Customer loyalty describes an ongoing emotional relationship between you and your customer, manifesting itself by how willing a customer is to engage with and repeatedly purchase from you versus your competitors. Loyalty is the byproduct of a customer’s positive experience with you and works to create trust.
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People are loyal for various reasons, but it’s relatively easy to group them into six distinct loyalty categories.
These customers like your products or services, have never complained, and probably have purchased from you numerous times. But your competitors can easily steal them: all it takes is a better deal, a discount, or the formation of a new relationship.
These customers are with you only because of low prices. If they can save money elsewhere, they’ll leave. If you offer the best price again, they’ll return. It’s pretty easy to keep this type of customer, but at a tremendous cost.
These customers are not loyal to your company or what you sell. They are loyal only to your loyalty program, and in many cases, only because your loyalty reward offers the best deal.
This person is loyal only because your brand is easy to communicate with, easy to find, and easy to purchase from. A convenience-loyal customer isn’t swayed by price: Convenience is what keeps them with you.
These customers are not drawn to your brand because of what you sell but because of other things you offer. Free Wi-Fi or infant changing tables or free inspections are some examples. Customers who are loyal to your freebies may buy from you only sporadically and don’t contribute heavily to your revenue stream.
These are your customer advocates. They repeatedly purchase from you, talk about their great experiences with your company, and send their friends and family to you.
Customer loyalty and customer retention work together. Loyalty is a mindset that predisposes a customer to engage with and purchase from your company. Retention is a metric used to track customer engagement and the resulting sales.
It’s all about keeping the customers you worked so hard to acquire, providing great experiences, and continuing to offer value. Customer retention strategies are developed to provide—and extract—more value from your existing customer base.
Customers spend, engage, and interact with brands based on the experience a brand provides, including interactions with customer service, whether via phone, email, chat, or in person. If customers feel that your customer service team is appropriately prioritizing and addressing their inquiry, feedback, or issue, they are more likely to remain loyal. Similarly, if they have a unsatisfactory experience with your customer service team, they’ll be less likely to continue to spend and engage with your brand.
Forward-thinking brands compete on customer experience (CX) because it’s a driver of higher customer retention levels. A CRM system is key to providing a scalable, consistent, differentiated customer experience. CX depends on knowing your customers, and knowing your customers depends on data. A CRM system collects all possible customer data points and houses them in a central location so you can develop more-personalized customer experiences.
Best-in-class customer loyalty and customer retention strategies for B2C and B2B brands include everything from customer onboarding and customer feedback loops to gamification and partner offerings.
Customer onboarding comprises all activities and interactions involved in introducing a customer to your product or service. It’s different from awareness marketing, which is the introduction to your brand. Customer onboarding occurs after the sale and is handled by the sales team or a customer service/customer success team.
A frequently asked question (FAQ) is one of the most routinely used ways to engage with customers and prospective customers. It is a static list of commonly asked questions and answers located (usually) on your website.
A customer feedback loop is another easy way to improve customer loyalty. A customer feedback loop is not a tool. It’s the act of responding to customers in a meaningful way whenever they leave good or bad feedback. Many customer relationships have been saved or strengthened by simply acknowledging a customer’s complaint and working to fix the issue.
Customer management teams are about communication and relationships. They are widely used as part of a B2B customer loyalty strategy, working as a point of contact between customers or clients and your sales, customer service, and customer success teams.
Tiered loyalty incentives are focused on building long-term customer relationships by grouping customers into certain levels (or tiers), usually based on metrics you establish (commonly, this metric is amount purchased or number of referrals made).
Gamification has broad applications for customer loyalty, and many companies use some type of game playing as part of their overall customer loyalty strategy. Through gaming, companies try to drive short-term behavioral changes so players feel they’ve achieved something and, hopefully, change their behaviors over the long-term.
According the data from a recent LoyaltyOne study, 94 percent of customers who received an unexpected reward or special recognition felt more optimistic about the company, and 34 percent of them said the experience led them to give the company more business.
Allow channel partners (distributors, wholesalers, retail partners) to award loyalty program points for ecommerce transactions and purchases.
Loyalty is critical because, in most industries, customer acquisition costs can be prohibitively high. Most businesses need to retain new customers for at least 12 to 18 months to break even on the marketing investments made to acquire them. Only in the case of extremely large (highly complex, highly customized) products can companies break even on customer acquisition costs after just one purchase.
…after just one purchase from an online apparel retailer, an average shopper was likely to refer three other people…a customer that made ten purchases from an online apparel retailer was likely to refer seven different people.
— Bain & Company
You need those newly acquired customers to stick around and become repeat customers. Loyal repeat customers boost profits in two main ways: They tend to buy more as the relationship grows, and they refer others at a higher rate than their new counterparts do.
Loyalty marketing is a strategic marketing approach in which you focus on growing and retaining your existing customer base.
Customer loyalty strengthens marketing initiatives and campaigns. In general, loyal customers think highly of your brand, products, or services, which increases the chance that they will repeatedly buy from you. Loyalty marketing:
A loyalty program encourages customers to purchase products from, engage with, or use the services of a specific brand. Customers are recognized and rewarded across every channel based on monies spent or other some other interaction with your brand.
Whether it involves collecting points, taking a specific action, or spending a certain amount of money, a loyalty program is an up-front deal you make with your customers: If you engage with us, we’ll give you something of value in return. Incentives could include vouchers and discount codes, exclusive products, and exclusive access to better pricing, free delivery, or even free merchandise.
A customer loyalty program is a subset of a customer retention strategy, and it’s a well-established way to retain customers and build loyalty.
Loyalty programs have two purposes. They help acquire customers, retain customers, and grow customer advocacy. They are also designed to collect first-party customer data (name, address, email) while deepening relationships between you and your customers.
Customers are moving away from loyalty programs that only provide incentives and rewards for past purchases. They still want that, but they are increasingly looking for actual relationships with their favorite brands, particularly brands that can meet (and keep up with) their needs and desires. They expect recognition and reciprocity at every interaction point, not just during a transaction. They expect two-way communication; acknowledgment; appreciation; the opportunity to provide feedback; and proof that you know who they are, what they like, and what will provide value to them.
In short, they want you to know them, and they want you to show them that you know them.
If you can deliver those types of customer experiences, you will build a large and loyal customer base. But all of this requires data. A fully integrated CRM customer loyalty software solution makes it easy for you as a marketer to gather and leverage data to understand customers individually and drive desired actions.
When building a customer loyalty program, work to ensure that it has the following characteristics:
Customer loyalty marketing is moving beyond transactional "spend-to-get" programs to loyalty programs with an engagement focus. Customers want to do more than just buy. They want to engage with you, express their opinions, and share their experiences.
Consumers with high emotional engagement buy the brand 82% of the time whereas consumers with low emotional engagement buy it only 38% of the time.
To these customers, interacting with you is much more important than any one purchase. Therefore, engagement-based loyalty programs work to build those emotional bonds and nurture relationships of trust. These loyalty programs focus on long-term goals—build a team of advocates, boost the number of monthly referrals, or send more customers to various digital assets (mobile app, social media posts, landing pages, and so forth).
Brands are turning to omnichannel loyalty and engagement strategies to increase market share, entice customers away from competitors, and retain their most valuable customers.
More specifically, brands are increasingly investing in loyalty programs because
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