Having a core of loyal customers is great for your business
. Through these customers, you get a continued source of sales and revenue, all without having to spend a penny on customer acquisition.
In this article, we’ll look at what customer loyalty is, as well as talk about why driving customer loyalty is important.
Customer Loyalty Definition
Customer loyalty comes in a variety of forms. On one level, it’s when customers continue to buy from a single brand or store. However, it also encompasses customers referring people they know to a service, or customers advocating for a brand in their day-to-day life.
Apple is a brand with high customer loyalty. It’s common for people to queue up all night just to get the chance to spend hundreds of pounds on a new iPhone.
Additionally, many people will not just buy an iPhone, but will also purchase other products in the Apple ecosystem. The most dedicated Apple followers will recommend the brand to people they know or post about it on social media.
It’s not just global brands that can drive customer loyalty. Customer loyalty is also why people go out of their way buy coffee at a certain coffee shop, why they train CrossFit three times a week, or why they buy every book written by an online guru.
In the digital world, gaining customer loyalty can be hard to do due to how easy it is for people to switch to a competitor. Research by VisionCritical
suggests customers in the U.S. stop shopping with a brand after only two bad experiences.
However, it is still possible for those in the digital space to have loyal customers. Slack
have developed a core of loyal customers by creating excellent products with brand messages that effectively target their users. This has allowed them to retain customers despite the high level of competition in their industries.
Why is Customer Loyalty Important for a Business?
Having loyal customers can be great for business. Some studies suggest it costs less
to sell to existing customer than gain new ones. Others
say that existing customers spend more than new ones. Additionally, loyal customers can drive referrals and increase your customer base.
These are all factors that will help with your business’s bottom-line and, ultimately, drive you towards success.
Additionally, high customer loyalty suggests your business or product is doing well. It shows that people find value in your product, and that you are targeting your sales at the right audience.
If you have low customer loyalty, it could suggest that there is a problem with your product, your customer experience, or that you’re targeting your product at the wrong group.
How to Drive Customer Loyalty?
Far and away the most important factor is to provide customers with a product they love and get value from. People are loyal to Apple, Slack, and Spotify firstly because those companies produce world class products.
However, once you have a great customer experience, there are things you can do to increase the chances of a customer becoming loyal.
such as stamp programs, points systems, and VIP experiences can encourage buyers to make repeat purchases. Additionally, referral schemes where you reward customers for telling others about your product can increase the chance that customers will advocate for your brand.
How to Measure Customer Loyalty?
There are several measurements you can use to define customer loyalty. Calculating your customer retention
rate or your rate of customer churn
will show you how many customers you are retaining and losing over a period of time.
Alternatively, you could look at the percentage of customers who make a repeat purchase from your business. If you have a loyalty program set up, you could look at how many customers sign up to the program and how many go on to cash in their reward.
It’s easy for brands to focus on bringing in new customers and neglect the ones they already have. However, if you don’t take steps to build customer loyalty, you may be missing out on a significant source of revenue and sales.