In the ultra-connected, modern, hyper-competitive purchasing environment, customer loyalty is of unprecedented importance – no matter your business. The modern customer has countless product options and a myriad of marketing campaigns all vying for their attention; as a retailer, if you fail to inspire brand loyalty – that sense of allegiance among customers, worth its weight in gold – then you’ll be facing an uphill battle to hit your key KPIs and growth metrics. In the words of Walt Disney, one of the 20th Century’s most successful business people: “do what you do so well that they will want to see it again – and bring their friends.” This is the crux and the essence of customer loyalty.
And, from a retail point of view, it makes good business sense. For retailers, there are significant gains to be had by cultivating a trusting relationship and a sense of loyalty among customers. Aside from a quality product or service, this can be achieved through incentives like loyalty programs, rewards or positive online reviews. One of the most powerful ways of turning shoppers into brand loyalists, though, is by providing an outstanding level of service. And to ensure this happens, in our modern and omnichannel world, implementing a cloud-based virtual contact centre (VCC) is a must.
At Call Handling, we’re specialists in maximising retail communications, so we understand the business benefits customer loyalty can have on companies just like yours. In this post, we’ll look more deeply at customer loyalty, and walk you through its stages, before coming to a discussion of retail-specific benefits.
What is Customer Loyalty?
We’ve already outlined the value of customer loyalty. But what exactly is it? Well, customer loyalty is on the one hand easy to define, yet on the other, difficult to surmise; it can be lightning in a bottle, or impossible to capture, depending on how you look at it.
From a top-level perspective, customer loyalty is the sense of attachment a consumer feels towards a product, service or brand. Consumers who are loyal will implicitly – sometimes even unconsciously – identify with the brand, and place intrinsic value on its ethos, voice and values.
There is no quick fix or fast-track solution to this. It takes time, effort, hard work and dedication. Customer loyalty can be achieved only through an excellent product or service offering, consistent and targeted messaging, and outstanding levels of customer service. This is the valuable blend that will cause a customer to return for repeat purchases time and again, and sway them towards one solution over another irrespective of price, availability, or any other otherwise-determining factors.
To take things to a more granular level, Rare: Group has conducted fascinating research that actually attempts to quantify the specific makeup of customer loyalty. The findings claim that loyalty is not functional; it is driven by ‘likeability’ (86%) and ‘trust’ (83%). What’s more, the study strongly correlates brand loyalty with brand favouritism (in 90% of cases); in this way, it is an emotional and instinctive consumer reaction.
How to Measure Customer Loyalty
Although words like ‘trust’, ‘likeable’, and ‘emotion’ might seem difficult to quantify in any meaningful business sense, customer loyalty is far from intangible. Positive customer relationships, customer loyalty programs, a rewarding customer journey, quality products/ services and personalised, efficient communication all contribute to advantageous scores in the following metrics, which you can use to track brand loyalty.
- Customer lifetime value: Your customer lifetime value, or CLV, represents the average revenue generated from one customer over their purchasing lifetime; from the day of their first brand interaction, to the day of their last. Customer lifetime value indicates the inherent value of one customer to your business across the entire scope of the relationship, not merely on a purchasing basis.
- Net Promoter Score: One of the most widely-known and stringently adhered-to metrics in the retail world, your Net Promoter Score (NPS) is a simple scale asking consumers how likely they would be to recommend a brand to friends or family. According to NPS, the score divisions are as follows:
- 0-6: Detractors, likely to damage your brand
- 7-8: Passives, satisfied but unenthusiastic customers
- 9-10: Promoters, brand loyalists likely to increase referrals and encourage new customers.
- Churn rate: A good way of identifying negative customer loyalty is to determine your churn rate, or the percentage of consumers who cancel, fail to renew or don’t return for repeat business over a given period of time. The churn rate is especially important for companies that operate on a rolling payment or subscription model.
- Referrals: Broadly comparable to NPS, referrals show the number of new customers who sign up or purchase a product/ service based on word-of-mouth marketing; this can include positive online reviews. Running a referral program or proof-based marketing platform can be a great way to capitalise on the goodwill that exists among a loyal customer base; happy customers pave the way for new customers, after all.
Why Stronger Customer Loyalty Helps Companies Grow
ROI and revenue growth are all about cost-effectiveness and a business culture of efficiency. The old adage, ‘you have to spend money to make money’ is a true one, but there is an important caveat: the less money you spend, the bigger your profit margin will be.
Simply put, a loyal customer base dramatically increases retention rates. When your business retains more customers, it decreases the need to acquire new ones, and acquiring new consumers is significantly more expensive than keeping loyal and happy customers on board.
The Harvard Business Review found that retaining customers, as opposed to acquiring new ones, is 5x more profitable – at a conservative estimate. According to the data, this figure can rise to a staggering 25x. To put this another way, repeat and loyal customers can represent up to 25x better ROI to businesses than new consumers.
In harmony with this, according to Accenture, over half – 57% – of customers will make repeat purchases from a brand they feel loyalty towards. Research by Bain & Co.’s Frederick Reichheld, who also invented the NPS, shows that increasing customer retention rates by just 5% can improve profits by 25%-95%.
It is this tremendous uptick in operational efficiency that makes customer loyalty such a powerful, valuable asset for companies.
Customer Loyalty vs Customer Satisfaction: What’s the Difference?
Now we’ve elucidated what customer loyalty is, and how you can track it, there is an important distinction to make: the difference between customer loyalty, and customer satisfaction. Although they do overlap, in the sense that both tap into positive or negative sentiment among your target audience, and are informed by the customer experience (CX), there are some key contrasts to be drawn.
As we’ve already seen, customer loyalty is a shifting set of consumer behaviours and attitudes that indicate a sentimental affiliation with a brand, product or service. In this way, customer loyalty is more slow-acting and long-lasting than customer satisfaction.
Though customer loyalty follows as the result of customer satisfaction, the residual impression it leaves will typically outlast the temporary satisfaction or dissatisfaction created by the purchase experience. Customer loyalty is demonstrated by activities such as repeat purchases or the selection of your brand over a competitor.
Customer satisfaction, on the other hand, is more of a quick-release consequence of the CX. Essentially, customer satisfaction measures the degree to which a consumer experiences positive or negative feelings directly following a transaction with your business. Customer satisfaction may be measured by CSAT (customer satisfaction scores).
For example, if a customer purchases a desired product from your eCommerce store, at a good price and with quick delivery, they are likely to be satisfied. That satisfaction can be augmented by quality aftercare, personalised service and meaningful brand interactions. In turn, higher satisfaction rates lay the groundwork for repeat purchases and a more loyal customer.
In other words, customer satisfaction is the seedbed from which customer loyalty can grow. Satisfaction creates the conditions for stronger brand loyalty.
The 5 Stages of Customer Loyalty
Customer loyalty is not something you can conjure up overnight. It is a process, and as such, your brand must embark on a journey with your consumers in order to cultivate loyalty.
In a way, you’ll never really reach the ‘end’ of the customer loyalty process; a loyal customer could always exhibit ever-stronger brand advocacy – encourage more referrals, perform more purchases, create more brand-centric content – over the course of their purchasing lifecycle. With that said, you can divide customer loyalty into six distinct stages.
- Awareness. The first step of consumer loyalty is knowledge of your brand: what you do, what you stand for and what you’re all about. Brand awareness comes from original content and consistent marketing messages, often seen in the storytelling and audience-driven activities companies engage in across social media platforms.
- Exploration. Next comes exploration, where potential and new customers actively seek out your brand or service offering for more information. This happens when a user visits your website, asks a question, or scrolls through your social media feed. Great feedback and online reviews can be useful here.
- Benefits. Once users have discovered you, they need to understand clearly what advantages you offer them. Again, clear messaging and customer-centric marketing should be leveraged to achieve this. Why does a potential customer need your offering? And, more importantly, why should they choose you over a competitor? This would be a good moment to introduce customer loyalty programs, or other rewards and incentives.
- Familiarity. After a purchase, customers start to develop a relationship with your brand. It happens naturally and it’s not something companies can opt-out of. Depending on the experience, new customers will build up a bank of sentiment and positive, negative or neutral associations about you as a brand. This is a crucial step in customer loyalty, and a large part of the battle is either won or lost here.
- Commitment. If you manage to nurture customers through to the commitment stage, you’ll start seeing tangible results from the loyalty you’ve worked so hard to establish. At this point, the user has positive associations welded to your brand and product. They’ll come back to make repeat purchases, and spread positive word-of-mouth marketing narratives among their circle of friends and family.
The apex of customer commitment is brand advocacy, where the consumer actively contributes to future sales: by creating user-generated content, actively initiating business from new customers, or other means. This is one of the most powerful customer types in the world of retail.
Understanding The Retail Benefits of Customer Loyalty
In a retail environment subject to all manner of market forces, and with consumer preferences constantly evolving, building customer loyalty can sometimes feel like a moving target – and you do need to stay proactive and flexible, with the aid of future-proof technology such as our VCC – but in general, it’s based on a couple of core principles.
Connecting with customers where they are is and will always be a fundamental ingredient, and so will crafting and continually optimising an excellent CX. Done right, the retail-centric benefits of customer loyalty are plain to see and hard to ignore.
In a survey by Hubspot, it was found that 93% of purchasers will come back for repeat business when they have a positive customer experience; one of the core tenets in developing loyalty. Similarly striking is the exponential growth in value represented by a loyal customer base – according to Invesp, loyal and happy customers are worth up to 10x the value of their first purchase. This speaks to the advantages you can harness when you incentivise customer loyalty, perhaps by setting up a referral program or brand loyalty program, for instance.
Below you’ll find a list comprising just some of the retail benefits of customer loyalty.
- Increased customer retention
- Reduced customer acquisition costs
- Boosted, higher-value sales
- Improved customer lifetime value (CLV)
- Optimised marketing ROI and ROAS (return on ad spend)
- Better brand engagement
- More rewarding customer experiences
- Valuable online reviews and customer feedback
The Importance of Customer Loyalty: Helping Retailers Grow
Ultimately, the purchasing landscape has shifted dramatically over the past few decades, and looks set to continue evolving. While brand affiliation and advocacy is a dream scenario for many sellers, it’s their responsibility to find ways of delivering valuable consumer journeys and nurturing customer relationships that inspire loyalty among their target audience. In the era of omnichannel retail communications, this is far from easy. You need to stay across a website, eCommerce store, SMS, various social media platforms and email marketing – as well as more traditional channels like the telephone or brick-and-mortar store – and deliver excellence in each, in order to grow customer loyalty. Even one weak link in the chain can destroy all of your previous loyalty-building efforts. With quality communication, personalised interactions, human empathy and efficient user flows at the heart of customer loyalty, reaching that Shangri-la stage of brand advocacy can sometimes feel like moving mountains.
Fortunately, the tools you need are close at hand. Our VCC (Virtual Contact Centre) is a cloud-based, future-proof, omnichannel and retail-centric solution to customer communications in the digital age. By streamlining workflows and centralising your communications hub in a remotely-operable solution, we can help your business enrich and empower buyer-seller relationships and develop that all-important element of customer loyalty.
Elevate CX, boost CSAT, and sow the seeds of invaluable customer loyalty among your target audience. Book a demo today to find out how our VCC can take your communications to the next level.