Customer loyalty: A guide to types and strategies
Customer loyalty is when customers reward a company with repeat business over time. Our guide covers definitions, types, and strategies to help you learn how to build a loyal following.
By Lisa Painter, Sr. Director, Customer Experiences
Last updated February 6, 2023
Some brands seem to have a complete hold on their customer base. You’ll never see a Starbucks groupie in the Peet’s Coffee line if there’s a Starbucks within 10 miles. Lululemon purists will spend three times as much on the brand’s signature leggings to be part of the “Lulu Lifestyle.” And most Apple users scoff when a text comes through in a green bubble instead of a blue one.
These brands have nailed the secret sauce to customer loyalty.
All companies strive to achieve that same level of customer loyalty. With a loyal base, you will better prepare your business to weather the ups and downs of the market and thrive for years to come. Our guide provides the key ingredients you need to whip up a batch of your own secret sauce to start gaining loyal customers. Ready to start cookin’?
In this guide to customer loyalty, we’ll explore:
What is customer loyalty?
Customer loyalty is when customers reward a company with repeat business over time. Loyal buyers consistently choose to do business with a particular brand and often defend it against its competitors.
For customer loyalty to happen, a company must create an experience that inspires buyers to return again and again.
Loyalty entails developing a customer base so devoted to your brand that they’re willing to buy whatever you offer—no matter the price—even when there are cheaper alternatives in the market. Happy, loyal customers can also become brand advocates who promote your product or service to friends and family and stick with you even in tough times.
Essentially, loyal customers are those who:
- Make repeat purchases
- Aren’t interested in your competitors
- Engage with you on various channels
- Provide feedback on how your company can improve its offerings
- Advocate for your brand and recommend your products or services to others
For customer loyalty to happen, a company must create a great customer experience that inspires buyers to return again and again. The most loyal customers are often those who feel emotionally connected to a brand.
Why is customer loyalty important?
Keeping a customer is easier than getting a new one. Because of this, the long-term survival of your business depends on a loyal customer base. Here are a few examples that show the importance of building customer loyalty.
- Loyal customers are brand champions: Happy customers will boost your brand by leaving good reviews, telling friends and family, and posting on social media about their great customer experience. Customers referred by other customers also have a higher retention rate.
- Loyal customers spend more: Repeat customers trust your brand and will spend more in the checkout line. In addition, 75 percent of consumers will pay more for products from companies that provide a good service experience. Once you win customers over with a positive experience, they likely won’t leave if you charge them more.
- Loyal customers are more valuable than new customers: Retaining customers is much more cost-effective than acquiring new ones. Merely a 5-percent increase in customer retention can boost profits by 25 to 95 percent.
- Loyal customers are easier to sell to: A repeat customer is more likely to buy from you again. The more loyal customers you have, the easier it is to repeat sales, and the less you have to spend on conversion tactics.
- Loyal customers are more likely to forgive you for a mistake: 74 percent of consumers say they will forgive a company for its error after receiving excellent service.
A 5% increase in customer retention can boost profits by 25 to 95%.
Consumers who reward companies with their business—maybe generations of repeat business—send a message: They find consistent value in the products or services, and the overall experience they have with the brand is positive. As a company, there’s no greater compliment.
To earn and retain loyal fans, put customers’ needs and wants at the center of your business. Customer-centricity will help you build trust and establish good customer relationships—both of which are key to generating customer loyalty.
5 different types of loyal customers
Customers are loyal to businesses for specific reasons—whether it’s the low prices, convenience, company values, or quality of the product. Here are a few different types of loyal customers.
Truly loyal customers
Also known as happy customers, these buyers genuinely like your products or services and regularly make purchases. Though they may be satisfied, they can easily be swayed to switch to a competitor for a better deal, discount, or experience.
These customers shop with you because it’s convenient for them. They may appreciate the ease of making a purchase, the location, or the shipping speed. Convenience is what makes them stay with you for the long haul—and they’re willing to pay more for it.
These shoppers are loyal only to your loyalty program—not your brand. They’ll make purchases just to get discounts or freebies. As long as they see value in your loyalty or rewards program, they’ll continue to buy from you instead of your competitors.
These customers buy from you because you offer the lowest price or the best deal compared to the competition. While shoppers will stick around if prices remain low, they’ll also be quick to leave for a better deal somewhere else.
Truly loyal customers are your biggest fans, and it’s highly unlikely that they would ever leave you for a competitor. They make frequent purchases, provide feedback, participate in your loyalty program, and—best of all—encourage friends and family to buy from you.
7 strategies for increasing customer loyalty
Customer loyalty isn’t something you can work on once and then automate later. It’s a relationship that needs to be nurtured and cultivated—or it will wither like a plant without water and sunlight.
Many qualities we value in our personal relationships also apply to our relationships with customers. Among them: consistency, being a good listener, acting upon what you learn, and being honest. The ideal way to build loyalty is by understanding what the customer values and building around those wants and needs. Follow these seven tips to build customer loyalty.
1. Make things easy for customers
Keeping customers isn’t about creating a flawless product or service that perfectly meets their needs. It’s about providing a great user experience while making their buying choice a no-brainer. One way to drive customer loyalty is to create simple, convenient experiences.
For example, you can make it easy for customers by adopting an omnichannel approach to support—meaning you’re able to communicate with your audience in a consistent, reliable way across channels and devices.
Offering self-service options and chatbots also enable customers to find quick answers when they have an issue instead of waiting for a live agent.
2. Provide excellent service
Companies known for inspiring customer loyalty are also known for providing great customer service. When customers have a problem or need answers, they want a seamless experience—not hoops to jump through.
Be proactive: That means anticipating your customer’s next question and helping them head off issues before they start. Excellent customer service positions your brand as a strategic partner, not a one-off problem-solver.
Hire agents with soft skills: A well-trained support team can fix immediate problems, but agents who also provide a positive experience can help you build lasting partnerships. Soft skills include developing empathy, establishing rapport, and being able to connect emotionally with customers when under pressure.
Make personal connections: Magnolia, the popular home decor brand, defines success to include much more than helping customers with billing or shipping issues: it means making personal connections and creating community. Customers are just as likely to call for “transactional” support as they are for “experiential” support—sharing their experiences with agents who are trained to lend a kind ear.
3. Meet customers where they are
It’s essential to deliver an omnichannel experience to meet customers where they are and create a convenient, conversational experience across platforms. According to the Zendesk Customer Experience Trends Report 2022, 93 percent of customers will spend more with companies that offer their preferred method of communication to reach customer service.
Communication channels can include:
- Social media apps
- Messaging apps
Consumers overwhelmingly want to interact with businesses on the same channels they use to talk to friends and family. Offering support on channels like WhatsApp and Facebook Messenger allows you to communicate with your customers in a more personal way—helping you build emotional capital and, in turn, customer loyalty.
4. Keep evolving your business
Customer loyalty isn’t a destination—it’s an ongoing journey that’s influenced by various factors. Companies need to recognize a changing landscape and evolve their business practices to stay current. This includes throwing outdated definitions of customer loyalty out the window.
A traditional definition of customer loyalty might be a buyer’s unwavering dedication to a single company—be it an airline, brand of shoes, or car manufacturer—for many years. But a more modern definition acknowledges that customers who pledge brand loyalty to several (even competing) companies are more common.
Customer loyalty is a two-way street between businesses and customers. Companies want repeat customers who will stay with them through the ups and downs—yet they don’t always return the favor to customers. You must remember that buyers have plenty of options. To make sure you stay on their shortlist, show loyalty to your customers.
Responsibly use data to make customer-centric decisions, personalize customers’ marketing experiences, meet them on their support channel of choice, and respect their time.
5. Personalize the customer experience
Consumers want companies to deliver customer experiences that are tailored to their individual needs and preferences. Personalization often makes customers feel more valued, which inspires greater brand loyalty. According to our Trends Report:
- 90 percent of buyers will spend more with companies that personalize the customer experience.
- 68 percent expect all experiences to be personalized.
Companies can provide personalized service by documenting customer data and interactions, then using that information to cater to the consumer. Personalized service could take the form of communicating with customers through their preferred channels or accessing customer details to offer relevant product recommendations.
6. Create an emotional connection
There are many ways to form a connection with your customers, but you have to start by getting them emotionally invested in your brand. A top-notch rewards program or social media influencer promotion won’t be effective without first earning emotional buy-in.
Tap into the power of emotional data to help identify high-impact customers—those who present the most opportunity for a lasting relationship. Smartly using emotional data can increase customer lifetime value and turn buyers into brand ambassadors.
Trust is the key to achieving an emotional connection. You can build trust through transparency, sharing and implementing customer feedback, protecting sensitive information, and crafting personalized experiences that tap into the human experience.
7. Start a loyalty program
Once an emotional connection is there, customer loyalty programs can be a great way to increase customer retention. A customer loyalty program or rewards program is a customer retention strategy that motivates consumers to continue buying from you instead of your competitors.
As part of a loyalty or rewards program, buyers receive discounts or freebies after reaching certain thresholds, like having been a customer for one year. This incentivizes shoppers to make more purchases.
Take Sephora, for example. The retailer offers a Beauty Insider program where customers receive reward points for every dollar they spend. They can then use those points to choose gifts. Loyal customers are rewarded just for continuing their buying habits, further deepening their ties to the business and giving them value they can’t find at competitors.
Some types of loyalty programs include:
- Points programs
- Tiered loyalty programs
- Refer-a-friend programs
- Spend-based programs
- Mission-driven programs
- Subscription programs
When developing a loyalty or referral program, choose rewards that your particular audience will find enticing. You can base your customer rewards on how much money they spend, how often they make purchases, or how many people they refer. Not sure what your customers would prefer? Ask them.
How to measure customer loyalty
Some companies measure loyalty by the length of time they’ve had a relationship with a customer. Others might think of buyers who’ve stayed with them through tough times, like service interruptions or growing pains. Many businesses use metrics, such as customer churn rate, to gauge loyalty.
To gain a more holistic understanding of customer loyalty, your research should be both numbers-based and behavior-based. Use your customer service software to quickly access key metrics like those listed below.
1. Customer retention rate
Customer retention rate measures the number of customers a company retains over a given time frame. Any business that wants to succeed must keep a close eye on this metric.
2. Customer churn rate
Customer churn rate represents the percentage of customers who stopped buying your product or using your service. Churn tells you which customers aren’t loyal, leaving you with those who are.
3. Account upgrades
Recent account upgrades show you which customers are happy enough with your product or service to increase their financial commitment. If they’re willing to spend more money and rely more on what you’re selling, they’re displaying their loyalty.
4. Social media behavior
Behavior is just as important to track as metrics when it comes to understanding customer loyalty, though behavioral data can be harder to wrangle.
Routinely search by keywords related to your brand on social media (or use social listening software) to see what customers are saying about you. Find those customers who are consistently posting positive things about your business.
5. Buying patterns
Look for customers who regularly do business with your company—they’re loyal by default, especially if their spending grows over time. Combining both research methods (quantitative and qualitative) and tracking trends can give you a deeper understanding of your customers’ faithfulness to your company.
6. Net Promoter Score® (NPS)
Net Promoter Score® (NPS) helps companies measure customer loyalty by asking a simple question: How likely are you to recommend our brand to a friend or colleague? It enables companies to gauge and predict their customers’ long-term satisfaction.
7. Customer satisfaction score (CSAT)
Customer satisfaction score is a customer experience (CX) metric and key performance indicator (KPI) that gauges how satisfied a consumer is with a product, a service, a specific interaction, or the overall experience with a brand.
Companies measure CSAT with a survey that asks, “How satisfied are you with [product/service/experience]?” Along with the question, there’s a five-point scale and a comment box where respondents can provide support and reasons for their rating.
Building customer loyalty starts here
Having a loyal customer base is important for long-term business stability and success. A key step in earning that loyalty is doing your homework. The companies with the most dedicated customers make it their business to understand their buyers and form a connection with them. As with any relationship, this takes time, but there are steps you can take now to begin establishing customer trust and earning loyalty.
Stay up-to-date on the latest customer behavior statistics, and regularly ask your customers for feedback so you can better understand how they think and feel about your brand. From there, you can reevaluate your customer experience to see where you may be able to make improvements. Investing in customer service software is also beneficial, as it can provide even more insights into your customers and their buying habits.
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