We delve into the key drivers of customer loyalty, how to measure it, and the benefits of creating brand advocates.
In 2023, it’s a battle to get people interested in your brand. Digital marketing channels like social media, email marketing, and paid media are so oversaturated that it's near impossible to stand out. The secrets of retargeting and Google ads are out, and CAC is at an all-time high. What’s more, the customers you do manage to acquire could rapidly lose interest if you fail to meet their expectations.
For these reasons – and countless others – you have to retain the customers that you acquire. In fact, retaining customers is actually cheaper than acquiring new ones. Did you know that 80% of your future profits will come from just 20% of your existing customers? And 65% of your company’s business will come from your existing customers? Making a sale with a returning customer is 60-70% more likely than selling to a new one. These stats highlight just some of the benefits of customer retention. Now more than ever, it’s vital to the success of your company to understand, and prioritize, customer loyalty.
What is customer loyalty?
Customer loyalty is a person's decision to continuously purchase goods or services from one company.
In practice, customer loyalty is a complex problem with various factors that ultimately affect a customer’s decision to stay or go. Before you can improve customer loyalty, however, you’ll need to know how to measure it.
How do you measure customer loyalty?
To get the full picture of how engaged your customers are, you’ll need to look at customer loyalty from two different approaches: quantitatively and qualitatively.
Approach 1: Quantitative data
A quantitative approach involves analyzing the data and assembling metrics about your audience. This means looking at metrics like:
- Customer lifetime value
- Customer engagement rate
- Repeat purchase rate
- Loyalty program revenue
- Customer referral rate
Each of these represents a different interaction or engagement between you and your company and will be measured differently. They may also be more or less relevant to your industry or operation. For example, if you’re a Web3 organization, you may look at completely different metrics like interaction rates, market cap, and active NFT volume.
Approach 2: Qualitative data
A qualitative approach is more about asking “Why?”
This means that you will be analyzing and interpreting non-numerical data about your audience. This data may be customer reviews, interviews, surveys, focus group feedback, and more. Focusing on this approach may yield solutions for problems you didn’t even know your customers had with your brand. Understanding the public perception of your company is crucial. Younger audiences in particular place high value on emotional collections and shared values in the brands they support.
A complete picture can only be painted with a blend of these two approaches.
So how do you increase customer loyalty? You’re already on the right track with collecting and interpreting relevant data. Now you can begin to assess what influences how loyal the average customer is to your brand.
What drives customer loyalty?
Think about the brands you commonly buy things from. Perhaps you purchased a pair of Nike running shoes because you’ve seen other runners wearing them. After trying them yourself, you were so happy with the style and performance of your new kicks that you researched a bit more about the company. Maybe you read Shoe Dog and were inspired by the founder’s story. Or you saw how well Nike clothing matches the aesthetic of your new favorite pair of shoes. Or maybe you’re just concerned with the best bang for your buck and notice your Nike shoes tend to last the longest.
Other brands you use may carry a service that’s less tangible than a product. For example, there may be a content creator whose content you find relatable, entertaining, or useful. As long as they keep making the content you enjoy, you’ll continue supporting them and any merchandise they release.
There are a lot of factors that contribute to what makes an individual stay with a company. As we go through a few of the most important ones, think about how they could relate to your brand or what may need to be improved.
1. Convenience
The first factor to consider is simply how easy it is for customers to get your product. You may be thinking – convenience isn’t loyalty! And you’re not entirely wrong. Convenience can be thought of as a minimum requirement. If customers, new and existing, can’t easily interact with your company, they won’t stay in business with you. Are you visible and relevant on the platforms that your audience uses? Is it easy to access and purchase your products/services? Does your website load quickly? Are your prices in line with the wage demographics your audience has? No amount of loyalty will matter if your customers can’t access your brand.
2. Brand strength & reputation
This is the public perception of your brand’s reputation and trust factor. Has your brand provided high-quality goods and services in the past? How transparent are you with past and future initiatives? During a qualitative assessment, a brand’s strength is commonly revealed in how many positive or negative customer reviews there are. Surveys or focus groups may also reveal how comfortable or trusting customers are. Improving brand strength may mean being more attentive to customer feedback so they feel involved and heard.
3. Good customer service
What options are available for customers that have issues or questions about your company? Is it easy for them to get answers to the problems they have? A bad customer service experience will quickly make even the most loyal customer consider taking their business elsewhere. With retaining customers being far cheaper than acquiring new ones, it’s important to remember that a poor customer service experience will always increase customer churn.
4. Rewards for loyalty
A rewards program for customers that frequently shop with your company can give your brand an edge over the competition. In the digital age, rewards systems are becoming far more common to incentivize younger audiences to stay with their brands. With this, however, comes an increase in complexity. Emerging Web3 technologies are commonly being utilized to build profitable rewards programs.
5. Company values
Trust between companies and customers has eroded over time to the point that 65% of US and UK consumers don’t trust company press releases. Many audiences, particularly younger ones, are looking for companies that demonstrate actions that reflect their social values. Consider what your brand stands for, what its image is, and how it expresses these values. Nurturing values in line with your audience will lead to them seeking greater levels of engagement with your brand.
6. Personal relationships
Relating to building trust, engaging with your customers on a personal level can help them feel involved and relevant to a brand. Building a community project is one of the best ways to do this. A community is a social space, generally virtual, where other people who share similar interests in a brand can socialize and organize activities with one another. NFT projects, for example, commonly utilize social spaces to build customer loyalty. Community spaces around your brand may pop up regardless of your actions, so being an active participant and even host of a community will only build better personal relations with your customer base.
To sum up
Building customer loyalty can seem initially daunting. After all, these factors are only a snapshot of the complex system that is brand loyalty. But as your company begins its journey of improving customer loyalty, it’s important to remember that improving in some of these areas will drive your customers to interact more with your company and even become brand advocates to their friends and family. Driving up loyalty increases:
- Purchases - Customers spend more than twice as much in months 24-30 of their brand relationships than they do in the first six months)
- Referrals - 81% of consumers trust their friends and family’s advice over advice from a business
- Subscriptions- 37% of customers are willing to pay a fee for an enhanced tier of membership in their loyalty programs
- Brand engagement - If a customer engages with your content, it paves the way for you to guide them toward the purchase decision
When fully understood, customer loyalty can be a powerful and profitable tool for your brand.
