Understanding Customer Loyalty: Why You Should Focus on Retention

Return customers worth their weight in gold

When customers like your product, trust your brand and keep coming back for more it means they developed loyalty. If the customer loyalty level is high, they won’t desert you for your competitor, even for a better deal. Eventually, they start recommending your services and bring in new customers.

If you’re still not convinced, here are some more facts and numbers.

Based on the research, 40% of the businesses’ ROI comes from your regular customers. And if you’re operating a small business, your return customers worth their weight in gold — they come back frequently and spend more than new customers.

In fact, the average amount that one return customer spends on a purchase is approximately 5 times higher than a new one.

The other positive thing about return customers is that based on their purchase history they make it easier for you to analyze the pattern, plan out new strategies (whether you should integrate a new payment method or stock up on the most popular items), as well as forecast the revenue.

And there’s more. According to Harvard Business Review, the investments that you put into engaging new customers are 5 to 25 times higher. Calculate the money that you spend on marketing and advertising and compare it to what you’re doing to keep the return customers happy — making sure that your service is up to standard and, perhaps, adding a few extra benefits.

Moreover, if you manage to raise the number of your loyal customers by 5% your profit may increase by somewhere from 25% to a staggering 95%.

So if you figure out a strategy that will keep your customers satisfied, consider that you’ve cracked one of the most sought-after codes in the eCommerce strategy. But you cannot keep everyone happy all the time. Or can you?

Three Types of Customer Loyalty

There are 3 types of loyalty but your ultimate goal is to build an unbreakable bond

Before you start chasing after your future forever-devoted customers and work your magic on them, let’s figure out what the main types of loyalty are.

Technically, we can divide your regular customers into three groups: the ones that are with you because they find your services convenient, those who are there for the money value, and those who developed an emotional bond with your shop or brand. Although all of them are valuable, some are truly precious.

Convenience

Some customers return to you mainly because they find your store convenient. In physical retail, it might be because your shop is located near their house. In the eCommerce space, it can be because of the services that you offer, the payment method, express delivery service, or you’re might be selling something that other merchants don’t.

This type of customer wouldn’t mind changing the store if they happen to find another one that sells the same products or services for a better price. There are no feelings involved, it’s just a matter of habit.

Money Value

And then there are people who return to your shop because of the prices and offers that you make. If you’re offering a loyalty program and, let’s say, give them a free apple every time they’ve bought 10 of them, they will keep on visiting your shop because they would buy those apples anyways.

But if the other shop makes a deal that every 6th apple comes for free, they will switch the shop without thinking twice. Unless your apples are exceptional.

Emotional Bond

An emotional bond is the strongest one and that’s what you need to aim for. Once your customers developed strong feelings, it would be hard to part ways. One of the best examples of emotional bonding with a company is how we choose between Coca-Cola and Pepsi drinks. Some people just prefer one of them, even though, and let’s be honest here, they taste nearly the same.

If you managed to establish relationships with your customers that are built on their emotions, they will never leave you. Even if your service gets worse with time.

On the contrary, they will defend and keep promoting your brand until the end. In reality, only a few brands get to this level of loyalty.

Usually, it takes time to build an emotional bond with a customer and you might have to try several approaches until you find that secret ingredient that makes people fall in love with your brand. You may never reach it but the trick is to keep on trying to get close to your customer. They need to feel that they are special and you care for them specifically.

A Few More Tips on Building Up Customer Loyalty

We all know that honesty is the best policy but it wouldn’t hurt to use some tricks and try out new strategies to raise the rate of retention. And once all your customers are in love with you, you can take a short break.

Here are a few ideas that you can implement.

Work on Your Customer Service

The best way to show your customers that you care for them is by communicating with them. And that’s why your support should be impeccable. Not only you have to be quick, precise, and efficient, but you should also be one step ahead of them and predict the issues that might occur as well as guess their needs.

It might sound too difficult to achieve, but there are tools that can help you with perfecting the work of your support team and build up customer loyalty.

Build Your Community

The power of community deserves its own blog post. You can use your social media channels to connect with your customers and make it a safe space to share their experiences. If you don’t have enough time or resources, stick to mainstream platforms like Facebook or Instagram, but if you can afford to experiment — consider adding a few alternative ones such as Reddit or Quora.

The more you talk to your customers, the better you know them. And, of course, they will appreciate the possibility to have a dialog.

Run a Loyalty Program

Did you know that the Starbucks loyalty program attributes 40% of their sales? Isn’t it a good motivation to run a loyalty program of your own?

There are several types of loyalty programs that you can try out: points, tiers, social media, and paid programs.

Points-based loyalty programs will work best for the customers who return to you because of convenience — they receive points based on the amount they’ve spent, and they can use them, later on, to spend them in your store.

Tier loyalty programs encourage your customers to become more loyal as they get a better discount depending on the amounts of points they’ve collected. It can be based on their shopping frequency or total spending.

Social media programs help you build the community and increase customer loyalty at the same time. Use your social media channels to hold giveaways and contests, and send out gifts. Make it entertaining and use it as an extra support channel.

Paid loyalty programs are the tricky ones as they ask your customers to pay for getting their rewards. It might be a good idea to offer it to your existing return customers that would benefit from exclusive membership deals.

Conclusion

Focusing your efforts on retention, especially if you run a small business, is a great idea. Return customers are generating more profit than the new ones and it costs less to keep them coming back.

Your ultimate goal is to build trust and establish an emotional bond with your customers and you can achieve this by using a complex approach: offer a better deal, work on your customer support, build a community, or run a loyalty program.

CEO and Co-founder of Markeaze.com