Customer loyalty definition
Customer loyalty is an ongoing positive relationship between a customer and a business. It’s what drives repeat purchases and prompts existing customers to choose your company over a competitor offering similar benefits.
Loyalty is a result of multiple positive interactions that build up a feeling of trust over time. Not every interaction has to be perfect. Customer loyalty can withstand a few negatives, although too many will break down the strength of the connection.
One way to look at loyalty is in the context of brand. People are loyal to a brand because they associate it with positive experiences, such as great customer service, feeling connected to brand values and ideals, or consistently high product quality.
Why is customer loyalty important?
There are a lot of stats circulating about the exact figure, but most experts agree that the effort of keeping a customer is substantially less than the effort of acquiring a new one.
This alone is a good reason to prioritise customer relationships and look at ways of nurturing them through your customer experience, marketing and customer loyalty programmes.
But beyond reaching for their credit cards, loyal customers can boost your business in other ways.
Whether you think of them as brand champions, Net Promoters or heroes of word-of-mouth marketing, your happy customers all have the potential to bring more business to your door. That may be by sharing their experiences on social media, leaving positive reviews or simply telling their friends and family.
Finally, many businesses report that loyal customers tend to spend more, and be less sensitive on price when they shop with a brand they have loyalty towards. And when there’s high customer satisfaction, you can expect a lighter load on your support and customer service teams too.
Loyalty over time
Customer loyalty can fluctuate over time. An individual may be strongly loyal at a certain point and become less so (or conversely, start off neutral and develop loyalty). You might notice that loyalty shows up in their purchasing patterns, but doesn’t lead to related behaviours like recommendations, referrals or positive reviews.
Because of its power and its complexity, it’s important to track customer loyalty over time, using a range of metrics that capture the entire customer journey through business data and customer feedback. That way, you can understand which parts of your customer base should be your priority, what drives loyal behaviours, and how you can encourage customer loyalty towards your company.
How to measure customer loyalty
Loyalty isn’t a tangible phenomenon, but it’s still one that you can measure. The best way of doing that is to use a combination of different metrics. These include:
NPS (Net Promoter Score)
NPS gives you an indication of customer emotion towards your brand, and willingness of your customers to advocate it to friends and family. It’s a good metric to have in the mix as it acts as a solid proxy for customer satisfaction and likelihood to stay loyal in the future.
Customer engagement outside of purchases can be an indicator that someone is personally invested in your brand. Measurable data around engagement could include social likes and reposts, reviews left on your site or elsewhere, email click-throughs, registration of an account on your website and membership of any loyalty programmes you have.
A track record of regular purchases is a must-have metric for loyalty. It’s also worth tracking whether your customer makes purchases across different departments and product categories, as this shows that you’re front of mind with them whatever they need.
CLI (Customer Loyalty Index)
CLI is a metric specifically designed to measure loyalty, and in particular a customer’s intention to remain loyal in the future. It’s measured using a specific survey questionnaire.
Ways to improve customer loyalty
You can build customer loyalty by excelling at the things that drive it. Here are 4 key drivers of customer loyalty.
Great customer service
They may love your product or service, but if your customers don’t feel valued and respected they’re unlikely to form a positive emotional connection to your brand. As well as friendly and pleasant service when they make a purchase, a key factor in good service is how you receive feedback and what you do with it.
Customers who feel listened to and looked after when something goes wrong, or if they need support after a purchase, are likely to have positive emotion towards you in the future, and to tell others good things instead of bad – whether that’s via social media or face to face. Increase customer communication and customer satisfaction should follow.
A deep understanding of the customer journey
Each purchase is part of a larger picture – the customer journey. This includes your marketing and customer-focused advertising, your retail experience (whether online or offline), reviews about your products and those of your competitors, and what happens after a sale is made.
Together, all these touchpoints have an influence on customer loyalty. By considering the journey as a whole you can target your efforts strategically to boost that loyalty factor. That might mean improving response times, ironing out pain points in your website or booking engine, or simply managing customer expectations by clearly communicating the way you work.
Long-term strategy, not short-term reaction
Why do customers leave companies they’ve been loyal to? Overwhelmingly it’s because they don’t feel the company cares about them. In the short-term, it’s relatively easy to please most types of customer with introductory discounts and loyalty perks. But what about customers who’ve been loyal for longer? Too often, businesses take these kinds of customers for granted, assuming that their attachment to the brand is strong enough to be self-sustaining.
In fact, all customers need to feel cared about in order to stay loyal. With a long-term customer retention strategy, you can proactively improve the experience for every segment within your customer base, and make them all feel suitably valued.
What does employee experience have to do with customers? More than you might think – it can actually be a strong driver of loyalty. Take Starbucks for instance, where 87% of customer affinity for the brand is driven by how it treats its employees. Customers warm towards brands who treat their people well.
But more importantly, engaged employees who are part of a company culture that values them are much more likely to extend the same positive treatment towards customers. Giving staff autonomy, respect, a good work-life balance and pay that they feel is fair for the work they do will all feed into your customer loyalty outcomes.