What is Customer Loyalty: definition and tips how to build it
What’s so amazing about customer loyalty? Everything! In sales and marketing, it’s an essential concept for customer-oriented companies that pursue long-term relationships with end-users. In the best scenario, it means that a client that has purchased your product or service becomes a regular customer who also recommends you to others.
Loyal clients won’t switch to your competitors, even when the market is crazy about their cheap products and high-quality services. That’s why it’s worth knowing how to build customer loyalty and use it for your company’s success.
What is customer loyalty?
Marketing experts define customer loyalty as preferring one company’s services or goods over its competitors when making purchases.
Client loyalty is also viewed as a business model in marketing. It’s applied when the company strategically plans to invest funds in strategies, improvements, and customer loyalty programs, expecting that the sales plan will be met or exceeded.
For example, marketers expect a high product quality or its new features to lead to client satisfaction, which results in client loyalty and better sales performance.
Customer loyalty and Net Promoter Score (NPS)
You can measure customer loyalty and satisfaction with Net Promoter Score (NPS). This indicator gives you an idea of how much a client is attached to your brand, and if they are ready to recommend your company.
To calculate it, all you need to do is to ask your customers a simple question “How likely are you to recommend us to your colleagues and friends on a 0-10 scale?” Then subtract the percentage of Detractors (those who gave 0-6 as an answer) from the percentage of Promoters (those who put 9-10).
But note! Customer satisfaction doesn’t always mean loyalty.
If a client is happy with the service or product, it doesn’t guarantee they remain loyal to you. Indeed, being satisfied boosts brand loyalty and trust. But it doesn’t prevent a client from deciding to purchase solutions from your competitors. There are lots of factors that influence the choice.
An effective loyalty strategy seeks to meet the needs of the client, going above and beyond what is feasible and responding to their requirements in a personalized way. You need to know your customers’ preferences, understand their needs, and respond or, even better, exceed their expectations.
Client exit barriers
Clients have a tolerance zone. A small upsetting incident has a low chance to ruin the relationship if they still feel that the overall quality is high. Customers also won’t leave you if there are not so many good alternatives, if the switching price is high, and if they value their relationship with your company. This connection works as an exit barrier.
There are several types of barrier ties, they include:
- Legal ties (contracts),
- Geographical ties,
- Economic dependence,
- Technological ties (shared technology),
- Time and planning ties,
- Knowledge ties,
- Ideological ties,
- Social, cultural, or ethnic ties,
- Psychological ties.
Consequently, the relationship can break if:
- The client relocates to another area, out of reach of the company’s service,
- The client doesn’t need the business’s services or products anymore,
- The market offers more affordable alternatives,
- The relationship ties are in decline,
- The company doesn’t solve a critical incident properly,
- The company increases the price without explanation.
This was a brief insight into the technical side of loyalty. Now, let’s see customer loyalty from another point of view — feelings and beliefs, connected with the brand philosophy.
Emotions and customer loyalty: start with “Why?”
A scientist and blogger Simon Sinek claims that “loyalty is emotional and not rational.” Your service or product needs to be good, but it doesn’t always have to be the best.
Instead, loyalty starts when you know the answer to this question: “Why you do what you do.” It doesn’t even concern money, it’s all about why your business was created and what vision it has. Why does your company exist? What beliefs and ideals do you stand for? If people have the same philosophy, they will leave your competitors and start working with you.
According to Sinek, the task of every brand is to stick to your philosophy and always do the things your company believes in. Such an approach is named authenticity. Not everyone does business this way, and there are not so many genuinely authentic organizations today, as it requires a lot of prior research and professional branding work.
Therefore, every customer loyalty strategy should start with “why” and not with “what” or “how.” In this case, your clients, team, and market, in general, will see your vision and strategy, and it will be easier for them to stay loyal.
Some people are so loyal to their favorite brands that they even get tattoos with their logos. No one gets surprised when they see permanent logos of Coca-Cola, Nike, Apple, or Harley Davidson tattooed on someone else’s body. And we think these images speak for themselves — it’s not just loyalty, it’s having the same philosophy deep inside your heart and mind.
A lecturer and consultant Juan Serrano compares growing loyalty to planting trees. If not taken care of, they stop growing at some point. Their roots are in-grown, and their branches are small and don’t bear fruit. The same happens to company clients and team members. Having no opportunity to develop together with the business, they get stuck on the same level.
If planted properly, trees grow well and give a generous yield — same with loyal customers who always know that you take care of them and return to you.
Customer loyalty is a complex thing. On the one hand, it can be treated as a marketing strategy that has its methods and metrics to measure its success. On the other hand, it’s a philosophical concept that needs to be elaborated beforehand, or at least at the beginning of the deployment of each business, so that your brand attracts the right target audience that stays loyal.
We wish you loyal clients, and we are ready to help you build trustful relationships with your audience — our reliable all-in-one CRM toolbox allows you to clearly share your brand vision and take good care of your leads. Use it for free or get a personalized plan. Give it a try and share your feedback with us!