Your Customer Loyalty Mastersheet: Everything You Need to Maximize Retention

Customers are more influential than ever. Empowered by social media and digital devices, they’re the ones who dictate when, where and how they engage with brands. Not only are customers actively sharing their thoughts on products and services, but their data is being harnessed to shape product development and customer experience (CX) strategies.

Today, the consumer has the upper hand, meaning your customer loyalty strategy is absolutely critical for driving profits. In fact, increasing customer retention by just 5% could boost profits by as much as 95%. Therefore, a well-executed loyalty program delivers excellent ROI – but it all starts with knowing what the different types of loyal customers are, how to hold onto them and how to measure and track success.

• Defining customer loyalty
• Why customer loyalty is important
• 5 benefits of having loyal customers
• How can you measure customer loyalty?
• Creating a customer loyalty strategy: How to build, improve and maintain loyalty
• Why you need a customer loyalty program
• Final thoughts

Defining customer loyalty

Customer loyalty is the ongoing emotional relationship that exists between companies or brands and their customers. The strength and quality of this relationship is measured by how willing a customer is to engage and interact with, as well as repurchase from you, compared to your competitors.

Loyalty is the direct result of customer satisfaction and positive customer experiences, which drive trust and lead to loyal customers.

Here’s a quick overview of the different types of loyal customers:

1. Satisfied customers

These are the customers who are generally happy with your products/services and don’t have anything to complain about. They stick around without the need for extra incentives, but can jump ship if a great offer comes along.

2. Value-loyal customers

If you’re offering the cheapest prices, this type of customer will stay, but their main goal is to get more for their money, so they’re likely to switch to other brands/companies for a better deal. At the same time, they could easily come back to you when you have lower price offers.

3. Convenience customers

Whether it’s geographical location or another reason that creates a hassle-free experience, convenience-led customers are usually happy to pay for ease. As a result, they’re not as price-sensitive, but they’re not truly loyal to you just yet. This creates many opportunities to engage with them – small improvements to the customer experience and customer service could lock them down.

4. Loyalty scheme customers

These customers are motivated by rewards and stay for your loyalty program, not your brand. They will continue to be loyal to you as long as they keep getting discounts, offers or freebies.

5. Benefit-driven customers

Like the customers who stay loyal because of rewards, the benefit-driven customer is loyal based on what they can get from your business. For instance, this could relate to coffee shops with free WiFi or online retailers with free returns.

6. Passively loyal customers

These customers are accidentally loyal, simply because they don’t have the time, desire or initiative to shop around. In a way, they see your brand as the ‘best of a bad bunch’ and will quickly go elsewhere if a better offer is available and is convenient to them.

7. Actively loyal customers

The holy grail of loyalty – businesses should strive to have most of their customers in this category. These customers regularly buy from you and make a significant contribution to revenue, and will actively talk about your products/services to others. They’re also the first to try any new products you launch and are willing to provide feedback.

Why customer loyalty is important

The fact is, it requires a lot less effort to retain an existing customer than to acquire a new one. Customer acquisition is both expensive and time-consuming, and many businesses report that loyal customer types are the ones who spend more money with them.

Here are some interesting stats that drive home the importance of making customers loyal to you:

• 82% of companies agree that retention is cheaper than acquisition (Econsultancy) 
• Nearly 70% of US customers say they would spend more with a company that provided better customer service than competitors (American Express)
• A huge 93% of customers are likely to make a repeat purchase when their customer experience and customer service expectations are met (HubSpot)

5 benefits of having loyal customers

The impact of customer loyalty is hugely positive, not only encouraging repeat purchases and getting a higher return on your efforts, but also giving you sustainable growth.

Here are the top five benefits of having a customer loyalty strategy in place:

1. Build meaningful relationships

Switching your focus from sales to loyalty is the best way of standing out. Customers are exposed to between 4,000 and 10,000 ads a day, meaning your message is often diluted in a sea of content. To gain a competitive edge, align your brand with your customers’ goals and values, and create engaging, relevant and useful content that goes beyond just offers and incentives.

2. Grow your bottom line

Nurturing customer relationships is an easy way of nurturing your bottom line. Customer retention can be anywhere from five to 25 times cheaper than customer acquisition, giving you an easier way to boost revenue. As mentioned, loyal customers spend more too, resulting in better marketing ROI.

3. Turn customers into brand advocates

In addition to increasing sales, a customer loyalty strategy can also help you optimize word-of-mouth and peer-to-peer marketing. Actively loyal customers can be turned into brand advocates. These people will talk about your brand on social media, share product photos, write positive reviewsand are more likely to recommend you to their friends.

4. Gather valuable data

With a customer loyalty scheme in place, it can be much easier to collect first party data for the purpose of personalization. This level of data can also be used to forecast trends, helping businesses get a better idea of what customers want and how customer experience can be improved.

5. Drive long-term growth

Loyal customers stay and they’re happy to engage with you, giving you meaningful, long-term relationships that provide sustainable growth. This is why it’s important to have authenticity in marketing, connecting with customers on a much deeper level than just talking about products and services. This is how you convert customers into brand loyalists, the type of customers that are not easily swayed by your competitors.