Lessons in Marketing – Customer Loyalty and Customer Retention

by Natasha Ambavle |

Lessons in Marketing – Customer Loyalty and Customer Retention

At first glance, you would assume that customer loyalty outweighs customer retention. Who doesn’t want a strong set of loyal customers? Retaining customers may seem less important compared to having loyal customers, but what most fail to understand is that customer retention is a very important stage that leads to customer loyalty. How can you expect to have loyal customers when you can’t engage your customers beyond a one-time purchase? Customer retention and loyalty are both very important aspects of marketing, with the former making way for the latter.

What is Customer Loyalty?

Customer loyalty is the ongoing transaction between a brand and the customers that develop into more just a set of occasional purchases. It is the result of customers willingly, if not excitedly, continuing to associate with the brand.

Loyalty cannot be developed in a day or a week; it’s a gradual process that brings tremendous value and long-term benefits to the brand. Customer loyalty is influenced by various factors, such as customer experience, product range and quality, and customer satisfaction levels. It is a strong asset that strengthens brand equity, credibility, and position in the market.

How Does Customer Retention Impact Customer Loyalty?

Customer loyalty and retention definitions are often misinterpreted. Customer retention is a brand’s competence to maintain its customer base and encourage them to keep repeating their purchase patterns. Customer loyalty is the outcome of trust a customer places in the brand. A retained customer is not necessarily a loyal customer. Once a brand has successfully retained its set of customers, nurturing their trust in the brand, on top of providing unparalleled customer experience and service, can help the brand to ultimately convert retained customers into brand loyalists. Loyal customers are the catalyst for business growth and help to increase sales and revenue. An effective customer loyalty and retention strategy will help to reinstate the brand’s position in the market and aids in developing a strong brand identity with an incredible following.

Stages of Customer Loyalty

Having established that customer retention promotes customer loyalty, the next step is understanding the stages of customer loyalty. Promoting and instilling customer loyalty is a gradual process and having a firm grasp of the stages of loyalty can help you accelerate the process.

  • Brand and Product Awareness – In this stage, the customer has been made aware of your brand and your range of products and services. The awareness stage is the first step of introducing the brand to the market. This is one of the most important stages since it is somewhat unlikely that customers would purchase from a brand they have never heard of before without any doubts or worries. The better-acquainted customers are with your brand, the easier it is to engage them.
  • Customer Value – The next step is the customer’s assessment of your brand, as well as products and services. The customer will compare, scrutinize, and assess whether associating with your brand is worthwhile or not. The brands that offer better value for money are more likely to pass this stage with flying colors.
  • Customer Retention – Once the customer has purchased from your brand after the initial assessment comes the most important questions. Did the customers like the product? Are they satisfied with their purchase? But most importantly is, will they purchase from me again? Customer retention is a crucial step towards building customer loyalty. When customers consciously decide to repurchase and engage with your brand, half the battle has already won.
  • Organic Promotion – The next step is the stage of brand advocacy and organic promotions. Customers are usually vocal about their preference; while some advocate the brand through word-of-mouth publicity, others may share their experience on social media platforms. Either way, this offers great exposure to the brand since the customers are giving their vote of confidence publicly.

Parameters to Gauge Customer Loyalty

  1. Net Promoter Score – Net promoter score is a simple yet highly efficient method to determine the likelihood of brand recommendation expected by the customers. It is an upgrade to the traditional feedback system since it focuses on the most important question: whether (or not) the customer would recommend the brand to his network of family and friends. The net promoter score enables customers to score your service from 1 to 10 and will give you a good idea of their satisfaction and loyalty level.
  2. Repurchase Frequency – This parameter will help you determine how many repeat purchasers you have and the probability of their repurchase. It also assists in segregating repeat purchasers from one-time purchasers and can show you the frequency of repurchases.
  3. Upsell Rate – Customer loyalty and customer retention also depend on the upsell ratio, which lets you identify customers that have purchased from your brand extension. A customer that trusts the brand shows a high probability of purchasing products from across the brand extensions.
  4. Customer Retention and Churn Rate – Customer loyalty and customer retention are interlinked. Measuring your customer retention and churn will also identify your loyal customers. These simple calculations can give great insights into your customer satisfaction levels as well as the effectiveness and reach of your marketing campaigns.

3 Important Strategies to Foster Customer Retention and Boost Loyalty

Customer retention is the prime focus of businesses since it shows instant results; however, customer loyalty and customer retention go hand-in-hand. While you can strive for improvement in customer retention, there is no assurance that the customers will have developed an affinity towards your brand. Adopting a smartly designed customer loyalty and retention strategy will not only offer a significant boost in sales but also help the brand to carve a niche for itself and improve brand equity.

  • Improve Customer Experience – Improving customer service and overall customer experience is a trial-and-error method. You cannot determine what your customers prefer best unless you know what they specifically do not prefer. As Leonie Brown, Qualtrics XM Scientist, puts it, “People who had a bad experience with a brand, but the brand fixed it, are more loyal than customers who never had a problem in the first place.” Understand your customers, listen to their feedback, learn from your mistakes, and deliver an unparalleled customer experience to ensure repeat purchases.
  • Focus on Customer Engagement – Customer loyalty stems from consistent customer engagement. Engaging with your customer periodically will not only give you insights into your customer preference and purchase habits but also help you create a relationship with them. Building a community of customers that echo your brand values, share common interests, and enjoy your products and services helps the brand tremendously in the long run.
  • Leverage the Power of Loyalty Programs – Loyalty programs bring more value to the brand than occasional sales and offers. It is a systematic and strategic program that aims to keep the customers engaged with the brand for a prolonged period by incentivizing their purchases. The idea is to make the customers feel appreciated, as well as ensure repeat purchases, and in the process, improve brand credibility and engagement through means of the loyalty program. However, loyalty solutions are not a one-size-fits-all strategy, you need to design solutions that echo your core value and business ethics, to know more about bespoke loyalty solutions, connect with Annex Cloud. Customers that associate with the brand through loyalty programs ideally turn into strong brand advocates and are less influenced by competitor’s products and marketing tactics.
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