Success Thanks to Returning Customers
Our digital age gives customers online access to a vast range of products and great flexibility of choice. For companies and brands, this means constant competitive pressure and uncertainty. This makes it all the more important to bind customers to your company or brand and generate customer loyalty. Customer relationships need maintenance and nurturing to build a tribe of loyal customers and ensure long-term profitability.
It is not uncommon for terms such as customer satisfaction, customer retention, and customer loyalty to be used interchangeably. There is no question that they all make a decisive contribution to a successful company—however, these terms are neither synonyms nor a marketing definition. They are different and yet still related to each other. Customer loyalty, for example, is only possible if there is a strong customer focus within the company and the customer is satisfied with the performance they receive. Only then does a customer decide to be loyal to a company. If this is the case for lots of customers, then this is reflected in the company’s success. Why is this so, and how can customer loyalty be turned into something measurable?
Table of Contents
- What is Customer Loyalty, and How Does It Differ from Customer Satisfaction?
- Trust, Image, and Connection: Generating Customer Loyalty
- Customer Loyalty’s Revenue Potential: How Loyal Customers Promote Profit
- Helpful Tips for Increasing Customer Loyalty
- Understanding, Communication & Effort: This Is How Customer Relationships Work in the 21st Century
- Maintaining Existing Customers to Develop and Strengthen Customer Relationships
- Customer Loyalty vs. New Customer Acquisition
- Measure Customer Loyalty with the Net Promoter Score®
What is Customer Loyalty, and How Does It Differ from Customer Satisfaction?
The quantity of fixed and reliable customers is a not to be underestimated metric for every firm. The following definitions help us first better understand the terms:
Definition of loyalty:
Loyalty means sincerity and straightforwardness towards another person. Behavior and attitude are here essentially the same.
Definition of customer loyalty:
Customer loyalty is the customer’s voluntary attachment to the store or its products. It is the opposite of the hard customer loyalty caused, for example, by contracts or economic and technical constraints. Customer loyalty can therefore be used as a synonym for customer retention. The term brand loyalty as a synonym should again be avoided because this is specifically aimed only at specific brands and thus the branding of the company.
Definition of customer satisfaction:
Customer satisfaction, on the other hand, refers to the perception and quality of the relationship between the company and the customer. Here the customer compares their expectations with their fulfillment by the company. Depending on the size of this discrepancy, a customer may or may not be satisfied.
As a rule, customer satisfaction and loyalty are a good prerequisite for not only selling current products or services but also creating a healthy sales market for new products in the future. Loyal consumers are, therefore, the basis for continued success and positive company growth. Unlike new customers, loyal customers do not look for alternative offers from the competition. They usually remain faithful to their choice even when prices change and also typically have an excellent payment ethic. Besides this, loyal customers deal more readily with possible delivery delays or other irregularities.
Trust, Image, and Connection: Generating Customer Loyalty
There are three factors that profoundly influence customer loyalty. These are:
Consumers must have confidence in the company or the brand. This can be guaranteed, for example, by years of existence. If the buyer has faith in the company, they are willing to rebuy products in the future.
The term image refers to the attitude, feelings, and experiences that the customer connects to the brand or company. Companies can generate confidence and sympathy, eventually leading to a more intense relationship with the buyer. The corporate identity of a company also plays a significant role in terms of customer loyalty.
High attachment means that the customer identifies with a characteristic or product. Consumers like the range and feel so strongly connected to it that they not only speak out about it to others, but also take sides, promote products, make them better known, and at the same time provide detailed feedback on products, services, and customer service.
Customer Loyalty’s Revenue Potential: How Loyal Customers Promote Profit
Anyone asking themselves what customer loyalty means for sales should know that it brings great potential for companies. Customer loyalty signals that buyers identify with the company and the brand, and this has a very pleasing effect on all the business areas of the company. Loyal customers are both more powerful and profitable. Not only do they buy more products or use more services, but they also do so repeatedly and not just once. For the company, this means a consistently high sales potential.
Additionally, companies can leverage existing customers for cost-effective and persuasive marketing. So-called recommendation marketing is neither artificial nor intrusive, but seems very authentic thanks to the positive attitude and voluntary loyalty to the company. Customers act as promoters. If loyal customers in a circle of friends, acquaintances, and families rate a service, product, or trademark as good, there is a very high chance that word of mouth will be well received by those around them and create even more loyal buyers. Loyal customers, therefore, offer the following decisive competitive advantages:
- They recommend the products, service, or even the entire company to friends, acquaintances, and colleagues,
- They have a high willingness to pay,
- They are less responsive to changing prices,
- They can be used for up- and cross-selling offers
- They are not actively looking for alternative providers,
- They are more likely to tolerate delivery delays,
- They voluntarily provide detailed feedback on your products and
- They ultimately improve employee motivation.
Helpful Tips for Increasing Customer Loyalty
Securing customer loyalty is not always easy. The following list gives several tips on how to increase it.
1. Customer service
Good customer service is taken for granted by many consumers, but companies rarely succeed in implementing it. In the best-case scenario, this means letting customer service have an answer for every question. This not only satisfies the needs of the customer, but they will also feel competently taken care of. In addition, it makes sense for there to be carefully chosen experts for specific disciplines. The customer then immediately knows who to contact with their question.
2. Pleasant atmosphere
For customers to visit salesrooms again and again, it is essential that the atmosphere triggers a cozy and homely feeling with the buyer. In short, a customer should be spoiled on-site, giving them the feeling that everything possible is being done for them. If the customer feels comfortable, they are also more likely to spend money.
3. Personal welcome
It creates a good impression when companies look after their customers individually, know their respective names and individual needs. It inspires confidence and a sense of closeness with the customer. In this way, companies create an effective bond, which should be nurtured and maintained.
4. Details are important
The customer needs the business to remember not only past purchases but also personal information. Since not everyone can know everything, the company should purchase software that collects and collates customer data, and then make it available to all employees at any time.
5. Listening is the be-all and end-all
Customers have concerns and problems that entrepreneurs should take to heart. Besides which, a business receives a lot of feedback about their products and services during conversation. In this way, you can find out whether your assortment of goods and services should be changed or maintained.
Another tip for more customer loyalty is to tell the consumer what is currently going on in the company, whether it be new products or other changes on the horizon. In this context, it also makes sense to contact the buyer if, for example, orders have arrived earlier or are somewhat delayed. Transparent communication is essential for customer loyalty.
The authenticity of a business describes its credibility. This is influenced by all the actions, practices, values, and activities that the company undertakes. Therefore, it is essential to align all internal and external processes according to a modern philosophy or codex and follow it. This is not just about slogans such as sustainability, empathy, or profit orientation. Such a corporate philosophy is the perfect prerequisite for employees and customers to identify with the respective values and for the company to be authentic.
If there are returns or complaints, then it is important that companies react competently and professionally. Often it is not the fact that someone had to complain that is decisive, but the processing service that goes along with it. At best, companies not only solve the problem but also go to make amends—this happens above all on an emotional level.
Understanding, Communication & Effort: This Is How Customer Relationships Work in the 21st Century
There are various steps to improve communication with interested parties and promote customer relationships. This includes, for example, incitement to have genuine customer dialogue and thereby gaining feedback on your service, products, and services. Companies should involve customers in the development of new ideas and promote open and honest communication.
The exchange of information from the company to the customer must be clear and not phrased in incomprehensible technical jargon. This means avoiding foreign words, buzzwords, and company-internal terms—because most customers will take this as an imposition. Old-fashioned letters are back in fashion these days, as they help you stand out, come to the fore more than any email, and suggest to the customer that the company has taken the trouble to send a letter. In the end, customers are just people who appreciate the attention. It becomes clear that a company must know the wishes and expectations of its clients in order to meet them. This is achieved by clearly defining the potential customers, carefully analyzing data collected from all possible channels, and incorporating its evaluation into company strategy.
In general, customers have seven expectations:
- Friendly and convenient customer service
- Short response times
- High credibility
- Continuous accessibility
- Fairhanded handling of complaints
- Digital and personal communication options
If you want to meet and exceed these basic expectations, you can further develop customer service with concrete measures.
Maintaining Existing Customers to Develop and Strengthen Customer Relationships
Rewards are a great way to express gratitude and help ensure that customers who are loyal to the company receive something for it, whether a present or other items such as discounts and the like. Do not ignore existing customers; they can also be given at least one gift on special occasions. The care of existing customers is therefore just as important as rewarding customer loyalty. Rewards just shouldn’t be related to anything else. They should be something separate that the customer is happy about and connects this appreciatively with the company. This positive behavior creates emotional moments and positively develops the customer relationship.
Customer Loyalty vs. New Customer Acquisition
In the marketing mix, existing customers generate fewer costs. In the long term, customer retention is much cheaper than attracting new ones. The aim of customer loyalty is that existing customers consume regularly and recommend the business to others through word-of-mouth propaganda. The majority of existing customers can be stimulated to buy more through cross- or upselling. The company’s performance, quality, and service have already won the customer over, which is why they are often willing to pay higher prices. Of course, discounts and contractual obligations are equally effective ways to achieve customer loyalty. Offers and quick refunds when buying goods are other suitable approaches, as is the formation of a community.
By contrast, the acquisition of new customers is more expensive and involves a great deal of effort. There are numerous different marketing opportunities to attract new customers. One advantage of leveraging customer loyalty compared to new customer acquisition is in product development. Loyal customers are well supplied with existing products. These must, of course, be renewed and modernized from time to time. However, new customers want state-of-the-art products and end up in the arms of the competitors on discovering the smallest point of “difference”. Another factor is that existing customers shop regularly, whereas new customers may only try an item once and then never purchase a product from the company again.
Measure Customer Loyalty with the Net Promoter Score®
To make customer loyalty measurable, businesses use NPS® or the Net Promoter Score®. This key figure measures company success with their customers, made possible by revealing the numerical difference between a company’s promoters and detractors. To determine the size of these two groups, customers are asked the following question.
“How likely is it that you would recommend our brand or company to your friend or colleague?”.
In order to produce a measurement result, the answers are written down on a scale from 0 to 10. 0 is unlikely, 10 highly likely. All detractors are in the range of 0 to 6. Customers with 7 to 8 are the indifferents, and the promoters are the customers who rate either 9 or 10. The formula then reads:
Promoters (%) – Detractors (%) = NPS.
The higher the value, the more positive the result for the company, and the more customers are classified as loyal, as they would recommend your service or product to others. zenloop software effectively helps to calculate and evaluate your NPS®.
Customer loyalty is a factor in marketing that can have a decisive impact on the profitability of a business. But this can only be achieved if a company manages to use this loyalty for itself and continually strengthens customer satisfaction. What is certain is that customer loyalty is a critical metric for companies. If you want to remain competitive today and stay in the market permanently, you need customer loyalty. However, loyal customers cannot be purchased. Loyalty requires trust in the products and the company. It is only possible to build a good, long-term relationship if there is a sense of customer needs. This strengthens loyalty and prevents the customer from looking for a market alternative after just one or two purchases. The difference compared to a new customer is the higher willingness to buy, the price insensitivity, and a higher recommendation rate. Loyal customers help a company to better focus its potential on the end-user.