Customer Loyalty
People who had a bad experience with a brand, but the brand fixed it, are more loyal than customers who never had a problem in the first place. - Leonie Brown
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What is customer loyalty?
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.
Loyal customers
Purchase repeatedly
Use what they purchase
Interact with you through a variety of different channels
Are your biggest proponents, sending others to you and providing proactive (and reactive) positive feedback
Why is customer loyalty important?
Customer loyalty is important for many reasons, not least because the effort of keeping a customer is substantially less than the effort of acquiring a new one. Why would you spend extra money to make a sale if you didn’t have to?
Loyal customers produce higher conversion rates. Existing customers have way higher conversion rates than new ones. The average conversion rate of a loyal customer is 60% to 70%, while that of a new one is 5% to 20%
Retaining customers is much more cost-effective than acquiring new ones. Merely a 5-percent increase in customer retention can boost profits by 25 to 95 percent.
On the flip side, nearly half of all customers will switch to a competitor after just one bad customer service experience. Creating positive experiences for your customers builds loyalty. But allowing negative experiences to happen can lose them for good.
A repeat customer has a 60-70% chance of converting. - Paul Farris
How to measure customer loyalty
Businesses always want to increase customer loyalty. But many struggle to evaluate the success of their strategy.
Some companies measure loyalty by the length of time they’ve had a relationship with a customer. Others might think of customers who’ve stayed with them through tough times, like service interruptions or growing pains. Many businesses use metrics, such as customer churn rate, to gauge loyalty.
For the former, use your customer service software to quickly access key metrics:
Customer retention rate measures the number of customers a company retains over a given period of time. Any business that wants to succeed must keep a close eye on this metric.
Customer churn rate represents the percentage of customers who stopped buying your product or using your service. Churn tells you which customers aren’t loyal, leaving you with those who are.
Behavior is just as important to track as metrics when it comes to understanding customer loyalty, though behavioral data can be harder to wrangle.
Social media behavior: Routinely search by keywords related to your brand on social media to see what customers are saying about you.
Buying patterns: Look for customers who regularly do business with your company—they’re loyal by default, especially if their spending grows over time.
How to increase customer loyalty and retention
One thing’s for sure: Loyalty must be nurtured constantly. It’s not something you can work on once and automate later.
According to leaders, many qualities we value in our personal relationships also apply to our relationships with brands. Among them: consistency, being a good listener, acting upon what you learn, and being honest.
Taking a customer’s entire experience into account, the ideal way to build loyalty is a mix of internal processes and emotional factors.
Reduce customer effort One way to drive customer loyalty is to lower customer effort. This means designing experiences that are simple to understand and navigate. A seamless experience makes customers more likely to return.
Provide excellent service Companies known for inspiring customer loyalty with great customer service say that being proactive is key. That means anticipating your customer’s next question and helping them head off problems before they start. Excellent customer service positions your brand as a strategic partner, not a one-off problem-solver.
Create an emotional connection There are many ways to form a connection with your customers, but you have to start by getting them emotionally invested in your brand. A top-notch rewards program or social media influencer promotion won’t be effective without first earning emotional buy-in.
Start a loyalty program
Once an emotional connection is there, customer loyalty programs can be a great way to increase customer retention. As part of a loyalty or rewards program, buyers receive discounts or freebies after reaching certain thresholds, like having been a customer for one year. This incentivizes customers to make more purchases.
📝 Case Study: Starbucks Customer Loyalty Program
Download this case study to learn more about how we help Starbucks automate offer assembly, offer management, and reward fulfillment, as well as measurement and tracking of key performance indicators (KPI).
🌐 Web3.0 - Good Reads
The Web3 World, by Grace Isford
Web3 in a nutshell, by Eshita
A thoughtful critique on Web3, by Moxie Marlinspike
A rebuttal to Moxie, from Vitalik Buterin
The Architecture of a Web 3.0 application, by Preethi Kasireddy
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