Customer loyalty is the holy grail of sales and marketing. Achieving a status where your consumers repeatedly and consistently purchase your products, is the ultimate prize for companies. It highlights the trust and value a customer gets from a brand, its products and its services and yet many companies stumble on how to retain their customer base for the long term.
What is customer loyalty?
Satisfaction is a rating. Loyalty is a brand.
- Shep Hyken
It's not uncommon to see customer satisfaction and customer loyalty used interchangeably. However, there are distinct differences between the two. Customer satisfaction is a measurement of the customers’ reaction to a product or service – if a product or service works well, it will likely have a high customer satisfaction rating.
Customer loyalty can be slightly more complicated.
Customer loyalty can be measured in two ways: behaviour and attitude. Behaviour is measured by how many customers continue to purchase a brand's products, rather than choosing a competitor, whereas attitude is measured by the customer’s continuous need for that product which cannot be satisfied elsewhere.
Customer satisfaction can be fleeting, but customer loyalty can build the basis for a brand’s success. A loyal customer base consistently purchases on an exclusive basis and they are unwilling to compromise what they prefer over a competitive company.
What does strong customer loyalty look like?
The most appropriate example of showcasing high customer loyalty is Apple. According to NPS Benchmarks, Apple’s NPS score in 2017 was a resounding 72, which is significantly higher than the average NPS score of the consumer electronics industry. Net Promoter Score®, or NPS®, is a metric used to measure customer experience and predict business growth. This proven metric transformed the business world and now provides the core measurement for customer experience management programmes the world round. The reason for Apple’s success? Apple, with its high attention to detail and streamlined processes to ensure great customer support, consistently ensures that its customer base knows what to expect at every step of a purchase and consumers know they can rely on the company to support them whenever they need it. Alongside the trust the brand has established, from the unboxing of an iPhone to its features – Apple doesn’t just sell products, it sells experiences.
What drives loyalty to a brand?
Customer loyalty is a measure of how likely a customer is to repeatedly spend money on a product or service that a business offers, brand loyalty is a measure of overall trust in that brand.
These definitions may seem one and the same, however, brand loyalty measures the likelihood that repeat customers who have regularly purchased goods from your company will try other products from your company before turning to your competitors.
An American Marketing Association study found that four main factors can help achieve brand loyalty:
When customers learn they can depend on your company for the products and services they need, they are more likely to return to your business first, before considering others.
A company that forms a meaningful bond with a customer, whether by sharing a founding story to which a customer can relate or through another method, can achieve widespread customer satisfaction among its buyers.
If your brand can demonstrate superiority over competing products, customers may be hesitant to buy from other companies.
Social media presence
Companies with a strong social media presence can further build a loyal customer base. Social media affords you a chance to share your company's story and show what you do and how you do it better than others. You can learn how to harness the power of an online community to increase the number of customers you have and grow your business.
Why should brands try to build customer loyalty?
Loyal customers are more profitable to a business, than new ones. Developing a strategy to boost customers' loyalty to your brand is critical to your business's long-term success.
It costs a business about five times more to gain a new customer, than it does to generate new business from an existing customer. Why? Because happy customers who live and breathe your product are your own personal brand ambassadors. They are more likely to rave about and refer your products and services to their friends and family and reach them at a level that your sales representatives can’t. It’s the ultimate form of word of mouth marketing.
In 2000, Bain & Company, in collaboration with Harvard Business School, conducted a study and analysed the costs and revenues resulting from serving and selling to customers over their entire purchasing life cycle. The results, which startled many executives at the time, showed that increasing customer retention rates by even just 5% increased profits by 25% to 95%.
It showed that repeat business and loyal customers not only retain and rely on the brand, they also naturally spend more. This presents an opportunity to cross sell other products and gain trust and retention for them as well.
The more loyal your customers are, the more it can put you ahead of the competition. Companies with strong brand loyalty can make them practically immune to competitive forces, which is crucial in markets that see frequent new players.
Is building customer loyalty as simple as having great customer service?
Attracting customers is one of the hardest parts of running a business; keeping them is even more challenging. Providing good customer service is important, but that's not enough anymore.
As we said earlier, customer loyalty isn’t just about satisfaction. It goes to the root of human behaviours and attitudes, and that’s why brands focus so much on their energy on trying to retain their customers, because it assures them that their product is worth coming back for time and time again. To build and maintain customer loyalty successfully, you need to give something back to your customers.
Loyal customers shouldn’t be taken for granted. It’s important that companies reward their existing and loyal customers by giving them personalised offers and personalised rewards which express appreciation. When you show your customers such appreciation, they feel valued and if they feel valued, they continuously come back.
The simplest and most effective way of rewarding customers is by building a customer loyalty programme. Investing time and energy in promoting customer loyalty should be an integral component of any business’ marketing strategy. As of 2020, the loyalty management market is worth USD 4.0 Billion and pushing brands to provide better and more creative solutions for customers. If you don’t invest in customer loyalty, you’re likely to lose more customers than you gain. Creating an effective and engaging loyalty and rewards programme, can support organisations with achieving their goals relating to profit figures and growth, as it can encourage customers to continuously participate with the product offering.
But a loyalty programme isn’t just something to throw together.
What makes a good customer loyalty programme?
A loyalty programme is a key part of your competitive strategy and, as such, it must meet certain criteria.
- Does the programme align with company capabilities?
- Will customers value the programme?
- Can competitors offer a more desirable alternative?
Any rewards programme that does not address these questions is likely to fail, as it may offer a short-term promotional advantage, but will not survive a long-term strategy.
A good customer loyalty scheme should:
- Include popular options
- Offer a variety of price points
- Promote special deals
Offering tailored and targeted rewards for customers can also have a much higher perceived value than generic special offers. Bespoke offers don’t just make the customer feel valued, they also help enhance your relationship with them. This acts as proof to them that you understand their needs, further establishing and building customer loyalty. It creates a positive emotional response to your brand by alluding to the fact that you have taken the time to focus on them and their needs which makes them feel appreciated.
Loyalty programmes also offer a very clear and direct way to communicate with customers; you can utilise your loyalty programme to promote sales, special events, and showcase new products as well.
Programme data can also allow you to track analytics and measure the effectiveness of customer loyalty on your sales. Measuring important retention metrics like programme engagement, repeat customer rates and frequency of purchase can allow brands to collect valuable data that they can model for successful future product launches. With digital interaction, you can create targeted marketing campaigns aimed at the ideal customer and dig deep on what makes that customer trust and value your brand.
A good rewards programme can attract new customers in several ways. First, if you offer points or discounts for signup, you will automatically be able to add new customers to your mailing list simply because customers want to take advantage of discounts. Meanwhile, if a customer sees a good loyalty programme where rewards are within reach, they are more likely to try your brand, simply because the rewards are easily accessible.
Building customer loyalty through a rewards programme might take a bit of structuring initially but working with a company to create one that is self-sufficient and allows plenty of room for growth is a start. A good, existing loyalty programme doesn’t need to go stagnant either – try adapting to optimise and improve by incorporating more marketing aspects.
The right mix of loyalty rewards can drive long term relationships
It’s important to remember that when considering your core demographic, you don’t end up excluding other customers who could hold additional value. By offering a carefully selected mix of rewards, you can appeal to consumers across all age and income groups, and potentially move some of those “second best” customers into the category of “most loyal.”
There are several reward types you should consider for your rewards-based loyalty programme. At Blackhawk Network, we offer flexible solutions that are fast, scalable and cost-efficient. Most solutions can be personalised and branded for you.
Physical and Virtual Prepaid Cards
The closest-to-cash reward that can be spent anywhere that MasterCard is accepted
Digital Codes and Rewards
Trying to please a diverse audience? Send a Select Code to be exchanged online for the ultimate in reward choice
Gift Cards and eGift Cards
Wide selection of popular brands, available in both physical and digital formats
Gift cards are more than a great gift idea. They’re powerful business tools that can help your company grow and build momentum on customer loyalty. Having a curated and personalised gift card programme can:
- Increase new customer acquisition
- Increase gift card sales in general
- Increase sales with tailored promotions
- Improve and maintain customer loyalty
- Improve employee engagement, where employees are rewarded for hard work
For a company to see a measurable return on their customer loyalty programmes, they must commit to the steps that build loyalty and cherish the existing consumers they have, whilst rewarding new ones they acquire. An organisation must be persistent about focusing all their marketing programmes and efforts on the goals and measures that will develop a loyal customer base and achieve success and growth in the long term.
Interested in finding out how a loyalty programme can support your customers? Fill out the form on your right and one of our customer loyalty experts will be in touch.