What is customer loyalty?

Customer loyalty is simply put the relationship between a customer and a brand that goes beyond simply buying and selling. It’s about creating an emotional connection that makes customers keep coming back to the brand. A loyal customer will always choose you over the competition. This contributes to the lifetime value with your brand and also drives word-of-mouth sales by recommending your products to others.

Customer loyalty can be divided into two categories – transactional and emotional loyalty. 

Transactional loyalty is the value a customer gets from your company’s product or service. For example, someone may choose a pharmacy because it’s close to them and open 24*7

Emotional loyalty stretches deeper than that. It’s a result of providing your customer with consistent experiences that extend for a long period. These customers develop a deep connection and stick with your brand.

They go out of their way to honor their loyalty commitments as well.

As a business, emotional should be at the core of your brand strategy. It’s unconditional and doesn’t fluctuate based on price or convenience.

Let’s understand the reasons why customer loyalty is so important.

Why is customer loyalty important?

Here are a few reasons why you should invest both time and effort in building customer loyalty.

Improves customer retention and lifetime value

Customer loyalty helps you improve customer lifetime value and customer retention.

For any brand loyal customers are the assets they want to hold on to for years. Repeat customers spend more and they spend more frequently with you. A study from Bain&Company showed that the average repeat customer spent 67% more in months 31 to 36 of their shopping relationship than in months before.

On the flip side, depending on the product or service your business sells, new customer acquisition often costs five to 25x more. That means establishing customer loyalty programs is one of the most effective ways for a brand to increase its ROI.

It improves word-of-mouth referrals

Loyal customers are also more likely to recommend you to both friends and family. This word-of-mouth marketing is great for growing your business. It makes your business sound both credible and persuasive.

 It helps you improve your product and service quality

Customers loyal to your brand will give you honest and useful feedback without any resistance on their part.

Loyal customers give you real insights about your product, its quality, its advantages, and problems. They help you see if your product or service works well and what aspects can you improve. Such customer feedback is more valuable than market research and any internal discussions with your own team.

Your customers will use your product as long as it meets their needs. It has to solve their problems and meet expectations as well.

It gives your brand a competitive edge

Loyalty gives your brand a great edge against competitors.

When consumers have similar needs or requirements, guess who they will choose over others? The brands they’re loyal to. It wins over price, products, and promotion.

Brand loyalty influences customer’s purchasing decisions.

Ways to build and maintain customer loyalty

Now that we saw the importance of customer loyalty let’s look at ways to win loyal customers for life.

All of these tactics below align toward customer service, no matter what customer support channels you use, whether virtual phone systems, live chats, or social media platforms.

1. Delight and surprise them

We all love surprises. A gift in the mail, handwritten notes, a personalized birthday card can make your customer’s day without them having asked for it. It brings satisfaction and turns the relationship to long-term loyalty.

A small kindness where one is due is often enough. You can make this easy for yourself with the help of a CRM tool that automatically keeps track of customers, their important data and past interactions. Always make sure that you spend your time doing great customer service. 

2. Reward them for their loyalty

Another popular way to foster customer loyalty is by regarding them for their long-term association with your brand and their trust in you. Do this with the help of a rewards or a referral program. A rewards program is a marketing strategy that rewards customers for their loyalty with exclusive discounts, perks, and incentives.

There are different formats of loyalty programs that you can choose from beginning with loyalty programs, tiered programs and pay to join programs.

How Nordstrom does this

Nordstrom does this with the help of a loyalty program called the Nordy Club.

The tier based program has member benefits in giving exclusive invites to events, beauty workshops, vouchers, and even gift cards.

The program as 13 million members who spend four times more than regular customers.

3. Create a Community

It’s a great feeling to find like-minded people. This offers a great opportunity to ingrain loyalty in customers if you can bring them together and get them conversing about things that matter most to them. When creating a community the brand also has to nurture it so that the thought of leaving the community becomes an unacceptable choice for customers.