When customers are loyal to your business, they will recommend you to their friends and family at a rate of 86%, write positive reviews at a rate of 66%, and remain loyal at a rate of 46% even in the event of a bad experience.
Customer loyalty enhances word-of-mouth marketing, creates user-generated content, retains customers, and increases sales and revenue.
What is customer loyalty?
Customer loyalty describes the positive relationship that connects you with your customers. It measures how dependable and stable your customers are.
Given the fierce competition in the retail industry right now, customer loyalty can differentiate your business in the retail sector. Retailers are also seeing shorter sales periods, which means loyal customers return to make more purchases more frequently.
Why is customer loyalty important?
Customer loyalty is essential for several reasons.
Increased revenue and profits: It’s more expensive to acquire new customers compared to retaining customers who know and love you. Customer loyalty not only helps drive new sales for your business but also increases profits as marketing costs go down.
Additionally, customer loyalty contributes to increasing the average order value (AOV), meaning that loyal customers make larger and more frequent purchases over time. This also increases the customer lifetime value (CLTV).
Improving brand reputation and publicity
Word-of-mouth marketing is the strongest form of promotion. Loyal customers don’t just enjoy shopping at your store; they also love to tell their friends and family about it.
When you cultivate customer loyalty, you build an audience. Stronger customer loyalty contributes to brand discovery and reach – the more loyal customers you have, the more likely they are to promote your business or refer it to their friends and relatives, leading to increased sales.
Leonardo Gomez, founder of Try Runball, said, “Since implementing customer loyalty building methods, sales have increased by 80%, most of which comes from customers who repeatedly recommend our products or buy them repeatedly.”
Gathering valuable feedback and expanding the customer base
When customers become loyal to your business, they wish to see you succeed. Growing a loyal customer base allows you to access valuable customer feedback and ideas that help you grow.
Loyalty programs also allow you to tap into your customers’ networks through referrals. You can gather referrals to track new converters and loyal customers and partner with loyal customers to create user-generated content.
Gary Renshaw, director at Modelers Central, said, “One of the ways our company has benefited from building customer loyalty is through partnerships. We partnered with well-known enthusiasts who are considered loyal customers to create our own products and educational materials, which really set us apart from the competition and helped us expand into international markets.”
Types of loyal customers
Customers can be loyal to your business in different ways.
Price-driven customers: Price-driven customers shop with you because you offer the best prices, and they respond more favorably to discounts and promotions. These customers are not influenced by quality or convenience, and they are likely to switch to your competitors if you raise prices.
Convenience-driven customers: Convenience-driven customers shop with you because of ease of use, such as a convenient location or fast shipping. They are not as price-sensitive as price-driven customers and are often willing to pay more for convenience.
Brand-driven customers: Brand-driven customers shop with you because they believe in your brand and/or brand values. Regardless of product quality or price, these customers will prefer your brand over competitors.
Loyalty program-driven customers: Loyalty program-driven customers shop with you solely to take advantage of your loyalty program. They benefit from all the perks and discounts available to them.
How to measure customer loyalty?
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The following metrics can help you monitor how customer loyalty is increasing and the reasons behind it.
1. Net Promoter Score (NPS): NPS helps you understand the likelihood that customers would recommend your services to others. To measure customer loyalty through NPS, ask: How likely are you to recommend our brand to your friends and family?
2. Customer Loyalty Index (CLI): It is a standardized measure of customer loyalty over time. It takes into account NPS, upselling, and repeat purchases. CLI differs from NPS in that it measures customer intent versus actual behavior.
3. Customer Effort Score (CES): CES measures the effort required by your customers to resolve a problem or purchase/return a product. Customers tend to be more loyal to products and services that are easy to use.
4. Repeat Customer Rate: The repeat customer rate measures the number of customers who are willing to make a second purchase from you and helps you estimate how likely they are to buy from you in the future.
5. Purchase Frequency: Purchase frequency measures how often customers make repeat purchases – an important metric to track as purchase frequency is often the largest contributor to annual revenue. In fact, a 2018 study showed that purchase frequency is the most effective factor driving retail growth.
6. Average Order Value (AOV): It tracks the average order value for each customer purchase and helps you identify the highest value customers.
How to Build Customer Loyalty
Try some expert-recommended tactics to enhance customer loyalty for your retail business.
1. Provide Excellent Customer Service: Exceptional customer service is key to building customer loyalty. When all things are equal – price, convenience, etc. – great customer service can bring customers back to shop repeatedly.
Customer service encompasses everything from the first interaction with your business, the quality of your products, and how your team answers questions post-purchase. By answering questions, resolving issues, and genuinely striving to help your customers, you not only make your customers happy but also ensure a loyal and repeat customer.
In fact, more than 50% of consumers say that customer service is what makes them loyal to their favorite brands.
2. Create Customer Feedback Loops: Customer feedback is not only beneficial for customer loyalty, but it’s also a way to build it (hence, the loop).
Encourage customers to provide feedback – whether positive or negative. When customers feel heard, valued, and respected, they are more likely to respect your company, despite a poor experience.
In turn, asking for feedback from your customers can make them feel appreciated, thus encouraging them to remain loyal. Use customer satisfaction surveys to understand how customers feel about your services and how you can improve them. Leverage social media, and check customer reviews and mentions of your business.
Not only do customer feedback loops enhance customer loyalty, but they also make your business as a retailer easier. Jack Meredith, Vice President of Marketing at Kettle & Fire, says, “It’s easy to fall into the trap of thinking you know everything about your industry and the field you’re in. We all want to be like Steve Jobs in consumer goods and be able to predict everything. But at the same time, having that feedback loop makes things ten times easier.”
Segmenting Customers and Personalizing Experiences
Customers want to feel that they are seen, and you can achieve that by segmenting your customer base and personalizing their experiences.
Most merchants love to drive customer loyalty through bulk discounts and incentives. Jeremy Ulrich, co-founder of the Shopify store Lash Fridays, takes a different approach: “By using Segments by Tresl, we were able to analyze which products increase purchase frequency and which customer segments boost purchase frequency. This feeds into guiding our customers – we now know which customer segment is likely to buy more and which of our products are likely to drive them towards more purchases.”
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This approach allowed the Lash Fridays team to increase customer purchase frequency by 20%. The takeaway here is “focus your energy and efforts on attracting the right type of customers and loyalty and retention will flow from there,” according to Jeremy.
Subscription models can also help create personalized experiences for customers. Shopify client Hiya Health boosts customer loyalty through their subscription service. Darren Litt, founder of Hiya Health, says, “To stand out from the competition, we send you a reusable glass bottle – and we’re willing to absorb the cost because we hope to recoup any revenue on the backend from customers who stay with us. We give customers a very easy way to cancel or get a refund. This way, there’s no reason not to give us a chance. At Hiya, we even have a tough-eating guarantee, so you can easily cancel in the first month if your child doesn’t like the vitamin. We also delight our customers with stickers so that the child can personalize their vitamin bottle.”
Finally, personalize the customer experience through your marketing – email, text messaging, and even handwritten greeting cards following holidays or after a purchase. Even a phone call after purchase asking “How was your experience?” can set your business apart in our current world.
Providing Consistent Customer Experiences
One of the most important factors contributing to customer loyalty is continuity. When your customers interact with your brand, they expect a consistent experience. If your experience is different every time, customers will have a hard time building a relationship with you.
Take Apple as an example. Customers go to great lengths to show their loyalty, such as standing in long lines for product sales and passionately advocating for Apple products.
Will Cannon, CEO of Signaturely, says, “Brands like [Apple] succeed because they understand how to use exclusive experiences like product reveals, sales, and launches to attract customers. It’s important to view the customer experience as more than just using your product – it’s also how they feel throughout their engagement with your company.”
Treating Employees Right
Employees are the face of your business, and taking care of the people who represent your brand in front of your customers is essential to building customer loyalty. Physical stores should encourage employees to greet customers with a positive demeanor and make them feel welcome.
Moreover, employee loyalty is just as important as customer loyalty. Loyal employees tell others about your business, help grow your company, and can define the customer experience.
Embracing Shared Values
Consumers have more choices than ever. Differentiating your product through price or quality alone may not be as attractive as it once was. One surefire way to attract and retain customers is through shared values.
Brand awareness is no longer enough. You need to stand for something… people need to know more than what you sell. When shoppers have a better idea of what you stand for, it builds loyalty today. Paige Arnof-Fenn, CEO and founder of Mavens and Moguls, said, “Our goal is to help our customers find happiness by taking care of their loved ones. That value makes us stand out and maintains our customers’ loyalty. If you are honest with your customers and continually improve your product, they will be happy to keep doing business with you.”
Jean Gregoire, CEO of Lovebox, found the same benefit in sharing his company’s values: “Our goal is to help our customers find happiness by taking care of their loved ones. That value makes us stand out and maintains our customers’ loyalty,” he adds, “If you are honest with your customers and continually improve your product, they will be happy to keep doing business with you.”
Building
Community
Customer communities are a win-win for both your business and your customers. A dedicated conversation forum allows you to share important information and request customer feedback. Frequent communication with your customers keeps your business top of mind and makes them feel valued and wanted – increasing customer loyalty.
One of the easiest ways to build customer loyalty is to make it easy for customers to engage with you. I call this “Customer Proximity – those who are closest to the customer win.” It means staying in touch with customers on social media, through email newsletters and text alerts, and even by organizing exclusive virtual events. The more ways you can surround the customer, the greater the chance for customer loyalty to develop.
Bryan Lim, founder and CEO of iHeartRaves, attributes the recent success of his Shopify store to the customer community: “We found that customer loyalty is critical, especially during the COVID-19 pandemic. We were in a tough spot because we sell fashion products for music festivals, and those events were canceled or postponed across the country.”
He adds: “We had to find a different way to connect with our customers, so we created the #RaveFromHome series to keep the festival spirit alive for our amazing community. Every Friday, we share tips for dancing at home and ways to spend time stylishly. We provide carefully curated Spotify playlists with some of our favorite dance music, alongside some shopping deals and discounts. In turn, customers tag us in living room dance parties, home photoshoots, dance moves, and lighting skills.”
Building a Customer Loyalty Program
A successful customer loyalty program can strongly influence your audience’s shopping patterns, encouraging them to shop with you rather than competitors or to return more frequently for rewards. Building a customer loyalty program is one of the best and perhaps cheapest ways to reward customer loyalty.
Katrina Bell, founder of The Copper Bell, said: “By tracking the returning customer rate – 31% in the first quarter, 39% in the second quarter, and 60% in the third quarter – I know that people are happy and coming back to my website. I initially used generic discount codes to encourage people to make repeat purchases, but I achieved real personalization with that [program] using Smile. These loyalty apps give greater rewards for more money spent, so my VIP customers receive larger discounts than other customers.”
Her customer loyalty efforts go beyond being a general discount program; her customers also engage with her brand on social media. She maintains a consistent brand voice across her website, social presence, and email marketing channels to build trust and customer recognition.
You can implement a customer loyalty program through email vouchers, free shipping, or reward points. Consider offering a mobile app for your program – 69% of consumers agree that they are more likely to participate in a customer loyalty program if a mobile app is available.
However, KPMG found that “reward points and perks were less likely to earn loyalty compared to transparency and honesty in business.” Remember that a thoughtfully created customer loyalty program cannot make up for a poor experience or service.
Examples of Customer Loyalty Programs
Here are some examples of customer loyalty programs that make customers come back for more.
Starbucks: As much as I can, I support local coffee shops here in Chicago. However, I find myself going back to Starbucks repeatedly because their loyalty program is hard to beat. Using the app, I earn a certain number of stars for every purchase I make, which I can redeem in the future for drinks.
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The Starbucks® Rewards app allows users to redeem stars for larger purchases such as coffee cups or ground coffee – an added bonus during the holiday season.
The Starbucks loyalty program is successful because it is easy to use. Users can scan their loyalty cards, reload their balances, order drinks and food ahead of time, and find nearby locations all in one app.
Sephora: Sephora is well known for its customer loyalty program, Sephora Beauty Insider. The program boasts over 25 million members, who account for nearly 80% of the company’s annual sales.
Sephora’s products aren’t cheap, which makes the Beauty Insider program even more valuable. Members can redeem reward points for gift cards and discounts, lowering purchase prices without affecting the value of the products. Additionally, the more money members spend, the greater the rewards they receive; all members get a free birthday gift, but top customers gain access to exclusive gifts and events.
The Sephora loyalty program is successful because it is flexible. Beauty Insider members have plenty of options in the beauty realm, making participation in the program more enjoyable and easier.
Amazon: Amazon’s loyalty program – Amazon Prime – is a great example of a paid customer loyalty program. Instead of rewarding customers based on how much they spend, Prime rewards paid members with benefits like two-day shipping, Prime Video, Prime Day discounts, and more.
Originally designed in 2005 to reduce cart abandonment rates, Prime has now become a massive revenue driver for Amazon – Prime members spend more than twice what non-members do.
The Amazon loyalty program is successful because it is comprehensive. For an easy monthly fee, customers benefit from this retail giant and more.
Customer Loyalty Trends
Learn more about trending strategies that contribute to customer loyalty. Experiential retail
Experiential retail relies on creating memorable and shareable shopping experiences with the idea of building a community around your brand. It offers consumers more shopping options than ever; experiential retail can help set you apart. Download the Future of Retail report
Experiences in-store are expected to be
Source: https://www.shopify.com/retail/customer-loyalty
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