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June 24, 2022

What is customer loyalty and how to build it

In a world where brands compete at the click of a button, the loyalty of these customers is a huge factor that plays a decisive role in their decision to make both initial and subsequent purchases. In today’s article, we would like to talk about what real customer loyalty is. How to successfully build and develop it for customers?

What is customer loyalty

Customer loyalty is the desire of customers to buy and engage with a brand again and again, resulting from a consistently positive customer experience, quality of products and services, and a vision, understanding and sharing of the common values ​​that the customer receives from the brand.

In simple terms, this is an indicator that reflects the real attitude of the consumer to the brand, as well as the overall likelihood of the client’s repeated cooperation with your company and its possible recommendation to his friends, relatives and acquaintances. Loyalty customers can be both current customers and those who are just going to become them.

In the latter case, such loyalty has a delayed effect – a client’s positive attitude towards the brand is established by receiving public recommendations of such a brand from persons whom this potential client trusts. Recorded at the level of his memory, it is stored as long as possible and causes a positive consumer association at the very moment when such a consumer needs a product or service offered by the brand.

Why is customer loyalty important?

Customer loyalty is something that all companies should strive for simply by virtue of their existence: the goal of starting a commercial company is not only to make a one-time profit from the first purchase, but also to attract and retain customers who buy your products further at once. “Care and loyalty is the most powerful marketing strategy a business can have.”

Here are some statistics to support this claim:

  • Loyal customers spend more than others. Even compared to themselves, a repeat customer spends 10 times more than they spent on their first purchase.
  • Acquiring a new customer costs a business 5 to 25 times more than retaining an old one (Harvard Business Review).
  • In the US, 40% of online shopping revenue comes from repeat customers, who make up just 8% of site visitors.
  • A 5% increase in customer retention increases business profits by 25-95%.
  • Loyal customers tell their family and friends about positive shopping experiences and interactions with the brand.

A Harvard Business Review Corporate Executive Board (CeB) study of 7,000 consumers across the United States, United Kingdom and Australia found that brand loyalty is impossible without one key element: 64% cited shared brand and customer values as the top reason for their loyalty. Shared values and beliefs are by far the strongest driver and magnet of brand loyalty, with consumers everywhere claiming to be loyal “not to the company, but to its beliefs.”

How to increase customer loyalty?

A few common truths. A repeat customer is more loyal than a first time customer. A customer who refers to a friend is more loyal than even one who buys more than once. It is these mechanics that underlie any actions aimed at increasing customer love for the brand.

This is how the classic model of customer loyalty growth appeared, consisting of six step-by-step stages of customer loyalty, each of which is impossible without going through the previous one:

  1. Awareness. The stage when the customer is aware of the company and what it offers to its customers.
  2. Study. The stage where a customer is considering purchasing a product or service from a brand and has already visited their store, website, etc.
  3. Purchase. A customer bought a product or service from a brand.
  4. Usage. The stage when the customer uses the service he has purchased.
  5. Repeat purchase. The customer makes a repeat purchase from the company.
  6. Recommendation. The stage when the client recommends to his friends, acquaintances, relatives the brand’s products and the brand itself.

The goal of any company in the world that provides services or sells goods to consumers is to move each of its customers from the first stage (awareness) to the sixth stage (recommendations).

How to count customer loyalty?

Remember that your repeat customers are the most valuable, cheapest, and most profitable customers for your business. Yes, they may not be large buyers (including in the context of average checks), but their real strength and potential, with proper work, can more than exceed the revenue from one-time buyers with larger checks.

Different industries and businesses have different ways to measure customer loyalty, but one of the easiest ways is to look at the average number of lifetime purchases customers make in your database. If this figure does not exceed a multiple of 2, then it is worth considering what stops customers from re-engaging with your brand.

It should also be understood that a client cannot be strictly loyal or disloyal – there are loyalty spectra that determine the strength of his loyalty, that is, customers can be slightly loyal or extremely loyal. Using the metrics below will help you determine exactly how loyal customers are and where in your business more work needs to be done.

Lifetime value (LTV)

Loyal customers will spend more money with you over time. It’s easy to measure. Lifetime value is the amount of money a customer spends with you from their first purchase to their last purchase at what you define as “that’s it, the customer is gone” (average time period).

An increase in average LTV is a great but lagging indicator of customer loyalty, meaning as customer loyalty rises or falls, LTV will also rise or fall. Please note that LTV also depends on the type and cost of various products or services and their customer segment.

For example, buyers of baby diapers in a supermarket stop buying them at some point for one simple reason – their baby has grown. But this does not mean that while maintaining the quality of service and purchases of other products, the mother-customer will reduce her loyalty to such a supermarket and stop going to it.

Customer churn rate

In addition to evaluating the customers who stay, it’s also important to look at the customers who leave. There are several ways to measure customer churn.

The easiest way is to calculate the percentage of lost users based on the number of users you started with in a certain period of time, dividing the number of customers left at the end of the period by the number of customers you started with. This percentage will allow you to estimate how much customers your business is losing over a given period.

Also, you can also calculate the churn expressed as the churn of the company’s potential income. Every time you lose a user, you lose a certain amount of revenue, which can be calculated by analogy with customer churn. For some types of business (for example, large online stores), this indicator is no less important than the outflow of users.

Net Promoter Score (NPS)

Net Promoter Score or an indicator of the level of readiness to recommend a company by a consumer to their friends, acquaintances and relatives, which is considered quite simple – a user who has passed stages 1 to 5 in the loyalty funnel described above is asked to rate the level of that very readiness to recommend a brand on a ten-point scale, where 0 – not completely ready, and 10 – absolutely ready. Even though NPS is often seen as the ultimate question when evaluating customer loyalty, it can be somewhat misleading. Why?

Because NPS only measures the INTENTION of a customer to recommend a company. This is not an action and certainly not a recommendation.

Moreover, in the future, the customer may change his mind and become disloyal for other reasons – perhaps he is extremely price sensitive or has a bad service experience. And just because a client is signaling to you that they can recommend a company, it doesn’t mean they will follow through with it. Cause and investigation.

Tips for developing customer loyalty

1. The best product, service and service

The very first, easiest, and most powerful way to win customer loyalty is to provide the best customer service in everything your company is involved in (sales, packaging, pricing, shipping, support). It seems like a pipe dream, but is it bad to go for it?

Actually, this is precisely the goal of any business – optimization of processes and improvement of their quality both for the client and for the business itself. A striking example and a sworn enemy of all global business is Amazon, which has managed to optimize each of these processes and has most likely become the permanent world leader in trade on planet Earth. And it all started, as you remember, with simple books.

2. Make the company public

Openness shows current and future customers of your company that nothing unexpected awaits them when interacting with your company. Openness disarms and eliminates the consumer’s negative thoughts about the possible risks that arise when interacting with your company.

For example, a health food retail chain might tell all its customers right away that they will refund 100% of the cost of a product if they don’t like the taste of the product. This fact is complete:

  • distances the brand from competitors closed in itself and positions it as a company that meets its client in any situation;
  • integrated into all business processes of the company;
  • used by its marketers as one of its unique selling propositions.

3. Communicate publicly with clients

For example, public communication on social networks, devoid of formality and dry “thank you for your order”, establishes more free and informal relationships, and also creates a balance of trust between the brand and its consumer, putting them on the same level for each other.

In addition, communication with the consumer has always been a source of quality feedback that points to weaknesses in the processes of your business. Give customers the opportunity to quickly tell you what they like or dislike, respond and fix problem areas and you will be surprised at the number of repeat purchases from such customers.

This phenomenon is explained simply – we are all human beings and consciously or unconsciously tend to make mistakes. The only difference between people is whether they tend to: a) hear, understand and admit their mistakes; b) to do everything possible for their non-recurrence in the future. And if so, then customers treat brands and their representatives in a similar way.

4. Use additional loyalty programs

Most loyalty programs are based on motivating the client to return to purchases in a particular company by providing him with additional discounts, thanks to which such a client will save his money (the saying “saved – count, earned” comes to mind).

This is a classic that works and has long established itself in marketing. But after reading what we wrote above, think about it – is this enough for your customers? There are many brands that offer products or services at extremely low prices, but … for some reason they do not become leading companies. It’s all about the added value that needs to be invested in loyalty programs, of which there may be several in general.

So, some brands to create this very value for the consumer use:

  • factors of social responsibility, helping the needy or disadvantaged segments of the population;
  • concern for the ecology and safety of nature or wildlife;
  • сo-financing the development of sports and an active lifestyle;
  • partnerships with other companies;
  • and many other formats related to things that directly intersect and, most importantly, coincide with the interests of their clients.

A feature of additional (not classic loyalty programs) is always this very value or mission that the client accepts and shares with the brand. Do not try to play with this trust in this format – the consumer very quickly feels false, especially when companies are trying to cover up their own greed with good intentions. All you get in this case is a disappointed client whose loyalty will fly down like an elevator to hell.

5. Gamify additional loyalty programs

Everyone loves games at any age, it’s just that their nature and content change with age. One thing remains unchanged – the game mechanics have always aroused increased interest and showed deep involvement.

Modern marketing has come up with and uses many such mechanics: “find a bonus under the cover”, “guess the number”, “bring a friend”, “build a collection” – all these mechanics are simple and understandable, which means they are easy to do by those they are aimed at. Remember your childhood and do not overdo it – often it is the simplest actions and things backed up by fantasy that show the highest efficiency.

Additional types of rewards can be used in additional loyalty programs and they do not have to be directly related to cash or savings. Many mechanics are associated with rewards with exclusive products, partner products or services of other companies that fall within the consumer’s area of ​​​​interest (drawing tickets to the theater as one good example), as well as intangible types of rewards, for example, excursions to production or branded brand merchandise.

6. Grow your own community of loyal customers

Imagine that you have a thousand loyal customers who do not know about the existence of each other. And now let’s imagine that they found out that each of them has 999 other happy and contented like-minded people. Personal benefit:

  • more convenient work with all clients together;
  • development and training of clients with each other;
  • higher motivation due to social effect.

Not to mention that such a community can be used in brand marketing activities, for example, to manage reputation and buy honest and sincere reviews about the company from customers. What do you think is better?


We hope this information has better clarified for you what constitutes and develops sincere customer loyalty. Just remember that at the heart of all processes there is always a basic human need for recognition and no less basic human relationships. But how exactly and on the basis of what to build these relationships is the essence of any loyalty program.

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June 24, 2022

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