Aug 10, 2022

The benefits and value of customer loyalty explained

What is customer loyalty?

Put simply, customer loyalty is an exceptionally positive relationship between a brand and its customer.

It describes a situation whereby a customer is retained and they interact and buy from your business over and over again.

A business that cares for its customers, offers enjoyable, memorable, positive experiences, and delivers a solution to a need or want, is a business that stands a good chance of building loyalty.

The key to succeeding is placing customer value at the heart of every product or service you offer, prioritising customer satisfaction, for example by offering a rewards programme, encouraging exceptional customer service will build customer relationships across every channel.

Why does a business need a customer loyalty programme?

In a highly competitive, over-saturated market, loyalty can get you ahead of your rivals. With consumers being spoilt for choice and won over on price, loyalty matters now more than ever. Striving for an increase in customer retention should be high on the agenda.

It’s reported that loyal customers spend 67% more on products and services than new customers. Even though your most loyal customers only make up 20% of your audience, they provide up to 80% of your revenue. Putting this into context, experts say if a business can improve its customer lifetime, retention rate by just 5%, they can increase profitability by 95%. When you put it like that it’s hard to disregard the notion of customer loyalty.

Loyalty is also very cost-effective in terms of marketing. Acquiring a new customer base can cost five times more than retaining current customers. Consumers will buy from brands they trust, so if you already have that you don’t need to nurture them as much as a new customer. New customers however need to be marketed to and require a lot of your attention to convert.

And if we haven’t convinced you enough yet, did you know loyal customers are your best brand advocates? They’ll buy from you, share their experience with others, and tell prospective customers about you. Word-of-mouth really is marketing gold - you can’t get much better than that!

Benefits of customer loyalty

Here are five areas your business will benefit from if you have a good customer loyalty strategy in place.

A loyal customer base:

  1. 1. Will spend more
  2. 2. Give you a competitive edge
  3. 3. Drive word-of-mouth marketing
  4. 4. Reduce costs - retaining customers costs less than customer acquisition
  5. 5. Builds a highly credible brand reputation


How do you measure the value of customer loyalty?

Measuring customer loyalty is an exciting part of the marketing puzzle because loyalty is an emotion, it’s knowing how many valuable customers you have, how many hold an emotional connection with your brand. it reveals how  customers feel about your brand. There are a variety of metrics used by professionals today, here are three explained:

1. Net Promoter Score (NPS)

This is a customer loyalty score that measures how willing your customers are to recommend your product or service to others. And it’s measured by answering one simple question: How likely are you to recommend our product/service?

The beauty of this is, not only does it tell you how satisfied a customer is, it also gives you an indication as to whether they will buy from you again. A happy customer is a satisfied customer!

The customers answer with a value between 1 to 10, and their response determines which category they fall into:

  • Promoter (scores 9 or 10): satisfied and likely to repeat buy
  • Passive (scores 7 or 8): has a lack of commitment and enthusiasm
  • Detractor: (Scores 6 or lower): dissatisfied

The detractors need managing. The customers in this segment have the potential to cause brand damage if they share a negative experience with others, particularly if they make it public online.

To calculate your brand’s NPS, subtract the percentage of your detractors from the percentage of your promoters.

2. Conversion rates

This is one of the ways to measure how engaged your customers are online. The conversion rate for a brand is calculated when you divide the number of conversions by the number of unique visitors, and then multiply by 100.

As an example: If your page has been visited 2000 times and you’ve sold 25 products, you have a conversion rate of 1.25%.

This means that 1.25% of your visitors will make a purchase.

3. Repurchase ratio

This type of metric is dependent on the type of business you have, and how you monetise it.

Let’s imagine you are operating with a subscription model.

The repurchase ratio in this instance is simply the number of customers who keep their subscription service, divided by the number that cancel after a certain period.

Get started

Now that you are clear on what customer loyalty is and the benefits it can offer to your business, we encourage you to start implementing a customer loyalty programme, asap. 

Businesses must consider customer loyalty as a key component of their business model and part of the marketing strategy. It’s crucial.


If you’d like support implementing a customer loyalty programme, get in touch via our contact form or call 0203 758 4313 and one of our team can help you.