“There is a huge difference between a satisfied customer and a loyal customer.”
Good companies become great companies with customer loyalty. Many studies have linked customer loyalty to be directly proportional to profitability. Companies who have profitably sustained themselves for decades do not tinker with their core competencies too much. They prefer going deep, rather than spreading their length and breadth. A focus on customer loyalty deepens relationships with customers, which is essential in building customer lifetime value, eventually generating more revenue.
As a rule of thumb, investing in loyal customers is worth more than new customers.
According to a Harvard Business School report, just a 5% growth in customer retention can boost profits by 25% to 95%.
Also, your existing customers have fewer barriers in trying out a new product than completely new customers. Statistics show that a repeat customer is 60% more likely to buy your products and services, while the conversion rate of new customers stands at a dismal 5-20%.
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Building on the Customer Capital
When there are loyal customers, there is sustainability and long-term growth. Customers buy from you not just because of the utility of the product, but also because of loyalty. The idea that “customers are capital” is deeply entrenched in the DNA of successful organizations. Though significant resources are spent on acquiring new customers, the existing ‘customer capital’ must be put to its best use.
A customer base that is firmly loyal is an asset to the organization. Many companies are now mining the existing customer data and creating custom loyalty programs. That’s a good way to put “customer capital” to use.
Every successful organization understands the value of loyalty. The historical data proves that customer retention is 5 less expensive than customer acquisition, which pays off in the long term. That is the reason more and more companies now focus extensively on tapping into customer loyalty.
Customer Retention Fixes the Leaky Bucket
The adverting guru Peter Drucker said, “The true purpose of business is keeping customers.”
The classic line is more relevant today than ever. In a world of cut-throat competition, keeping your customers is a challenge where competitors are ready to snatch them away. But many companies just do the opposite.
In order to chase market share, companies fiercely adopt ruthless strategies to penetrate into a competitive market which often involves tactics that may see a compromise in the quality. If customers feel neglected and ignored once they have been acquired, their trust and loyalty would gradually diminish. Chasing the low-hanging fruit can provide short-term growth, but eventually harm the brand in the long run. This is a clear case of a leaky bucket, where you keep on acquiring new customers, but they would leak away through the holes.
Plug holes in your leaky bucket by building customer loyalty. Because that’s what matters for business growth. There is nothing more valuable than customer loyalty, which is a prime factor in your commercial success over time. Building a brand takes time and patience. Customer loyalty is the best strategy to ensure that business not only survives but thrives during turbulent times.
5 Practical Ways to Retain the Customer
- Finding the signs of customer churn and addressing them
- Customize offers based on purchase history
- Segmenting your top 20% customers based on revenue
- Great customer service with personalized messages
- Following and incorporating customer feedback
Driving Revenue with Customer Loyalty
As discussed earlier, repeat customers have better conversion rates because they already know you. The churn happens when your customer finds a better deal elsewhere.
But again, customer loyalty can offset the competitor’s threat to a large extent. Loyalty is an important element of customer retention, which in turn, is a great driver for accumulating massive revenues.
According to a report by KPMG for a retail industry survey, customer retention is a leading factor in driving revenue.
Customer Loyalty Statistics and Reports:
- Customer Retention: 52%
- Customer Acquisition: 45%
- New Products: 30%
- Pricing and Promotions: 25%
- Sales Channels: 19%
- New Markets: 11%
While getting better returns, the number of resources spent are considerably less when targeting existing customers as compared to the resources spent on finding new customers. A considerable amount of marketing money and effort is saved, which can be invested in your core competencies. Having a well-crafted loyalty strategy and reward program goes a very long way in growing your businesses.
- According to research by eMarketer, 60% of users believe that the shopping experience is improved with reward and loyalty points.
- An Oracle report said that 72% of customers are likely to choose a brand with a loyalty program over a brand that has none.
- According to a Bain study, 54% of users said they would not purchase from the brand where they had a bad experience.
- A HubSpot report concludes that 50% of customers in the US will switch their loyalties for competitors which offers them a better deal.
Designing a Loyalty Program for Generating Revenue
A good customer relationship is a leading factor for commercial success. More focus on keeping the existing base happy, rather than catching new customers. If you are looking to capitalize on loyalty to drive sales and boost profits, you need the right loyalty partner who can help you design a loyalty program according to your business goals.
Talk to our customer retention experts now!