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What is customer loyalty and how to acquire it? Definition and strategy for a loyal customer
Casper Cooper
23/11/2023
| 6 min read
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Customer loyalty means the enduring and repetitive behavior of a customer choosing products and services from a particular brand. This means that the customer is willing to return to your company, even if the competition offers similar products or services at a lower price.
It is important for businesses because it allows for building long-term customer relationships, which translates into stable revenue and increased profitability. It is particularly important for businesses operating in highly competitive industries such as telecommunications or retail.
Companies can increase customer loyalty by offering high-quality products or services, competitive prices, good customer service, and loyalty programs. Loyal customers are also more likely to recommend a specific brand to their friends and family, which naturally has a positive impact on business growth.
Factors affecting customer loyalty to a company
One of the main factors influencing customer loyalty is the quality of the products or services offered. Customers are more likely to return to your company or online store if they are satisfied with the quality of the products or services they have purchased; they are also less likely to look for alternatives.
Another important factor is good customer service and easy delivery and return conditions. Customers want to feel heard and understood, so companies and e-commerce online stores should provide their customers with fast and professional service that solves their problems and answers their questions.
Other factors that can influence customer loyalty include price, product or service availability, quality of post-sales service, flexibility in adapting to user needs, and loyalty programs for customers.
Loyal customer and measurement methods - definitions, surveys, and questions asked
NPS (Net Promoter Score) Survey
One of the main methods of measuring customer loyalty is the Net Promoter Score (NPS) method. It involves conducting a survey in which customers rate their satisfaction with a company on a scale of 0 to 10 and answer the question "How likely are you to recommend this company to your friends and family?".
Based on these responses, customers are classified as Promoters, Passives, or Detractors. NPS is easy to conduct and allows for a quick understanding of the level of customer loyalty.
CSS (Customer Satisfaction Score) Survey
Another method of measuring customer loyalty is the Customer Satisfaction Score (CSS) method. It involves conducting a survey in which customers rate their satisfaction with various aspects of a company's operations, such as product quality, customer service, price, etc. Based on these responses, the company can determine areas where customers are satisfied and where they are not, and take appropriate actions.
Customer loyalty strategies, such as loyalty programs, personalization, and customer service
Loyalty Programs
One popular strategy for building customer loyalty is implementing loyalty programs. These programs involve rewarding customers for their consumer loyalty, for example, through points, coupons, free delivery, discounts, or other rewards and incentives from your brand.
These programs encourage customers to return to a specific company because they know that they will receive rewards for every purchase. Loyalty programs can also be tailored to individual customer preferences, allowing for even better alignment of the offer with their needs.
Offer Personalization
Another important strategy is offer personalization. Customers want to feel special and treated individually, so companies should tailor their offerings to the individual needs and preferences of customers.
This can be done through customer data analysis, such as purchase history, website behavior, or communication with the customer. Try to personalize communication, as it allows for more effective alignment of the offer with customer needs and increases their satisfaction with services or products.
Examples: How to increase customer loyalty in different industries and retain customers?
In every industry, you can create a customized loyalty program and build a bond between the customer and the brand through a mix of marketing activities.
- Hotel industry: the "Marriott Bonvoy" loyalty program offers its members the opportunity to earn points for each stay at a Marriott hotel. These points can be used for accommodations, airline tickets, or other rewards.
- Retail industry: the "My Starbucks Rewards" loyalty program allows customers to earn points for each purchase at Starbucks cafes. These points can be used for coffee, pastries, or other products.
- Insurance industry: the "Allstate Rewards" loyalty program offers customers the opportunity to earn points for policy renewals, policy cancellations, or referring the company to friends. These points can be used for material or financial rewards.
- Transportation industry: the "Delta SkyMiles" loyalty program allows passengers to earn miles for each distance traveled and class in which they traveled. Miles can be used for airline tickets, hotel services, or other rewards.
- Retail industry: the "Sephora Beauty Insider" loyalty program allows customers to earn points for each purchase, which can be used for product samples, free purchases, or other rewards.
The importance of loyalty of new customers in long-term business success, or how to acquire and retain
Customer loyalty is of great importance in the long-term success of a business for several reasons. Implementing a loyalty strategy allows for:
- Building long-term customer relationships, which, through customer attachment, translates into, among other things, stable revenue and increased profitability.
- Customers who are loyal to a particular brand are less susceptible to competition. This means that they are more likely to return to a specific company for repeat purchases, even if the competition offers similar products or services at a lower price (this is a good way to keep customers for yourself).
- Loyal customers are also more likely to recommend a specific brand to their friends and family (helps build trust - customer acquisition costs in CRM decrease), which positively impacts business growth.
- Loyal customers are also more likely to increase their spending on a company's products or services and are more likely to use post-sales services, which positively impacts a company's revenue.
- In addition, having loyal customers allows for better understanding of their needs and preferences (through more feedback, responding to newsletters and contact forms), which facilitates tailoring the offer to their expectations and thus increases their satisfaction with services or products.
- In long-term business success, loyal customers represent a stable source of revenue (customer lifetime value increases, and the customer base and loyal customer base expand), allowing for better forecasting and planning of business activities.
Comparison of traditional customer loyalty acquisition methods with new trends such as relationship marketing
Traditional customer loyalty acquisition methods mainly involve offering loyalty programs, such as points for purchases, discounts, or rewards. The goal of these methods is to encourage customers to return to a specific company by rewarding them with promotions or content marketing materials.
On the other hand, new marketing trends, such as relationship marketing, focus on building long-term customer relationships by personalizing offerings, adapting to individual customer needs and preferences, and providing high-quality customer service.
The goal is to create a unique experience for customers at every touchpoint (omnichannel) on the customer journey (whether on the website or on social media)
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