Understanding Customer Loyalty and Strategies to Reinforce It

by Natasha Ambavle | Customer Loyalty, Loyalty Progams

During one of our conversations, a friend of mine insisted I switch my brand of toothpaste to hers. Her reasoning was simply that it was better and she had been using it for years. I questioned her about the product’s quality and whether she had any hard facts that prove it was better than the one I am currently using, both of which she failed to provide. After the conversation was over, I wondered why I was so defensive about my brand of toothpaste. It was just toothpaste after all! The only reason I could think of was I have been using it for as long as I could remember.

This is, possibly, the most straightforward proof of customer loyalty. Customer loyalty is the extent to which a customer is willing to associate, engage, and purchase from the brand. Loyal customers form a positive association with the brand and are undeterred by factors such as price fluctuations, competition, and other offers.

Customer loyalty is an important factor in a company’s growth and market share value. According to a study by Kotler & Keller, “As the brand’s percentage of loyal customers goes up, market share increases and the brand becomes more profitable.”

Let’s delve more into the importance of customer loyalty and how brands can benefit from it.

Advantages of Customer Loyalty

  • Flexibility to Change Pricing – An increase in customer loyalty gives you the flexibility and liberty to alter your pricing without affecting your sales. Loyal customers are undeterred by minute changes in pricing since their purchase decision is based on emotionally triggered factors.

 

  • Brand Publicity – Creating customer loyalty programs gives a better ROI than other marketing strategies, and loyal customers bring better publicity to the brand than paid advertisements. Devoted patrons feel strongly about the brand and aggressively promote it on social media platforms and through word-of-mouth publicity. According to Nielsen, “92% of consumers believe suggestions from friends and family more than paid advertising.”

 

  • Increase in Sales and Revenue – Loyal customers are responsible for repeat purchases. They significantly contribute to increasing the company’s sales and revenue through their purchase patterns and brand advocacy.

 

  • Accuracy in Sales Forecasting – Another advantage of creating a customer loyalty program and growing your loyal customer base is that, in time, it helps you with accurate sales forecasting. When you have a ballpark idea of what constitutes your ideal customers and have analyzed and studied their purchasing habits, you begin to better understand your financial projections, which helps you create accurate sales forecasting.

 

Types of Customer Loyalty

Customer Loyalty is a rather subjective term: one customer can be highly dedicated to a particular brand and the other may only be faithful to the brand as long as he/she is benefiting from it. To understand the concept better, here, we list down various categories of customer loyalty.

  • Rudimentary Loyalty – Customers with rudimentary loyalty have low loyalty levels; they purchase from the brand because it is convenient. Convenience is key for customers with rudimentary loyalty. They won’t go out of their way to purchase a product if it’s inconvenient for them. Most strategies are targeted towards them to create loyal customers out of this indifferent audience.

 

  • Arbitrary Loyalty – The second set of highly targeted customers are those that have arbitrary loyalty towards brands and services. Their purchase decision is not made based on favoritism and mostly has no rhyme or reason. Their purchase pattern is highly unpredictable, but by creating a customer loyalty program that is smart and effective, these customers can be converted into brand loyalists.

 

  • Dormant Loyalty -These customers may have been loyal in the past but for some reason are not purchasing from the brand at present. Customers belonging to this category may have either switched to other products permanently or are temporarily trying out other options for a ‘change.’

 

  • Emotionally-Trigged Loyalty – Customers belonging to this category associate with the brand on an emotional level. They either have a strong fondness for the brand, long-term association with the brand, or have been referred by someone they trust. The purchase decisions of these customers are driven by emotional triggers, such as happy memories, nostalgia, and long-standing faith in the brand. According to Motista, “Customers with an emotional relationship with a brand have a 306% higher lifetime value.”

 

  • Fanatical Loyalty – These customers are an asset to the brand. They remain fiercely loyal to the brand despite price influxes, competitor products, and other related factors. They are strong brand advocates and responsible for bringing in new customers with their persuasive recommendations.

 

There is also another kind of audience that is more apathetic in nature. They remain unbiased throughout the customer lifecycle and never develop loyalty towards brands and products. Such customers are hard to influence and never significantly contribute to the brand’s image or revenue in the long run.

Strategies to Create and Reinforce Customer Loyalty

Now that we understand customer loyalty better, we’ll look at some important tips and strategies to create loyal customers in 2021-22.

  • Create a Loyalty/ Reward Program – One of the best ways to create loyal customers is by engaging them in a loyalty or rewards program. Creating a customer loyalty program can help in repeat purchases, keep customers engaged with the brand for a longer time, and eventually reinforce customer loyalty. You will need to partner with a dynamic platform like Annex Cloud that helps you design loyalty solutions that are best suited to your business aesthetics.

 

  • Emphasize your Brand Values – A study by the Corporate Executive Board of US Customers states, “64% customers cited shared values was the primary reason behind their purchase decisions.” Customers are motivated to form an association with brands that share their values and ideologies. If you as a brand promote a cause or have joined hands with a charity, be vocal about your values. This helps to attract like-minded customers and will aid you in forming a strong community of loyal customers with shared values and similar ideologies.

 

  • Customer Engagement – The first step to create loyal customers is to listen to them and empathize with them. It is very important that you communicate with your customers in order to better understand them. Regular engagement with your customers can also help in building a relationship with them. You can use your feedback tools and mechanisms and social media platforms to connect with your audience, learn about their needs and wants, and turn them into loyal customers.

 

  • Offer Payment Flexibility – An excellent way to boost brand credibility and customer loyalty is by offering flexibility in payment modalities. Most of the time, customers refrain from making a huge purchase due to financial constraints. Making the payment process, particularly the time allotted before the total is due, less rigid helps increase sales, creates a positive brand image, and aids in improving customer loyalty.

 

  • Improve Customer ExperienceCustomer experience refers to the start-to-end experience a customer has with a brand. It comprises communication at all touchpoints, including the ease-of-use of the website, overall store management, and customer service, along with the quality of the actual product. If you meet the requirements of consumers and offer them a seamless and satisfactory customer experience, there is a very high possibility that these one-time clients could end up turning into strong brand advocates in the future.
 
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