Maintaining a loyal customer base is an essential way to achieve a consistent revenue stream and an enthusiastic community behind your brand. While offering quality products and services is a great place to start, the competition in today's offline and online markets has made it necessary for businesses of all sizes to leverage strategies to build customer loyalty.
But what is customer loyalty? In this article, we will explain customer loyalty in its various forms, review methods for measuring it, and discuss the benefits of customer loyalty. We’ll then provide some of our best strategies for building and retaining a loyal customer base.
What Is Customer Loyalty?
Customer loyalty is a measure of your customers’ willingness to make repeat purchases with your business, rather than seeking similar products or services from competing brands. As your customer loyalty improves, you can expect to see the same customers making purchases with increasingly regularity, choosing your products over more affordable alternatives, exploring your other services, and even advocating for your brand on social media platforms.
While there are several strategies to build customer loyalty, loyalty is generally earned through consistent, positive interactions between a business and its customers. As customers place more trust in your business, they will start to favour your offering over that of your competitors, making it easier to plan for demand and invest in future growth. However, if the quality of your service starts to slip or your company’s reputation becomes tarnished, you risk losing customer loyalty as quickly as you gained it.
What Are the Types of Customer Loyalty?
As consumer behaviour is influenced by various factors, customer loyalty can take different forms depending on the motivations of your target audience. Appealing to the wants and needs of every viable customer is a fine line to tread. So having an awareness of the different types of customer loyalty improves your chances of leveraging the loyalty that poses the most benefits for your business.
The types of customer loyalty you should be aware of include:
- Price Loyalty
For many customers, their loyalty only amounts to what they are willing to pay for your product or service. As soon as a more affordable option becomes available, these customers will abandon your business for the cheaper alternative. While retaining price-loyal customers can be as simple as undercutting the competition, it is important to consider the impact this will have on your profit margins and whether this strategy is sustainable for your business.
- Convenience Loyalty
These customers are influenced by the buyer experience more than by price points and will remain loyal to your business as long as your offerings are easy to purchase, your deliveries arrive on time, and your customer service is accessible.
- Special Offer Loyalty
Some customers are more attracted to special offers and bonus gifts than the core products and services provided by your business. From offering product samples to limited trials of subscription services, the loyalty of these customers can only be sustained with a steady flow of freebies accompanying each purchase. Learn how you can think outside of the subscription box.
It is important to note that these customers tend to make more sporadic purchases than others, so we would not recommend targeting this group as your primary revenue source.
- Reward Programme Loyalty
Much like the special offer loyal customers, these customers are incentivised to make repeat purchases by the promise of rewards for consistent or cumulative purchases. Depending on how you structure your rewards programme, this type of customer loyalty could significantly benefit your revenue stream as customers make successive purchases in an attempt to access higher reward tiers.
However, the lucrativeness of any reward programme relies on your ability to offer rewards that are desirable enough to keep customers coming back without impacting the profitability of the programme.
Skip ahead to our section on how to build customer loyalty to learn more about creating a successful reward programme.
- Brand Loyalty
In addition to loving your products, services, and special offers, these customers connect with your brand messaging and view your offerings as an essential part of their lifestyle and identity. Leveraging the enthusiasm of these customers can be incredibly profitable for your business, as their advocacy may convince their family and friends to purchase your products, or even more members of your target audience should they start praising your offering in relevant social media groups.
How to Measure Customer Loyalty
Several methods can be used to measure the loyalty of your consumer base. For the most accurate measurement, we recommend combining several different metrics to provide the clearest estimation. These metrics include:
- Repeat Purchases
One of the clearest indicators of customer loyalty, and perhaps the easiest metric to measure, is the number of customers making additional purchases. While the regularity of customer purchases is essential data for your business, you should also track whether customers are coming back for the same products or exploring the rest of your product listing.
- Account Upgrades
While your active customer accounts offer an overview of your customers’ loyalty, the number of account upgrades made by your consumer base can provide a clear representation of your brand's loyal customers. By making an additional financial commitment to your business, you can be more confident that you have attained the loyalty of your customers.
- Engagement Levels
The amount of engagement and interaction customers have with your brand outside of their purchases is another indicator of their loyalty. Engagement can be measured across various platforms to offer insights into customer loyalty. For example, it could be reflected by reviews left on your product and service pages, registration for newsletters, and click-through rates of your digital touchpoints, to the number of likes, comments, and shares on your social media content.
- Net Promoter Score
By gauging how likely your customers are to recommend your offering to their family or friends, you can simultaneously determine your current customer satisfaction and the potential growth of your business. This well-respected metric can be gained by prompting your customers to complete simple surveys at the end of their purchase, such as “On a scale of 1 to 10, how likely are you to recommend our product/service to someone you know?”
- Customer Loyalty Index (CLI)
This metric offers a more comprehensive explanation of your customers’ loyalty. However, it requires significantly more input to yield insightful data. By creating a questionnaire designed to evaluate the relationship between your brand and its customers, you can calculate their satisfaction, lifetime value, and the advocacy they could offer your business.
- Customer Churn Rate
Tracking customers who have stopped making purchases is as important as measuring your consistent customers. Identifying the reasons why your offering was unsuccessful with certain customers can offer valuable insights into how to build customer loyalty with more promising demographics, such as previous mistakes to avoid or specific audiences to target with your marketing.
Benefits of Customer Loyalty
From increasing your revenue and the effectiveness of your marketing to offering valuable feedback on how to improve your products and services, there are numerous benefits to building and maintaining customer loyalty. These include:
-
Consistent Revenue
As loyal customers typically make repeat purchases, building customer loyalty provides a reliable route to attaining a consistent revenue stream.
- Higher Spend
Each time a customer purchases something from your business, their trust in your products or services will steadily increase. The more trust your customers place in your business, the more money they may be willing to spend with each successive purchase. According to a survey of small business owners conducted by the BIA Advisory Services, repeat customers are willing to spend an average of 67% more than new customers, demonstrating the immense profit potential of improving your customer loyalty.
- Lower Costs
The cost of retaining existing customers is significantly lower than the cost of acquiring new customers, anywhere between 5 and 25 times lower, according to the Harvard Business Review. While some investment is necessary to maintain the loyalty of your consumer base, the cost of identifying, marketing, and onboarding new customers is much more than keeping your current customers happy.
- Brand Ambassadors
As your loyal customers start to recognise the quality and reliability of your products and services, they may begin to share their positive experiences with your business with their family, friends, or on their favourite social media sites. Leveraging this advocacy can be highly lucrative for businesses, as customers are more receptive to recommendations from other customers than to branded marketing.
- Marketing Effectiveness
According to the marketing “Rule of Seven,” new customers typically need to engage with your messaging seven times for its influence to take effect. As your loyal customers are already familiar with your messaging, they are much more receptive to marketing for new products and services, sales events and other promotions.
- Valuable Feedback
As loyal customers are already interacting with your business more than any other demographic, they are in the best position to offer insightful feedback. Furthermore, as they are actively invested in the continued operation and prosperity of your business, you can rely on your loyal customers to be more forthcoming and honest in their feedback.
How to Build Customer Loyalty
Now that you have seen the many benefits that customer loyalty can offer to your business, we imagine you are keen to learn how to build customer loyalty and maintain the devotion of your consumer base. From your customer journey and their eventual onboarding, to reward programs and other incentives, there are many strategies involved in improving customer loyalty. These include:
- Quality Products and Services
Before you can improve your customer loyalty, you should ensure that your products and services are as good as they can possibly be. No amount of marketing or special offers will inspire loyalty in a substandard service, so you must be confident in the quality of your offering before employing any other strategies.
Furthermore, once you have set the standard for your service, you need to maintain that standard to ensure the customer loyalty you built does not suddenly diminish. While brand-loyal customers are usually outspoken in support of businesses, they can just as quickly announce their discontent with declining product or service standards, which can alienate other loyal customers and deter potential new ones.
- Stand Out From Your Competition
While providing quality products and services should be your priority, unless your offering is unique to your business, quality alone will not be enough to attract customers to you over one of your competitors. When operating in a saturated market, you need to differentiate your brand from competitors through your messaging, service, or any additional peripherals that appeal to your target audience.
- Onboard New Customers
Once your customers have made their first purchase, it is crucial to maintain their engagement through an effective onboarding process. This can be as simple as prompting your customers to make an online account for streamlined purchases and order tracking, adding them to a mailing list for frequent updates, or contacting them directly through your customer service team for feedback. When done correctly, customer onboarding can make the difference between a one-time purchase and building customer loyalty.
- Refine Your Customer Journey
From their first interaction with a piece of your marketing to receiving their order, every step in the customer journey could make-or-break whether your customers choose to use your business in the future. By considering each step in the journey and how each process in your order fulfilment pipeline impacts the whole, you can refine the experience to make it as seamless as possible for your customers.
Whether this means reviewing any faults with your checkout or booking system, improving response times to queries, or managing expectations through clear lines of communication, investing time in the customer journey can yield numerous benefits for customer loyalty.
- Create Emotional Connections
To transition price, convenience or special offer loyal customers into brand ambassadors, you need to connect with them on an emotional level. While this can be achieved through targeted marketing that recognises the values of your desired demographic, businesses are increasingly building customer loyalty by reaching out to their audiences on the channels they use to talk with their family and friends.
By integrating your service into channels such as WhatsApp or Facebook Messenger, your customers can engage with your brand in a more familiar environment, providing them with a personal experience that can develop into an emotional relationship.
- Implement a Rewards Programme
Offering exclusive deals, discounts and freebies through a rewards programme is an effective way to maintain the engagement of existing customers, as well as attract new customers to your business. Much like tiered subscription models, rewards programmes incentivise customers to invest more in your business in order to claim the most desirable rewards. In addition to the satisfaction your customers feel upon reaching the next tier, they feel increasingly value by your business with each successive reward, building their customer loyalty while increasing the revenue to your business.
- Implement a Referral Programme
In addition to offering rewards for repeat purchases, you could incentivise your current customers to direct new customers to your business in exchange for more exclusive deals and giveaways. Much like standard rewards programmes, referral programmes allow businesses to improve their customer loyalty by impressing the value of their loyal customers through their special rewards, while simultaneously increasing their consumer base and revenue stream. Furthermore, eventually your referral customers may begin to advocate for your business without the incentive of the rewards programme as their loyalty grows for your brand.
- Analyse Your Customer Data
While any of the strategies above could successfully build customer loyalty for your business, it is important to review your strategies after they have been implemented and analyse your customer data for improvements. If your rewards programme is not yielding the results you were hoping for, or your customers are consistently reaching a certain reward bracket and then making no further purchases, you may need to fine-tune your approach or look to different strategies.
- Provide Excellent Customer Service
Despite your best efforts, issues can arise at any point in the customer journey, and your customer service team needs to be on hand to resolve them. While efficiently dealing with problems is essential to restoring faith in your customers, providing a personal touch with friendly customer service representatives can help to smooth over any negative emotions and restore customer satisfaction.
While businesses are increasingly turning to AI to deal with customer queries, a survey conducted by CX Today found that 88% of customers are concerned about the impact AI is having on customer service, while 64% would prefer AI not to be used at all. Therefore, in the interest of building customer loyalty, it is essential that your customer services provide a personal, human touch as well as efficient solutions.
How Can Whistl Help to Improve Customer Loyalty?
Identifying and prioritising the needs of your consumer base is crucial to building customer loyalty. However, these processes can take time away from the many other aspects of running a successful eCommerce business. As the UK's leading logistics provider of mail, parcels, and eCommerce fulfilment, Whistl is equipped to enhance customer loyalty, whether you manage a small or enterprise-sized business. This can be through expert delivery management and order fulfilment, to providing unbeatable customer service support.
If you are keen to build your customer loyalty, please contact us today. A member of our team would be happy to discuss how we can help your business.
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