The Only Efficient Way to Increase Customer Loyalty
When running a business, building customer loyalty is one of your most essential tasks.
It can cost five times more to attract a new customer than it does to retain an existing one. Eighty percent of revenue comes from twenty percent of customers.
That’s why building a loyal customer base is so important.
To examine how customer loyalty between businesses and customers works, you must first figure out how loyalty works between people.
After all, the term originates from the relationship of two humans.
So here we go.
What is Loyalty?
Loyalty describes the devotion to a cause, where a person can be relied upon and trusted.
You’re loyal if you pay full respect to someone else and defend them externally.
Also, your values do not necessarily have to correspond entirely with the values of this other person.
Without loyalty, stable relationships are impossible.
How can you tell if someone is loyal?
The best way to describe loyalty is friendship.
As long as no problems emerge, there many people that want to spend time with you.
However, as soon as difficulties arise in your life, you can tell who your friends are.
While everyone else bails out from you, your real friends stay with you and support you.
That being said, loyalty becomes apparent as difficulties arise.
You voluntarily support someone, because you’ve decided to do so yourself.
But it doesn’t end there.
To be loyal also means to support goals that do not necessarily conform to our own purposes.
Therefore, loyalty can also mean to put your own interests aside for the benefit of others, even if this temporarily involves personal disadvantages.
Claiming to be loyal is easy. To prove it is something completely different, and it requires real character.
On the downside, there may occasionally be one-sided loyalty.
What’s one-sided loyalty?
One-sided loyalty is when loyalty is demanded from one person, while the other person’s commitment is weak or non-existent.
This achieves the exact opposite: loyalty is perceived as pressure or compulsion.
As a result, the other person behaves increasingly disloyal.
One-sided loyalty is transient and usually corresponds with feelings of fraud, treachery, and malice.
As you can see, to establish a stable relationship, both sides must be interested in loyalty.
That’s why loyalty is the prerequisite for genuine customer relationships.
Moreover, it always starts with customer satisfaction.
Do you remember the last time you bought something, and it was just so much better than you expected?
Happy customers are essential for the success of small businesses as well as large companies.
Let’s see why.
What is customer satisfaction?
Customer satisfaction is how customers evaluate the experience of the products or services they have purchased.
With every purchase, customers have certain expectations.
If these expectations are:
- not met, customers are dissatisfied
- fulfilled, customers are satisfied
- exceeded, customers are delighted
Customer expectations are different for each purchase. It depends primarily on individual customer’s requirements, the product or service, and the price.
Customer satisfaction is one of the most critical factors for the economic success of a company.
You should be aware of the expectations of your customers.
Seriously, only if you know what expectations your customers have, you can fulfill them, satisfy your customers beyond their expectations and retain them in the long term.
Consumer satisfaction is a vital prerequisite for customer loyalty.
Which factors lead to customer satisfaction?
The “Kano model” by Noriaki Kano breaks down various factors that contribute to customer satisfaction:
Expected requirements: customers take these attributes for granted. If these attributes are missing, they cause unhappy customers, but if they are present, they do not cause satisfaction. Even an outstanding quality of individual characteristics cannot increase customer satisfaction.
Example: the bed in a hotel room. WiFi used to be a feature, today it’s an expected requirement as well.
Normal requirements: customers explicitly expect these attributes. They have a direct influence on satisfaction. Customers often compare different products based on these attributes.
Example: the hotel breakfast. The better the breakfast, the more satisfied the guests are. If the ingredients come from regional farmers as well, some customers will be satisfied with the breakfast even more.
Delightful requirements: these attributes delight customers. They do not expect them. If one of these attributes is present, small improvements in performance can lead to significant increases in satisfaction, which can turn customers into brand ambassadors. However, if they are missing, it does not cause dissatisfaction.
Example: a bottle of sparkling wine on ice, which is unexpectedly prepared in your room on arrival. If it weren’t there, you wouldn’t miss anything. But because it’s there upon arrival surprisingly, it increases your satisfaction.
The division of attributes into expected requirements, normal requirements, and delightful requirements provides a good overview of the extent to which individual characteristics contribute to increasing customer satisfaction.
How does customer satisfaction relate to customer loyalty?
Marketers often equate customer loyalty with customer satisfaction.
However, there are some significant differences.
While customer loyalty is future-oriented, customer satisfaction is directed towards the past.
Customer Loyalty is a result, not a goal.
This can be illustrated with the help of a timeline:
- Customer satisfaction refers to the past: if customers were satisfied with the customer experience of a product or service, it’s the foundation for future purchasing decisions
- Customer loyalty refers to the future: based on previous satisfaction of a brand, customers have an intention of buying again and are willing to recommend a product or service
Therefore, customer loyalty arises as a result of satisfied customers.
Marketing professionals reveal tips and tricks on how to improve customer retention with conditions, bonuses, discounts, and loyalty programs.
However, traditional customer loyalty strategies no longer work, because they don’t aim at having customers stay because they want to, but rather because they have to.
Instead, it would help if you were focusing on how to gain customer loyalty.
What is customer loyalty?
Customer loyalty is the likelihood of customers to continue buying from a specific brand.
Strong customer loyalty leads to engaged customers that continue to buy a brand over and over, even if a competitor has a (temporarily) comparable offer.
Repeat customers continue to buy from the same brand, without considering to buy a competing brand.
As a result of previous good experiences, loyal customers voluntarily commit to your brand and are even willing to recommend your brand to others.
Example: As a fan of the Hamburg soccer club “HSV” (Hamburger Sport-Verein) I had to experience (and still do) what loyalty means for many years.
For more than a decade the club hasn’t been playing so well, fired many coaches and eventually even relegated to the second league (2. Bundesliga).
Despite having so many bad experiences at the stadium where I would see the team play badly and loose, I was always there for the next game, hoping to see the team win.
That’s why sports fans are an extreme example of loyal customers: they continue to buy season tickets, even if the club has to go through tough times and it probably would be more fun to cheer for a team that ends the season in the upper half of the standings.
How does customer loyalty help your business?
Loyal customers provide numerous benefits for your business, as they:
- don’t react to price changes so strongly
- do not search for alternative brands
- do not compare your product with others
- respond better to delivery delays or other problems
- have a good payment record
- react to up- and cross-selling offers very positively
- are willing to give detailed feedback
- recommend your products and services voluntarily
- are active brand ambassadors (word-of-mouth marketing)
At a company with interchangeable offerings and a service that is anything but enthusiastic, consumers make buying decisions primarily based on price.
If the product has nothing to offer, it should at least be cheap.
On the other hand, unique offerings that touch consumers emotionally or inspire them may as well cost a little more.
How to maintain customer loyalty?
You maintain customer loyalty by continuing customer satisfaction.
A central principle is: if you want loyal customers, you have to reward customer loyalty.
It may sound trivial now, but it’s not.
In many industries, customers have the feeling that once they have become a customer, companies treat them as “second class” customers.
Companies often spend so much money on customer acquisition.
Once they’ve acquired a new customer, they implement savings at every turn.
However, if you want to maintain lasting brand loyalty, you need to keep spending on experiences that lead to customer satisfaction.
Nevertheless, satisfaction should not be the ultimate goal, but only the bare minimum.
The goal should be an excellent customer experience.
It would be best if you always tried to increase customer satisfaction to stay ahead of the competition.
How to increase customer loyalty?
You improve customer loyalty by increasing customer satisfaction.
Customer satisfaction is a central prerequisite for their loyalty.
First comes customer satisfaction, then loyalty.
To increase loyalty, it’s not about your company. It’s about your customers.
The best way to increase customer loyalty is by offering incentives that evoke delightful customer experiences that they do not expect:
- offering freebies like free drinks when customers pick up their food (restaurant)
- offering order tracking that lets customers always know where their package is (e-commerce)
- increasing customer engagement by reposting images of customers on social media (pretty much any brand)
There are pretty much limitless possibilities to provide unexpected experiences that satisfy your customers.
Each and every one of them brings your brand closer to the result of turning customers into real fans of your brand.