Customer loyalty is a key factor for business growth as repeat customers are generally the most predictable source of revenue and have a lower cost of sale over net new customers.
As a result, creating an effective strategy that engages and helps retain existing customers is a top priority for organizations.
What is customer loyalty and why is it important?
Loyal customers have built a habit of doing business with select brands and seeking them out even if it is a little inconvenient or if a competitor offers a similar product at a discounted rate. Customer loyalty offers several benefits that include and are not limited to the following:
- business referrals from happy and loyal clients;
- positive customer feedback on social media sites and other avenues;
- insights into customer purchasing behavior;
- more targeted marketing for existing customers; and
- a better understanding of customer needs.
How can you build customer loyalty?
Building customer loyalty requires understanding several key areas that can help ensure the company has an effective customer loyalty strategy. This strategy can help retain customers and convert prospects into happy and loyal clients.
Here are six ways to build customer loyalty for a business.
1. Stay in touch with customers through multiple channels
Keep existing customers informed about new products, promotions and any other relevant information that affects the products or service a customer generally seeks with that business. Tools like HubSpot and Marketo support multichannel communication and can maintain contact with prospective and established customers within the platform. These marketing automation tools natively support different digital communication methods or integration with popular email, SMS and social media tools.
These communications can also serve to remind customers about core company values on topics such as climate change, recyclable materials and support of nonprofit organizations.
2. Show that you know the customer
Platforms from Adobe and Woopra, for example, can ingest different data sources such as sales data and customer demographics and provide insights into the overall customer behavior. These data sets can then be used to guide the delivery of timely promotions and product recommendations based on the statistical likelihood of the clients taking that direction.
Big data and artificial intelligence have provided a huge boost in this area and are supporting initiatives that help deliver purchasing predictions based on a customer's unique attributes.
3. Capture and take advantage of customer feedback
Organizations must be able to capture and act on feedback from their existing customers. Many of today's top CRM tools such as Salesforce, Microsoft CRM and others are a great way to collect and centralize customer feedback from social media posts, customer calls, email surveys, phone surveys or suggestion boxes. By analyzing that feedback and creating a strategic plan, companies can better understand what they need to adjust to retain those customers.
4. Show appreciation with a loyalty program
While customers may not save tremendous amounts of money by participating in a loyalty program, even small rewards can showcase a business's appreciation for its customers. Providing discounts or customer-only promotions is an easy way to incentivize those buyers to keep coming back. These programs also give a company the means to gather useful data, such as identifying the most valuable customers and those at risk of doing business elsewhere. Additionally, a loyalty program can motivate a repeat visit as the customer aims to reach a certain goal or discount. For this to work, a business must ensure that the incentive is adequate and appropriate. Several platforms give businesses access to a loyalty program, including LoyaltyLion, Qualtrics Customer XM, TapMango and Salesforce Experience Cloud.
5. Stay relevant to the customer
A business must highlight its ability to evolve with the market and meet customer needs in order to keep customers engaged. The products don't necessarily need dramatic changes, but they need enough to show the company is keeping up with current events and customer needs. Being open and honest about these changes and why they happened can foster positivity as customers consider their buying options.
6. Know your numbers and measure them often
Building a loyalty program alone is not sufficient to increase revenue or maintain the support of repeat customers. A company must also measure and analyze key data points to gauge its effectiveness and course correct when needed. Those key measures are as follows:
- customer satisfaction scores or net promoter scores;
- customer lifetime value (annual revenue per client multiplied by the average number of years with a client, minus the client acquisition costs);
- the ratio of clients who made a repeat purchase over a year (the number of repeat customers in an annual period divided by the total number of clients during that year or period);
- yearly revenue generated by loyal and repeat clients vs. other clients;
- revenues based on loyalty level -- if different levels of membership are in place; and
- number of purchases associated with promotions for repeat clients.
Engaging with and retaining customers should be a top priority for any organization. One of the best ways to do that is through a loyalty program that rewards returning customers and draws new customers to the business. However, the best loyalty programs require the proper tools to gather and analyze data insights, marketing and sales tools to implement those insights and a strategy to bring it all together.