage with and use your business, in the physical and digital world.
· Content and sharing: Content is a great way to engage with your customers and really get your brand out there. What do you want your customers to know? What do you want your customers to think of when they think of your business? The content you put out there can shape your customers perception of who you are and what you do. And, what’s more it’s a great to build customer loyalty.
Get your small business online
Why it works
By 2027, 23% of all retail purchases are expected to be made online. With a strong online presence, small businesses can increase their product range and geographical reach.
Who’s doing it well?
Digital banks are successfully disrupting the market by making it easy for people to manage their money online. Finder research shows that 86% of UK respondents use a form of online banking or remote banking, which is around 46 million people. With over 49% reporting they have opened, or intend to open, a digital-only bank account.
Monzo is one of the leading digital banks in the UK; owing its success in part to its online functionality and innovation. Taking the elements of banking that customers don’t like – having to visit branches with long queues and complicated processes – Monzo customers can do everything from the user-friendly app.
How your small business can do it
A website is one of the most powerful digital marketing tools and you don't need advanced tech skills to create one! With website builders like WordPress and GoDaddy, you can use their free templates to build your own professional website with just a few clicks.
Social media can be another great way to have an online presence. It’s one of the most cost-efficient advertising tools and you can use many of the platforms for free and pay a small amount to promote and target your posts. Social media is also the perfect opportunity to connect with customers and deal with any queries or complaints quickly and directly.
Become part of the community
Why it works
Building an emotional connection with your customers is perhaps the most important step in creating brand loyalty. That means aligning yourself with shoppers’ values. This is easy for niche businesses with a specific and clear USP. For example, cruelty-free cosmetic company, Lush, whose vocal opposition to animal testing makes it a popular choice for eco-conscious consumers. But for small local businesses, it can be a bit trickier. One way to align with everyone's values is to consider the local community.
People tend to have pre-established emotional connection to their neighbourhoods - their local parks, schools and high streets all being important aspects of their identity. By positioning your store as the heart of the community, people who are passionate purveyors of their local high street could be more likely to form an emotional connection with your store.
Who's doing it well?
Did you know that the Big Four supermarkets – Waitrose, Tesco, Sainsbury’s and Asda – all have community champions who fundraise for local charities?:
- Waitrose’s Foundation works with suppliers to fund local projects that help improve the lives of the workers who grow, pick and pack our produce. Every time you buy a Foundation product, 2% or equivalent of the sale is invested back into the community it came from.
- The Morrisons Foundation grants up to £25,000 to fully fund charity projects that improve people's lives, and matches the funds raised by colleagues for their chosen charities.
- The Sainsbury Foundation has a long history of working with food banks and community donation schemes to support our local communities as a founding member of FareShare.
- Tesco Stronger Starts is open to charities and community organisations to apply for a grant of up to £1,500. Every three months, three local good causes are selected to be in the blue token customer vote.
How your small business can do it
You don't need the multi-million pound turnover of a huge supermarket to help out in your local community. If you do have some spare money, consider sponsoring the local school football team's uniforms. It could help you get the name of your shop out there and build loyalty by showing that you care about youth activities and sports in your local area.
Hosting weekly events in your store also positions you at the heart of the community and identifies your venue as a meeting point for neighbours to gather. It's also an opportunity to promote your products. For example, if you run a book shop, host a book group once a month, or if you run a gift shop you could organise an event where people can meet the artists.
Give your customers what they want
Why it works
Another way you could stay ahead of the competition is by using the feedback you receive in-store, online and via social media platforms to improve the products and services you offer. Not only could this show that you value your customers’ opinions, but also that you’re committed to making your product (which your shoppers are spending their hard-earned money on) the best it can be.
Who's doing it well?
Amazon is known for utilising customer feedback to make not only improvements and changes to their products and services, but also to their pricing and development strategies. Through using a customer rating and review system, they’re able to make timely updates that make their customers feel listened to. Placing your customers voice at the heart of what you do is a great method to build trust and brand loyalty, as they feel valued while getting the products/service they want!
How your small business can do it
Social media is a great, free way of reaching out to customers and building a community feel online. Why not use social media to gauge customer opinion, or incorporate the feedback process into your community-building by inviting customers to exclusive events geared towards hearing their opinions? For example, clothing retailers could invite select customers along for a pre-season viewing or use their social media channels to ask shoppers which designs they'd most like to see in store. Similarly, grocers could offer samples of new produce from local farms and allow customers to vote on which ones they want to see on the shelves.
Deliver a memorable experience
Why it works
If customers actively look forward to coming into your store, they'll be more likely to pop in, rather than order online. The basis of a good in-store experience is excellent customer service, short waiting times and (where possible) no out-of-stock products. But some retailers go above and beyond to really surprise and delight their customers. From interactive displays to immersive experiences and exclusive pop-ups, there are a host of exciting ways you can really tempt customers to stop by!
Who's doing it well?
A good example of providing an ‘above and beyond’ in store experience on a large scale is last year’s collab between makeup mogul, Charlotte Tilbury and media conglomerate, Disney. To celebrate 10 years of Charlotte Tilbury and 100 years of Disney, they combined forces to takeover the iconic Selfridges Cornershop in London. With immersive displays, exclusive products and limited-edition items to buy, they really pushed the boat out to make a lasting impression of great customer experience.
A permanent example of a store providing above and beyond customer experience on a smaller scale is Lindt’s designer outlet store based in Scotland. Their only store in Scotland to have a Chocolate Bar in store, they offer exclusive ranges unavailable online and offer instore customers the chance to create their own ‘pick and mix’, and try their luxury hot chocolate.
How your small business can do it
Simplicity is key. Focus on your customer's five senses and how your premises can stimulate what they experience while they shop. Light background music has been shown to have a positive effect on the buying process, with customers likely to spend more money on impulse purchases if pleasant music is plays while shopping. The tempo can help set the pace as they wander around your place of business, too.
Customer Experience
If you own a store and want customers to spend more time there, you could offer customers something to drink or snack on. It could be as simple as offering a hot beverage or glass of lemon water. If you sell edible products, consider offering some sample or tastes to instore shoppers. These small gestures will help them to more relaxed and welcome, and they’re more likely to stay until their glass is empty. Running a restaurant? Put on exclusive tasting nights where your most loyal customers can try out dishes from your new menu!
Whatever your plan of attack, make sure that these gestures go above and beyond the typical shopping experience customers have grown to expect. You want to standout against run of the mill competition.
Personalisation is key - Consider the ways you can add personal touches to the way that you do business. You can get some quick wins with customers through interactions as simple as sending a birthday e-card. Personalised emails tailored to the individual can help customers build an emotional bond with your business and encourage them to use you in the future.
Be transparent – Being transparent in business leads to trust, and customers buy from companies they trust. A study published by Statistica found that 60% of consumers believe that trustworthiness and transparency were the most important traits of a brand, dominating all other traits. who embodied transparency. And in this Digital Age, customers want better communication and for companies to be honest with them when things don’t quite go to plan. Accountability matters, and if businesses don’t offer this, customers may be tempted go to another business who does.
Recognise loyal customers
Why it works
Loyalty is a two-way street and faithful shoppers want to be recognised. Coming back to the Pareto principle, rewarding the 20% of your best customers for their dedication to your business could help turn customers into brand advocates. If they have reward points to spend with you, why would they shop anywhere else?
Who's doing it well?
Cafés and restaurants typically lead the pack when it comes to loyalty schemes. Nando's have the Nando's Card, which gives frequent eaters bigger and better rewards the more they return. Starbucks Rewards goes one step further by personalising the rewards – customers are given discounts on their favourite orders, as well as exclusive early access to new products. A free coffee here and there makes little difference to Starbucks' bottom line but goes a long way in making a customer’s day. Rewards like these can play a major role in boosting customer satisfaction.
How your small business can do it
Why not give your customers a reason to come back by using a similar loyalty scheme? There are a few different ways you could do this:
- Offer them a gift or discount code for their birthday
- Loyalty cards that generate money-off vouchers on new products or free treats for repeat use
- Giveaways/prize draws that customers have the chance to win based on repeat custom
Remember to ask your customers for their consent to use their email addresses in competitions and other marketing newsletters or emails – a good way to re-engage your most loyal customers in the future while securing information for remarketing.
Today’s consumers are savvier than ever before and many won’t hesitate to switch to other brands to get the best deal. That’s why establishing and maintaining customer loyalty should be a paramount concern of small businesses in their battle to woo shoppers away from larger rivals.
