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Fading Customer Loyalty: A Risk and Opportunity

Posted by: John Tozzi on June 23, 2009

Customer loyalty is wobbling.

The Wall Street Journal looks at how small companies have to court regular customers today. Businesses can’t take loyalty for granted anymore. Among big U.S. brands, more than half of shoppers loyal to a brand in 2007 defected in 2008, the Financial Times reports.

We’re in a period when consumers and businesses are changing their spending habits. Spendthrift Americans got price sensitive seemingly overnight during the financial crisis. It’s why Coach — whose CEO called a consumer downturn in January 2008 — started making handbags to sell for $200 instead of $300.

Small businesses have two concerns with fading customer loyalty. First is what the Journal story points out: Companies have to work to keep existing customers — it’s not automatic. But I’m more intrigued by the opportunity for small companies in a time when spending decisions are in flux. When people and businesses question how they spend their money, it creates a window for new products and services to prove their value, and increase their market share.

Your company is competing with larger, more established brands — whether it’s on a supermarket shelf or in the B2B software market. Your competitors’ customers are evaluating their budgets and asking if there’s a better way to spend their money — to pay less, or to get more value for what they already pay. Most of them weren’t looking so closely 18 months ago, and most probably won’t be 18 months from now. What are you doing to take advantage of the moment?

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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