Learn how easy it is to use marketing automation to build customer loyalty with personalized communications that strengthen customer relationships.
What is customer loyalty and how do you
build it?
- 1. Customer Loyalty Definition
- 2. Why is Customer Loyalty important?
- 3. The value of customer loyalty
- 4. Types of loyal customers
- 5. How to measure customer loyalty
- 6. How to build customer loyalty
- 7. Customer loyalty FAQs
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In this article, we’ll look at what customer loyalty is, why driving customer loyalty is important along with effective customer loyalty ideas, metrics, and more.
To get started, Apple, Lululemon, and Starbucks—apart from their worldwide popularity, what do these brands have in common? Each has a fiercely loyal customer base that swears by its products and even advocates for the brand in public.
Think about how Apple purists wait in long queues all night to get their hands on the latest iPhone. They proudly flaunt their Apple possessions on social media and other channels and likely use other products by the brand, too.
That’s the power of customer loyalty.
Customer Loyalty Definition
Customer loyalty is the result of a long-standing positive relationship between a business and its customers, and it comes in a variety of forms. At its most basic, it involves customers consistently purchasing from a single brand or store despite competitors offering similar products or services at lower prices. However, it also includes customers referring others to a service and advocating for a brand in their daily lives. Essentially, customer loyalty measures how willing your existing customers are to make repeat purchases and recommend your products and services to others.
Why is Customer Loyalty important for a business?
Customer loyalty can directly impact the success of your business. Studies suggest it costs less to sell to existing customers than to acquire new ones and existing customers often spend more than new customers. Additionally, loyal customers can drive referrals and increase your customer base.
Additionally, high customer loyalty suggests your business or product is doing well. It shows that people find value in your product and that you are targeting your sales to the right audience.
If you have low customer loyalty, it could suggest that there is a problem with your product, or your customer experience, or that you’re targeting your product at the wrong group.
The value of customer loyalty
As loyal customers become brand advocates and recommend your offerings to their family and friends, they help you use the power of word-of-mouth marketing to attract new leads.
And these new leads are more likely to trust your brand than those who learn about you through other marketing strategies.
Ultimately, these factors positively impact your business’s bottom line and help it grow. The right customer loyalty strategy even improves customer satisfaction and strengthens your brand’s authority and reputation.
Types of loyal customers
Customers can be loyal to a business for several reasons, including low prices, convenience, loyalty programs, and company values. Here are a few different categories of loyal customers.
Happy customers
These are people who like using your products and services and make repeat purchases. They’re satisfied with the experience, but they might switch to a competitor for a better deal.
Convenience loyals
They are loyal to your business because it’s convenient for them. For instance, they might enjoy the ease of placing an order on your website or communicating with customer support. It’s difficult for competitors to lure such customers with discounts.
Price loyals
These customers only purchase from you because you offer the lowest price in the market. That means they’ll be quick to switch to a competitor when they get a better deal. But they’ll come back to you if you offer lower prices again.
Loyalty program loyals
They make repeat purchases from you because of your loyalty program. You can retain them as long as you continue offering attractive freebies, discounts, and other rewards as part of the program.
Truly loyal customers
These people are more than repeat customers. They are your brand’s fans and promoters. They’ll keep buying from you, recommend your offerings, and join your loyalty program. They want to see your business do well and are always willing to share their feedback.
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How to measure customer loyalty
There isn’t a universally accepted way to measure brand loyalty. It depends on several factors, including your product or service offering, price, and industry.
For instance, a ride-hailing app might measure loyalty in terms of how frequently a user books a cab. On the other hand, a real estate brokerage might ask clients how likely they are to encourage friends and family to use its services.
Regardless of how you choose to measure customer loyalty, you must focus on the right quantitative and qualitative metrics.
Customer retention rate
Customer retention rate represents the number of customers your business retains over a given period. It’s a strong indicator of repeat business.
Customer churn rate
The churn rate measures the percentage of customers who stopped purchasing from you over a given duration. A high churn rate means your customer loyalty plan isn’t delivering the desired results.
Net Promoter Score (NPS)
Net Promoter Score (NPS) is a metric that indicates how likely a customer is to recommend your product or service to others. Based on NPS data, you can group customers into three categories: promoters, passives, and detractors. You can measure NPS using a simple survey.
Purchase patterns
Monitoring buying patterns and trends can help you understand whether existing customers make repeat purchases and how often they do so. It can help you identify truly loyal customers and measure the impact of loyalty programs.
Customer sentiment
This indicator represents what customers think and feel about your brand, which, in turn, offers insights into loyalty. You can measure customer sentiment by monitoring brand mentions on social media and other online platforms. Customer feedback surveys and interviews also come in handy.
How to build customer loyalty
Driving customer loyalty takes more than an outstanding product or competitive pricing. It involves establishing an emotional connection with your customer base.
Here are a few helpful strategies to get it right.
1. Personalise the customer experience
In a recent PwC survey, 26 percent of executives reported that a personalised experience is among the top reasons behind customer retention. Personalisation involves tailoring every aspect of the customer experience, from product recommendations and pricing to help center resources.
It’s even better if you communicate with customers through their preferred channels and personalise your messaging.
A customer relationship management solution can come in handy here as it can provide sales and customer service teams with detailed information about each customer. It’ll help them personalise every customer interaction.
2. Offer exceptional customer service
Did you know 86 percent of customers will never buy from a brand they trust after only two bad experiences? This underscores the importance of minimising friction in the customer journey. The key is to be there for your customers at every step, whether they’re on a free trial or just upgraded their account.
Give them the option to reach out to your support team through multiple channels, including live chat and social media. Use a chatbot and build a comprehensive knowledge base to provide self-service support.
Lastly, encourage customer service executives to develop soft skills, such as active listening and empathy. These abilities will help them communicate better with customers and build an emotional connection.
3. Launch a loyalty program
Customer loyalty programs are excellent tools for driving retention and referrals. From Amazon and Airbnb to Sephora, leading brands in various sectors use them to attract devoted customers.
They’re a favourite among consumers, too. Case in point—62 percent of customers are likely to spend more with your brand once they sign up for your loyalty program.
Image via McKinsey
Depending on your offerings and audience preferences, you can choose from different types of loyalty programs, such as:
- Points-based loyalty programs
- Tiered loyalty programs
- Value-based loyalty programs
- Referral programs
- Game-based loyalty programs
4. Don’t take loyal customers for granted
Even with the best product, pricing, and customer experience, you can’t win a customer’s loyalty for life. You have to prove you’re worthy of it.
How do you do that? By rewarding brand advocates and promoters for their loyalty.
It can be as simple as sending a handwritten note on special occasions like anniversaries or birthdays. You can even offer gifts or reward points for completing a year (or more) as your customer.
5. Adapt with your customers
You can’t drive customer loyalty with a set-and-forget approach. Customer preferences and buying patterns change—and you must stay on top of them. The best way to show customers you care about them is to adapt your offerings to their evolving needs.
FAQs
Customer loyalty indicates a lasting positive association between a business and its customers. It measures how likely a customer is to make repeat purchases and choose a business over its competitors offering similar benefits and deals.
You can use various metrics to measure customer loyalty. These include customer retention rate, churn rate, and Net Promoter Score. Many companies also use KPIs like customer lifetime value (CLV) and customer loyalty index. Additionally, qualitative factors like customer sentiment and purchase patterns can offer insights into customer loyalty.
The most common types of customer loyalty programs include points-based, tiered, and value-based programs, as well as referral schemes. Many brands also use paid loyalty programs. The key is to choose a loyalty program that will resonate with your customer base.
One of the most effective ways to improve customer loyalty includes providing top-notch customer support across multiple channels. You can also delight customers with a personalised experience that makes them feel valued. It’s equally crucial to keep evolving your business and offerings with changing customer needs and preferences.
People can be loyal to a business for various reasons, based on which they can be grouped into the following categories: happy/satisfied customers, convenience loyals, price loyals, loyalty program loyals, and truly loyal customers.
Up your customer loyalty game with Act!
Whether you’re building a B2B SaaS platform or running a coaching business, customer loyalty is the key to making your mark. Loyal customers help businesses thrive and pull through challenging stretches. Plus, they bring more customers through word-of-mouth referrals.
A CRM solution like Act! can help you collect and organise customer data and make it readily available to customer-facing teams. That, in turn, can help personalise various interactions and bring your business a step closer to building a loyal customer base.
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