How has customer loyalty changed?

Happy people in a business meeting

We all know that repeat customers are essential to success; all successful businesses are masters at keeping customers engaged and loyal to their brand. But how do we achieve this when customer behaviors are becoming increasingly unpredictable? Keep reading to get the low-down.  

What is customer loyalty?

Customer loyalty is the ongoing, positive relationship between a customer and a business or brand. It’s also a measure of how likely a customer is to do repeat business with you. Customer loyalty is what encourages customers to repeat purchases and drives them to choose your brand over the competition. 

Customer loyalty is the result of multiple interactions that inspire customers to trust a brand. Not every interaction has to be perfect. In fact, customers are more than willing to forgive brands that show their human side when something goes wrong.  

Traditionally, loyalty was considered to be the result of a combination of customer satisfaction, positive customer experiences, and belief in the overall value of your goods or services. However, today, trust and a connection to a brand’s values, goals, and mission also inspires customers to stick around.  

Why is customer loyalty important?

I’m sure you already know by now that customer loyalty is essential. Retention and repeat business are goals for marketers in every industry, sector, and vertical. But, just in case you need a little reminder, here are just a few reasons why customer loyalty is essential to your business: 

  • Boosts profits. Profits can increase by 25% to 95% when customer retention rates increase by as little as 5%.  
  • Cheaper than acquisition. Acquiring new customers is 5x more expensive than retaining an existing one. 
  • Increases AOV. Loyal, existing customers have a higher average order value than first-time customers. Plus, it increases the longer they’re with you.  
  • Better strategy. Marketing teams can predict growth more effectively by looking at the habits of their loyal customers.  
  • Higher conversion rates. The average conversion rate of a loyal customer is between 60% and 70%, whereas new customer conversion rates are between 5% and 20%.  

Types of loyal customers

The reasons driving customer loyalty can be varied and unique to your customers. However, it is possible to group them into one of six distinct types of loyal customers.  

1. The happy customer  

These customers like your products or services and have probably purchased from you plenty of times. Unfortunately, they’re fickle and competitors can steal them easily with a better deal or discount. 

2. The price-focused loyal customer 

 These customers are driven by price and perceived value. If they find a similar product at a lower price, chances are they’re going to leave, but they will return if yours becomes the best value for money again. 

3. The loyalty-program loyal customer  

These customers are loyal to your loyalty program. They want to earn points, rewards, and accolades associated with your brand. But they’re also probably motivated by the deals and discounts here too.  

4. The convenience customer  

These customers are loyal because you make it simple for them to achieve their goals. You make it easy for them to find you, you’re easily reachable on multiple channels, and you make conversion simple. These customers are swayed by price, it’s the experience that drives them.  

5. The loyal-to-freebies customer 

These customers are loyal to your add-on benefits, not necessarily your brand, products, or services. Free events, learning resources, or Wi-Fi are just a couple of things that could be driving their repeated interactions with you.  

6. The truly loyal customer  

These customers are your true brand advocates. They repeatedly purchase or interact with your services, talk about their great experience with you, and openly recommend your brand to friends, family, and peers.  

How to measure customer loyalty

The trickiest thing about customers is that it’s not tangible. There’s no simple formula you can use to calculate how many of the email marketing contacts on your marketing lists are loyal to your brand.  

However, that’s not to say it can’t be measured. In fact, there are a couple of ways you can keep track of your customer loyalty:  

1. NPS (Net Promoter Score)  

NPS is a metric for assessing a customer’s loyalty through a single question: “How likely are you to recommend us to a friend or colleague?”. The higher the score, the more loyal the customer is.  

2. Repeat purchases 

How many times has a customer shopped with you? Keeping track of when and how will help you get a clear idea about their motivations. In your single customer views, you’ll be able to see what deals, offers, or marketing campaigns drove customers to convert.  

3. Engagement levels  

Depending on your brand, customers may not shop with you frequently. For example, if you’re a subscription service or a white goods seller, customers may only convert once or year or less. But you still want to keep them engaged and your brand front of mind. Measuring engagement levels require looking at clicks, account logins, and page views. 

4. CLV (Customer Lifetime Value) 

CLV is the total amount of money you can expect a customer to spend with you during their lifetime with you. Loyal customers are likely to spend more with you so the higher your CLV, the more loyal they are.  

How has customer loyalty changed?

It’s hard to believe that once upon a time, customer loyalty was so expected that businesses didn’t think about it as a necessity. It was a game of convenience. Why do I shop here? Because it’s my closest grocery store.  

However, that all changed with the digital age. Customers today have more choices, and nationwide and international shipping means that location and convenience aren’t a hindrance anymore if it’s something they really want.  

At the same time, this myriad of choices has complicated the decision-making process. Today’s customers consider a wide range of questions before deciding to convert with a new brand. But, once they have converted, they’ll be more open to shopping with you again.  

Off the back of multiple data breaches, customers are warier about who they do business with. Unexpected events around the world have shocked people into reordering their priorities. Systematic racism, the global pandemic, and global warming have led to customers expecting more from brands.  

Trust is essential; as is the expectation that brands should act responsibly and advocate for change. 53% of customers now rank ‘trusting the brand’ as the second most crucial factor when deciding to buy from a new brand.  

When focusing on trust and loyalty, 75% of people say they will shop again with a brand they trust, even if it’s not the cheapest option.  

60% of customers are comfortable sharing personal information with a brand they trust and claim they pay more attention to their communications. Seeing their personal information put to good use to deliver personalized and relevant content is a must.  

Finally, 78% of customers say they’ll likely share, repost, or recommend a brand they trust, and even defend it against criticism. This level of advocacy is invaluable to business growth. Referrals and recommendations are a cheap and highly efficient way to grow your business, which once again makes building trust essential for long-term customer loyalty.  

Brand trust is the key to loyalty

Getting customers to sign-up for your marketing is the hardest job of all. Customer motivations are wide and varied. They want to see a clear exchange – what will they get from you in exchange for their business.  

Discounts are still a big motivator for newsletter sign-ups, but climbing up the list are loyalty programs, proving that it’s vital to demonstrate an exchange of values early in your relationship. The more they trust your brand, the more they’ll do repeated business with you.  

For long-term loyalty from modern customers, start building trust from your first interaction.  

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