No matter the size of the business, customer loyalty is incredibly important. Repeat customers spend up to 67 percent more than new customers. Plus, it’s up to ten times more expensive to try to attract new customers than it is to keep the ones already doing business with you. If you’re looking for real ways to create and keep up customer loyalty, consider implementing a few of these strategies.
What is customer loyalty?
In short, customer loyalty is the measurement of a customer’s willingness to continue engaging in and purchasing your product or service. Building customer loyalty is important for improving the lifetime value of current customers, which can make up most of your consistent revenue. It even helps bring in new customers, since happy customers are more likely to recommend your product or service to others.
How to measure customer loyalty
There are many ways in which you can measure your customer loyalty; it isn’t just as simple as whether customers stay or go. To really measure the loyalty of your customers you need to know the intent behind repeat purchases, how often and when customers stop purchasing, where they make purchases from and how satisfied they are with each transaction.
While every business will incorporate different metrics to answer these questions, here are some of the best ways to measure customer loyalty.
Customer satisfaction levels
When it comes to customer satisfaction, there are five levels of measurement:
- Not satisfied: The customer felt their needs were not met.
- Slightly satisfied: The customer felt that some needs were met but most were not.
- Satisfied: The customer got what they expected.
- Very satisfied: The customer got what they expected plus some pleasant surprises.
- Extremely satisfied: All expectations were completely exceeded for the customer.
Gauging customer satisfaction levels can come from on-page star ratings and reviews, surveying, and even customer interviews. Reviews tend to be more ratings-based with some specificity if customers want to detail their experiences. Surveys allow you to ask for more specific answers from your customers, and customer interviews allow for even more in-depth feedback on your service or product.
They are all great ways to get to know your customers’ satisfaction levels, and you can take different avenues depending on the detail of feedback you’re looking for. You may want to start simple, like sending an email asking for a rating/review after a purchase. Then follow-up with a request for a more in-depth interview if that feedback is either extremely positive or extremely negative.
The percentage of your customers that cancel your product or service or do not renew their subscriptions is your churn rate. This metric is specifically important for SaaS or subscription companies that have regularly paying customers. Regardless of your monthly revenue, if your churn rate is high then you have a lot of customers canceling or stopping their payments which could allude to a much larger problem.
When analyzing your churn rate, view it through the lens of customer satisfaction. Try to uncover why customers are leaving with a cancelation survey or request a one-on-one interview. You may have to provide an incentive to get more information from a canceling customer, but it may be worth it in some cases.
Customer lifetime value
Your customer lifetime value (CLV) tells you how valuable a customer is to your business based on their entire relationship with you. Rather than looking at it from a purchase-to-purchase standpoint, your CLV tells you each customer’s worth to your business in totality.
It’s important to note that it typically costs more to acquire new customers than to keep the ones you have. Focusing on increasing the value of your existing customers will help guarantee growth for your company. And as we mentioned before, it can improve your chances of gaining new customers through your current customer base.
Repeat purchase rate
Your repeat purchase rate is the percentage of customers that come back to buy your product or service. This can also be referred to as your repeat customer rate, customer retention, or re-order rate. The higher the percentage the better.
It’s another metric that helps you define customer loyalty and can provide an outline for building customer relationships. For example, you can look at the purchasing habits of your most loyal customers to better understand when to push out promotions or reminders to other customers. In theory, they may need or want to make purchases at the same cadence, but need more of a push to do it.
The term affiliate refers to the business relationship between companies and other businesses or people with the goal of earning a commission. For example, if an individual or company becomes an affiliate of a different business they can share information for that company and earn money based on how much traffic they draw in. You’ll want to look at your return from affiliates, especially if you’re paying for it, to determine if you should continue leveraging that relationship.
There are a few different methods of sharing when it comes to affiliate work. Amongst the most popular are:
Links to the business’ site can be placed on the affiliate’s page in order to drive traffic directly from one site to the other. This method is common on blogs and other sites that share informative articles. This method is especially successful when used amongst people and brands that work in similar industries or appeal to a common audience.
Sometimes affiliates will be given a coupon code or discount that is exclusive to their name or company. Their customers or followers can then use that code to receive the discount, and it acts as a referral sent specifically by the affiliate. That way, the affiliate will earn a commission based on the use of their own code. This is especially common today in social media influencers.
Affiliate marketing is popular throughout many social media channels. This can be as simple as an affiliate posting about the business’ product or service and tagging them in it. This simple action can drive interest and traffic to the business’ site and they can track how much commission an affiliate will earn based on the interactions with their posts. This is another popular form of affiliate marketing with influencers and other well-known people on social media.
How to build customer loyalty
Knowing the tools and metrics for analyzing customer loyalty is just the first step. Now, you need to develop and put into practice a method for building customer loyalty. Here are a few steps to get you started.
1. Improve your customer experience
While this seems like a given, it’s one tip that bears repeating because it’s so important. Customer service matters. A survey in 2021 showed that 86 percent of customers were willing to pay more for great customer service.
Customers remember when they’re treated well, and they remember when they’re treated poorly. In either case, they usually tell their friends and family, and that can either mean more business for you or lost business opportunities. It’s important to go above and beyond for your customers, pay attention, and identify any areas you can improve on for their experience.
2. Determine the best communication channels
Frequent communication with your customers keeps you fresh in their minds and lets you pass along important information, but it’s important to know which platforms and methods of communication are right for them.
Email communication is still frequently utilized and can be helpful for specific customers and brands that aren’t as present on social media or have questions and comments they prefer to send via those inboxes.
Social media is quickly becoming the go-to method for customers to communicate directly with a brand through direct messaging or even calling them out with an @ mention. This can bring attention to the business in a very public setting, and (if they are exercising quick and helpful customer service) can prove themselves to be a reliable business in the public’s eye.
Webchat can be another helpful tool for both customers and customer service employees. Web chat allows for a business to program a chatbot feature that helps to answer frequently asked questions and direct the customer to helpful resources. If someone is looking for help on your site, they can start a conversation in the chatbox.
This helps save customer service teams time by not having to answer these common questions, giving them more time to focus on more in-depth questions for customers.
With all this technology available for chatting, it’s important to not forget the power of a good phone call. Everyone can relate to the frustration of feeling stuck in an endless loop of automated prompts until we bang on the phone keys in hopes of reaching a real human.
This is why it’s important to keep in mind that while automated phone systems may save money, highly trained customer service representatives build loyalty. Phone calls can allow for customer service teams to connect on a deeper level with their customers, and ultimately improve their experience with the business.
No matter the outlets your business chooses for communication, it’s important to make sure that what you’re doing works best for your customers. Their ability to easily communicate with you will help keep their trust and loyalty.
3. Develop a reward program
One of the best—and perhaps one of the cheapest—ways to reward customer loyalty is to give extra perks to your most dependable customers. This extra bonus can look different depending on what works best for you and your business. A few common rewards programs include:
A point program is popular because it’s simple! Each purchase a customer makes with your business earns them points. As customers accumulate points, they can then transfer those points to a reward or some sort of special offering.
A spend program focuses more on the amount of money a customer spends on each transaction with you. The more they spend, the more rewards they accumulate. This rewards method is known for boosting customer loyalty and reducing churn rate.
Creating a tiered rewards program allows you to have different levels of rewards and earnings based on a customer’s spending habits. You can make all customers feel included based on their ability to spend with you and reward them accordingly. The more they spend with your company, the more they will eventually be rewarded in exchange.
Exclusive VIP program
Some companies offer exclusive VIP programs that customers can pay a monthly or annual fee to join in order to seek special discounts and offers. This program should offer special benefits that are only available to those enrolled in it.
By setting up a reward system for the most loyal, you not only encourage them to stick around, but you also give an incentive for other customers to strive to reach that status.
4. Offer a head start on rewards
If you want to start a customer loyalty program like coffee shops use, whereby customers buy a certain number of drinks to earn a free one, consider giving them a head start. This can be as simple as giving them the first two punches on the coffee card for free. If you give your customers a head start on the program, they’re more likely to stick around and finish it.
5. Seek out customer feedback
One of the biggest keys to improving and retaining customer loyalty is seeking out customer feedback. Sending out surveys, asking questions on phone calls, and keeping track of your ratings while asking for as much feedback as you can get will ultimately be very telling in how you can improve your customer service.
Online reviews and comments or tags on social channels or other online forums are great places to respond to both positive and negative customer feedback. Doing so will show that you engage with all customers and that you take real criticism seriously in order to best serve your customers.
Sometimes it’s best to take on negative responses in a private channel. After engaging in a particularly negative comment, you may ask to switch to a private message or email in order to better serve their needs.
For positive feedback, you can ask to showcase customers’ messages. You may even ask to conduct a follow-up interview or other form of engagement to get more out of the great review. It is also good to always reward your customers for their positive contribution!
6. Consider different payment plans
There are some businesses out there that are very seasonal and run into cash flow issues during certain times of the year.
For instance, a wedding shop usually receives most of its sales during the summer months when weddings are in full swing, but during the winter they struggle. One shop decided to offer a payment plan through which customers could start shopping in the winter and pay a little throughout the months leading up to the wedding, rather than paying all at once.
This plan worked because it helped customers by giving them manageable monthly payments, and it helped the company by bringing in cash during an otherwise slow time of year. In fact, customers were so happy that they often referred the shop to others, and the business saw a nearly 400 percent increase in total sales.
Along with subscription plans, consider other payment options that are currently popular amongst shoppers like ApplePay or PayPal. These options allow customers to conveniently purchase your products or services electronically and more seamlessly at times.
7. Maintain voice, tone, and language at every touchpoint
This is another item that seems obvious, but it’s important enough to keep being reminded of.
A study in the United Kingdom recorded the expressions used to greet customers as they entered a store, and then cross-checked with how much they spent in the store. The study showed that shoppers who were greeted with a welcome and a smile spent up to 67 percent more than shoppers who were not greeted this way. While it seems like a small detail, a friendly greeting obviously has important consequences.
The need for positive language, tone, and visuals extends beyond in-store interactions. Maintaining a consistent voice and tone throughout your company communications is important to keep your brand strong, but to keep the experience of the customer solid. Make sure to use specific language and offerings within your internal communications to avoid conflicting information that could confuse potential customers.
8. Give customers a reason to be loyal
Many people believe that Apple has some of the most loyal fans out there. Customers go to great lengths to prove just how much they love the company, like spending hours camped in lines for product sales and having vehement arguments in favor of all the products.
Brands like this are so successful because they know how to excite their customers by making product reveals, sales, and launches an exclusive event. Thinking about the customer’s experience as more than just using their product, but how they feel throughout the entire interaction with your business is important. Reflect and improve the way that you treat potential customers for the sake of both them and your current ones. Strive to make the experience of purchasing your product or service a memorable one.
Investing in customer loyalty now will lead to future benefits
In today’s business climate, it’s impossible to stress just how important customer loyalty is. Customers are people and they understand that brands stand for more than just their products.
Following these tips is key to ensuring a positive and memorable experience for your customers. Leaving a good impression will help make for happy customers, spread positive reviews for your company, and ultimately create and strengthen your customer loyalty.
Editor’s note: This article was originally published in 2014 and updated for 2021.