You can probably guess why customer loyalty is important for any business that wants to achieve success.
The main reason? Loyal customers keep a business running and provide long-term connections. These connections play a key role in how a company develops and how it interacts with its base.
What's more, loyal customers provide insight that can help a business understand how to draw in more consumers.
In this post, we'll cover why customer loyalty is important and how it can be measured with market research. Let's dive in!
What Is Customer Loyalty?
Customer loyalty refers to shoppers who continue to purchase from a brand for a significant period. However, more goes into customer loyalty than simply sticking with a brand for a long time.
Take yourself, for example. Are there brands that you love, and have purchased from for a while? The answer is likely yes, and this is a perfect example of being a loyal customer.
Customer loyalty, at its core, is about a brand's connection to a customer.
There has to be a reason for a customer to continue to purchase from a brand, and that reason is often that they've formed a bond with that brand.
This emotional connection is what keeps the customer coming back. By emphasizing a connection to its customers, brands will see loyalty rates increase.
Why Is Customer Loyalty Important?
Customer loyalty is important because it's the foundation of any strong business.
Brands that have high churn rates do not have a stable foundation, and will likely fail sooner than later.
Instead of having one main benefit, customer loyalty has provided many positive contributions to a business.
Below are a few benefits of high customer loyalty rates...
Stable Company Growth
It's no secret that dedicated, loyal customers keep brands afloat. This creates a stable foundation for brands to continue to expand their services and offerings.
Adding onto this, customer loyalty has a direct link to increased revenue. Studies have shown loyal customers are far more likely to spend more with brands they love.
Much of this comes down to trust in the brand's products and services. Since customers like what they buy, they are more likely to spend higher amounts for quality offerings.
As a result, brands will see an increase in revenue, leading to significant growth.
Aside from higher revenue, customer loyalty also creates padding during economic downturns.
When a business has a steady group of repeat customers, this lessens the blow that financially trying times can create.
Reduce Marketing Costs
Attracting new customers can be expensive and in most instances, there's no way around that. You have to spend money to make money, right?
But, when businesses have a comfortable base of loyal customers, they can focus less on marketing campaigns that are targeted toward new customers.
For example, a brand may spend a significant amount of money on multiple campaigns to attract new customers.
However, that same brand could be spending less on multiple campaigns and instead focus their efforts on cultivating a positive experience for their existing customers, leading to higher loyalty rates.
You'll likely see higher marketing ROI costs too.
In the same vein, established customers need less convincing to shop with a brand, leading to lower advertising costs.
This is not to advocate against attracting new customers.
Of course, brands must always strategize how they can expand their reach. But focusing solely on new customers can be a big mistake, especially when there are bonds that can be strengthened with current customers.
Earning Customer Feedback
Collecting customer feedback is incredibly valuable when increasing loyalty rates.
Without knowing what customers think about a brand, every business move is like a shot in the dark. They may hit the mark, or miss it completely.
Customer feedback helps brands identify...
- Key pain points
- Service improvements
- How to improve customer loyalty
- Comparisons to competitors
Perhaps the most important aspect of customer feedback is the discovery of pain points. These simply refer to common issues customers face when interacting with a brand.
Using this customer feedback, brands can fix these issues, leading to higher rates of customer satisfaction.
How Can You Measure Customer Loyalty?
Thankfully, measuring customer loyalty isn't a difficult task, especially when working with a customer satisfaction company.
Many different market research methodologies shed light on loyalty levels and how they can be improved.
When partnering with a market research company to obtain this data, brands can discuss the best tools to use based on their specific needs.
Customer Lifetime Value
A common customer satisfaction metric used to track loyalty levels among customers is lifetime value.
Customer lifetime value (CLV) refers to the total revenue a customer will generate throughout their relationship with a brand, from beginning to end.
This metric is useful, especially because it helps brands track their budget. By using this metric, they can spend the proper amounts on retaining/attracting customers.
Additionally, tracking CLV will show brands which customers are high priority and which ones are low priority.
Just as importantly, CLV also reveals data on which products are successful and which aren't as popular. This allows brands to allocate their budget to products that are worth it, ultimately cutting costs.
Customer Churn Rate
Customer churn rate refers to the amount of customers that stop using a brand's services within a certain period of time.
This metric is valuable for many reasons, mainly because it's a clear indicator of how healthy a brand is.
For instance, high churn rates indicate a problem, whereas lower churn rates are a good sign.
By measuring churn rate, brands will be able to tell which customer segments are most likely to leave. As a result, the brand can then specifically target this segment and (hopefully) prevent them from leaving.
What's more, churn rate can help predict future revenue.
Unsurprisingly, high churn rates can cost a brand a large amount of money. Tracking churn rates will allow brands to make necessary changes before this happens.
Net Promoter Score
Measuring a brand's net promoter score (NPS) is one of the most important metrics to track when determing how loyal your customers are.
An NPS question asks the customer how likely they are to recommend a brand. This simple question is very telling, though.
Conducted via a Likert scale, customers will rate their likelihood to recommend a brand from 0 to 10, with indicating not likely at all and 10 indicating very likely.
Responses are grouped into three categories:
- Promoters
- Passives
- Detractors
It's pretty simple: promoters are massive fans of a brand and will rep it all day long, passives like the brand but could be swayed by a competitor, and detractors aren't fans.
This is one of the easiest ways to discover who your loyal customers are (promoters) and how you can cater to them.
Watch our video for a more detailed explanation of NPS and how to calculate it.
Customer Surveys
Customer surveys measure overall satisfaction levels within a brand, product, or service.
These surveys are highly customizable and will tell brands how they can improve services based on accurate customer feedback.
Designed to be short and user-friendly, customers will take this short survey and be asked a range of questions related to their experience with a brand.
Similar to what we discussed earlier about the importance of customer feedback, these surveys will highlight areas of improvement that brands can focus on.
As a result, these improvements will lead to stronger connections between customers and the brand.
Recommended Reading: Ultimate Guide to Customer Satisfaction Surveys
Understanding the Customer Loyalty Funnel
Used by brands to navigate and understand the specific stages of the customer journey, a loyalty funnel provides insight into what turns new customers into loyal brand advocates.
As we discussed earlier, retaining customers is just as (if not more) important than acquiring new ones.
A customer loyalty funnel focuses on how brands can retain current customers and strengthen those connections.
The different stages included in the customer loyalty funnel are:
- Awareness
- Research
- Purchase
- Regular use
- Repeat purchase
- Referrals
Stage 1. Awareness
Just as it sounds, this stage in the funnel indicates how customers become aware of a brand.
This may be through a variety of outreach strategies such as:
- Word-of-mouth referrals
- Social media
- Advertising efforts
- Online searches
Stage 2. Research
This stage in the customer loyalty funnel refers to the time customers spend considering, or researching, a brand to decide if they want to buy.
A critical point in the funnel, the research stage is when the "best" brand wins, referring to when customers choose one over other competitors in the industry.
Common research methods include reading reviews, comparing offerings, looking at a brand's website, and so on.
Stage 3. Purchase
This stage is when the customer has completed their research and chosen a brand to buy from.
However, this stage can also indicate the customer has had other favorable interactions with a brand, like signing up for a service and so on.
The main point is that the customer has chosen a specific brand to interact with on some level.
Stage 4. Regular Use
At this stage in the funnel, the customer has now become comfortable with their chosen brand.
This means that customers are regularly interacting or buying from a brand.
Additionally, during this stage, brands can begin to forge lasting connections with customers by encouraging them to use their products on a regular basis.
At this point, the shopper has been safely secured and can now be turned into a loyal customer.
Stage 5. Repeat Purchase
Whereas the previous stage is focused purely on encouraging product use, the repeat purchase stage focuses on encouraging customers to regularly invest in a product/service.
Usually, this stage emphasizes the effectiveness of marketing campaigns and other strategies to prompt customers to buy from a brand.
Now that the customer has been secured as a regular user, they can easily become a regular buyer with the proper tactics.
Stage 6. Referrals
This stage is when customers are satisfied and willing to recommend a brand to others. As a result, this can lead to more business and new customers that can turn into repeat shoppers.
The goal of this stage is that customers have had a positive experience with a brand, and are now using word-of-mouth marketing strategies to promote it to others.
How to Enhance Your Current Customer Loyalty
By now, you're aware that focusing on current customers is key to a thriving brand.
We've covered some key metrics to measure and how they can help improve loyalty, but now we'll cover specific measures brands can take to secure current customers.
Have Great Customer Service
Poor service is a sure-fire way to lose customers - and fast, at that!
On the flip side, a great customer service experience can easily turn a one-time shopper into a loyal fan of a brand. In fact, most shoppers admit that customer service directly impacts their loyalty to a brand, product, or service.
Below are some tips for creating a positive customer service experience:
- Focus on customer needs
- Efficient problem-solving
- Availability
- Going beyond expectations
Incorporating these into customer service strategies will ensure shoppers have their needs met should any issues arise.
Customer Loyalty Rewards
Customers will gravitate towards brands that incentivize actions.
Meaning, customers are rewarded for common actions like repeat purchases, engagement, and so on.
When brands offer perks for this kind of behavior, customers appreciate the gesture and will continue to do business with them. Common perks include things like discounts, bonuses, and other related deals.
Customers will begin to feel a connection with brands that offer these perks, as it increases satisfaction levels. What's more, it's a great way to stand out against rival brands that don't offer these perks.
Act on Customer Data and Feedback
Acting on customer data and feedback will 100% increase their satisfaction rates.
But how can we be so sure?
Because when brands invest in customer loyatly surveys and other research tools, they're getting feedback straight from the source: their customers!
So instead of thinking a new strategy will maybe benefit their customers, brands can use the data to be sure their improvements will have a positive effect.
Using customer data and feedback eliminates the guesswork, ensuring brands will make improvements that directly impact shoppers.
Personalize the Customer Experience
A personalized customer experience automatically enhances their relationship with a brand.
Personalization relies on key customer factors like needs, preferences, and behaviors. This data can then be used to create more targeted efforts that address the specific qualities of a customer segment.
And trust us, customers notice when a brand offers personalized services and recommendations.
The reason this is so important is because customers can create emotional bonds with a brand that offers personalized services and messaging versus one that doesn't.
What The Future of Customer Loyalty Looks Like
The future of customer loyalty tools will likely emphasize increased personalization efforts, smooth omnichannel experiences, and stronger customer relationships.
Going along with this, loyalty programs will continue to evolve with the ever-changing needs of customers. This will include a more dynamic reward system, perks, and so on.
It's also key that brands don't get lost in the details of how they can secure loyal customers, and instead pay an equal amount of attention to creating emotional bonds with them.
This emphasizes the importance of personalization and integrating a more "human" aspect into customer loyalty systems.
FAQ About Customer Loyalty’s Importance
We know that customer loyalty is essential for brands that want to have continued success. Before we wrap up, let's review a few key points that we covered in this post!
What is the value of loyal customers?
Loyal customers have significant value in the success of a company. Without them, brands will struggle to maintain consistent business.
Loyal customers provide lasting business and bonds, creating a strong foundation for a brand to grow. Customer loyalty contributes to high rates of satisfaction, increased revenue, and positive referrals.
Why is customer loyalty a strength?
Loyal customers drive business, it's as simple as that. These lasting bonds work to enhance growth and can also help create tailored customer satisfaction efforts.
What's more, loyal customers will continue to make repeat purchases with a brand, increasing revenue.
What is the key to customer loyalty?
The key to customer loyalty is a brand's willingness to cater to its loyal shoppers. This means prioritizing their experiences, taking time to gather their feedback, and making improvements based on their suggestions. These actions may take some time, but are necessary to secure shoppers and boost loyalty rates.
Contact Our Customer Satisfaction Company
Drive Research is a market research company based in New York. Our team has years of combined experience in measuring and improving customer satisfaction and loyalty for brands across the county. We will work with your brand to help establish a loyal base through surveys, focus groups, customer interviews, and more.
To learn more about our market research services, contact our team today.
- Message us on our website
- Email us at [email protected]
- Call us at 888-725-DATA
- Text us at 315-303-2040
Lark Allen
As a Content Marketing Specialist, Lark has a strong background and passion for creative, professional, and journalistic writing. She is also a self-proclaimed music freak and 90s enthusiast.
Learn more about Lark, here.
