The prosperity of a company depends on several factors, including customer loyalty. Indeed, having a loyal customer portfolio is very important for any structure that wants to establish itself and last over time. However, accomplishing this task is not easy. It requires time and effort. Fortunately, there are a few strategies you can use to achieve your goals.
Definition of customer loyalty
Customer loyalty refers to all the actions and strategies aimed at pushing a customer to always buy your company’s products and services, instead of going to the competition. In other words, it is an approach that ensures that the customer remains devoted and attached to your company.
Contrary to what one might think, building customer loyalty is not done after the acquisition of a customer. Indeed, the loyalty strategy starts from your first contact with your prospect (future customer) and must continue throughout the customer relationship. As soon as you approach your target and it seems interested in your company, you must already think of the means to use to retain it.
What are the different types of customer loyalty
Customer loyalty can take many forms. There is, in fact, not one, but 4 different types of customer loyalty: sudden or induced loyalty, behavioral loyalty, sought-after loyalty and, lastly, attitudinal loyalty.
Subjective or induced loyalty
The title of this type of loyalty already gives a clear definition of what it consists of. Involuntary loyalty is loyalty that results from a situation where the customer has (almost) no other choice. This can be due to various causes: geographical proximity to the company, barriers to exit the market or when the company has a monopoly on the market.
In such cases, the customer suffers from a situation over which they have no control or where there are no other choices. This type of loyalty is the result of an imposed situation and not of a relationship of attraction to the company concerned.
Behavioral loyalty is a type of loyalty that stems from the customer’s routine. It is the result of the customer’s habits towards the company in question and therefore comes from a behavioral passivity.
Generally, this type of loyalty is developed for convenience or when the costs of switching to the competition are too high. In the first case, for example, it may be because the company’s point of sale is on the customer’s usual route. In the second case, it may be because the customer has changed banks, for example.
The operating system of behavioral loyalty is therefore not (or very rarely) based on the customer’s actual preference, but rather on his habituation.
The loyalty sought is that which is provoked in customers thanks to the implementation of precise strategies and marketing actions. It can be: a customer centric approach, a loyalty program, a personalized customer service, etc.
By its nature, desired loyalty is opposed to induced loyalty.
It is the type of loyalty that every company should seek to achieve. Indeed, attitudinal loyalty is due to the fact that the customer has a real preference for the company’s products and services.
The customer therefore has a positive impression and a sincere attachment to the company. This attitude develops on the basis of various factors: quality products, affordable prices, good customer relations, an excellent customer experience, the feeling of being in tune with the company’s image and values, etc.
Attitudinal loyalty has a much stronger foundation than any other type of loyalty. Generally, it is the result of a well-managed, sought-after retention.
The importance of retaining your customers
For a company, acquiring customers is essential. However, retaining them must be even more important. This is especially true in a context where customers have access to a ton of information and are constantly comparing offers. This is especially true in a context where customers have access to a ton of information and are constantly comparing offers in order to find the one that will benefit them the most. Customer loyalty is therefore vital for a company in view of the many benefits it brings.
Customer loyalty is a real boost to a company’s profitability and can be observed at different levels.
First, it is cheaper than acquiring new customers. Generally, companies’ marketing teams focus their efforts on acquiring new customers. Even if this approach is not bad (because yes, it is important to increase your customer portfolio), it often overlooks the jewels that are already there: the current customers.
Of course, the costs of retaining customers (through the use of tools and methods) are not negligible. However, they remain much lower than those incurred to acquire new customers. Moreover, the return on investment is often higher. In fact, according to a study conducted by the consulting firm Brain & Company, a 5% increase in the loyalty rate leads to a 25% to 95% increase in a company’s profits.
Second, it reduces support costs. A loyal customer is more familiar with the company’s operations than a new one. They require less support and thus reduce the burden on customer service.
Improvement of the company’s reputation and brand image
When the loyalty strategy is well executed, the company’s brand image and reputation also benefit. A loyal customer, who has had a positive experience with your company, will be more likely to recommend your products to others.
This word-of-mouth method then becomes the spearhead of a good brand image. It is, indeed, easier to trust a company recommended by a close friend.
In addition, when you put in place a system that values the customer, the latter will quickly develop and strengthen his emotional bond with your brand and become a true ambassador. This can be requests for advice on a product or service, the opportunity to try a new offer or to interact with your sales section, etc. The customer will then convey a positive image of your company.
Finally, when a customer is loyal and develops a strong bond with your company, he becomes much less volatile. This doesn’t mean that they may never go elsewhere, but rather that there must be an extremely good reason for them to do so. In doing so, it reduces competition. This point is even more important when it comes to a B2B relationship because losing a customer at this level is, generally, more impactful than in B2C.
Improving the social climate of the company
Customer loyalty also impacts the internal actors of the company: the employees. When employees know that loyal customers convey a positive image of their company, they are bound to feel more fulfilled and more inclined to achieve their goals. Their commitment and sense of accomplishment are strengthened.
Build customer loyalty with these 5 strategies
Building customer loyalty doesn’t happen overnight. Even if some efforts must be made, the use of certain strategies is very useful.
Satisfaction surveys and questionnaires
Satisfaction questionnaires are an excellent tool to evaluate how customers feel about a company. Whether it is about the product itself, its price, its quality, the customer service, the customer experience or many others, this method allows to gather precious information. It allows you to react in case of negative feedback and to apply the necessary corrections.
Surveys provide information about the company’s performance from the customers’ point of view. This way, improvements can be continuously made. In addition, it demonstrates to customers how valuable their relationship with you is.
One of the best ways to build customer loyalty is to make them feel unique: this is personalization. For the most important and recurrent customers (whether in B2B or B2C), it is very important to set up a personalized follow-up for each of them.
However, this does not mean that other, less important or occasional customers should not be entitled to it. In fact, their desire for loyalty could even start from there. In these cases, it is more sensible to separate customers into groups and send them targeted messages or offers. The criteria for grouping can be: geographical location, purchase history, preferences, etc. The most important thing is that the customer has a special moment.
Discounts or surprises
This strategy allows to value the customer and to instill in him the desire to repurchase. Discounts or surprises are highly appreciated by both old and new customers. This can be a complementary product offered with the purchase, a discount for recurring purchases, a free sample that matches the customer’s taste, etc.
As long as the customer is pleasantly surprised and feels valued, they will be more likely to come back to you in the future.
Improving customer service
The better your customer service, the more customers will want to come back to you and talk about your company. Improving customer service can be done in a variety of ways: providing options to make it easier for customers to contact you, reducing the time it takes to process requests, improving the delivery process, solving as many problems as possible on the first call, etc.
Customers generally value a quality experience more than products and their prices.
If your business offers subscriptions, then this is the right retention strategy for you. Whether you are addressing new or old customers, this method will definitely serve you well. The goal of this maneuver is to offer subscriptions with exclusive advantages, good deals, etc.
Most of the time, loyalty programs are based on a point accumulation system. Customers are asked to participate in specific activities and reach goals in order to receive rewards.
Example of a customer loyalty program
Depending on the company, the field of activity and the habits of the customers, there are several possibilities when it comes to setting up a loyalty program. One of the most famous and successful examples is the Nike brand with its Nike+ Run Club application.
This application advocates an active lifestyle and leads users to surpass themselves to reach a better version of themselves. Progress becomes a powerful trigger, as it is possible to: record and track your performance, benefit from personalized coaching and share your experience with an active community. Moreover, the application is open to everyone and free.
These various points make it an excellent community tool that generates better customer engagement.
Building customer loyalty means putting in place means and methods to encourage frequent repurchases on the part of the customer without the need to go to the competition. There are various forms of loyalty. However, their ultimate goal is to create and develop a strong enough (emotional) link between the customer and the company to encourage repurchase behavior, reduce competition and enhance the company’s brand image. To achieve this, the company can use various strategies: satisfaction surveys or questionnaires, personalization, surprises or discounts, improvement of customer service or loyalty programs.
What are the drivers of loyalty?
The retention factors are:
- Product quality and price;
- Brand and product awareness/image;
- Purchasing timeframes;
- Quality of customer service and customer experience;
- The geographical location and the professionalism of the outlet.
What are the disadvantages of loyalty? Mistakes to avoid
When a company wants to retain its customers, it must avoid certain mistakes at all costs:
- Do not regularly collect customer reviews for improvement;
- Not having convenient means of contact;
- Wanting to build customer loyalty;
- Neglecting after-sales service.
What are the characteristics of a loyal customer?
A loyal customer must meet three criteria with respect to the company:
- Emotional closeness;
- Preferential attachment;
- Regular buying behavior.