What is customer loyalty and retention?
Customer loyalty and retention is a marketing term that means different things to different businesses. For some, it means an ongoing commitment to a company's service or product, while for others it means loyalty to a company's brand. Customer loyalty and retention are rooted in the concept of the customer journey. This journey starts with a customer's purchase and ends with their advocacy.
Why You Should Be Investing In Customer Loyalty and Retention
What is customer loyalty and retention?
Can you measure how happy are your customers? Customer satisfaction is more than a number. It's what customers feel when they purchase products and services from a brand. Let's learn more about customer loyalty and retention.
Customer loyalty- Customer loyalty is one of the most important assets of any company. It ensures that customers remain satisfied with the company's offerings and how likely they are to continue purchasing. Customer loyalty is customers' trust in a brand and the inclination to frequently revisit a brand to purchase and services. Brands build an emotional connection with their customers when they improve customer loyalty. Customer loyalty increases sales and builds customer lifetime value. Many businesses offer loyalty points when they sign up for loyalty programs and shop for products and services. These loyalty points can be redeemed for shopping for more products from the brand. Customers provide their personal information, such as names, email addresses, phone numbers, etc. when they sign up for a company's loyalty program. Companies have rights reserved to use customer information. Make sure to read the company's terms to use your information.
Loyal customers are natural brand advocates and are more likely to recommend your brand to their friends and family through a word-of-mouth marketing strategy. Companies have to spend almost five times more on acquiring new customers than retaining existing customers. Existing customers spend 31% more and are 50% more likely to buy related products than new customers. Customer loyalty helps businesses increase sales and revenue, spread awareness, and gather customer data.
Customer retention- Customer retention is the act of retaining customers by satisfying their current needs and desires. It is an ongoing process that ensures that customers continue to buy your products or service and that they tell other people about your business. A customer retention strategy can help you to improve customer satisfaction, reduce the costs of acquiring new customers, and increase the lifetime value of your customers. The benefits of retaining customers are obvious, but they can be difficult to implement.
Customer retention is measured by the number of customers gained and the number of customer churn during a period. According to research, a company's profits increase by 25-95% when they can increase customer retention by 5%. Many businesses organize campaigns to retain the current customer base. Brands make sure that they retain customers obtained through various marketing strategies.
Customer Loyalty vs. Customer Retention
What is the difference- customer loyalty and customer retention?
Customer Loyalty and customer retention may sound similar and used interchangeably but there is a big difference, although both are necessary for the customer journey. Customers start this journey with customers purchasing products and services and costumers end this journey with their advocacy.
Customer loyalty is defined as a long-term emotional relationship between brands and customers due to repeated purchases by a customer, resulting in higher profits for the business. Customer retention is attained when businesses use best practices to maintain a customer base.
Customer loyalty is essential to see how happy your customers are with your brand. Repeat customers are satisfied and share customer experiences with their friends and family. Brands need to keep customers happy and satisfied by incentivizing them regularly. This develops a strong emotional bond between customers and brands. Loyal customers make a long-term relationship with the brand. Customer loyalty boosts repeat sales but it is not just about revenue generation, loyal customers share a strong emotional connection with your brand that helps in building your brand reputation.
How to Boost Customer Loyalty and Retention
Customer loyalty retention strategies help in building a loyal customer base for some time. Before you plan any business strategy to retain customers, you need to set a feasible goal. Then you need to map their journey to encourage them to buy your products and services by offering various rewards and incentives through a loyalty program. Plus, brands need to offer excellent customer service to increase customer loyalty. When you consistently meet and succeed in customer expectations, you get loyal customers.
Let's read some strategies to boost customer retentioand loyalty-
Do You Know-: Customer loyalty is defined as a long-term emotional relationship between brands and customers.
Look for trends and changes
Companies must make sure that they are using the right customer success metrics to measure Customer Loyalty and retention to keep up with the pace. Look for data trends, study metrics results, and customer behavior for measuring customer satisfaction. When you analyze customer data you can determine the ways to improve customer retention rate.
Make sure you have well-trained customer support and a robust online presence on various social media platforms, apps, and websites to improve the business-customer relationship. First impression make a long-lasting customer experience.
Work on customer value
Customer satisfaction is one of the crucial aspects of customer service. When customers buy products from their favorite brand, they equally value customer support that brands provide, including phone, email marketing, or live chat. Make sure to provide excellent customer service to meet customer expectations. Plus, businesses need to work on their digital marketing tactics as customers tend to research various online resources, blogs, etc. before they commit to a brand. Brands can share Great Customer success stories on social media platforms and review feedback to ensure they stay on top of the game.
Set up a robust customer loyalty program
Brands can get a customer loyalty program software installed in the point-of-sale systems at the outlets that can automatically update customer loyalty points when they purchase a product. Many point-of-sale systems come with an in-built CRM software that allows retailers to hassle-free update customer loyalty points. Customers receive information related to their rewards, incentives, and loyalty points on their registered phone numbers or email address. It is easy for customers to track their loyalty points, special offers, and discounts when they receive real-time information related to their perks. Customers are likely to trust brands more that provide on-the-spot details of their rewards and perks and make repeat purchases.
Brands can build a strong bond with customers with a good Customer Loyalty program. Customers get purchase history, total loyalty points, purchase details, etc., when you install a loyalty program software. Plus, brands can easily track customer sales, behavior, and trends through the CRM functionality of the POS system. With a customer loyalty program, software brands provide a holistic experience to customers.
Note-: Many point-of-sale systems come with an in-built CRM software that allows retailers to hassle-free update customer loyalty points.
Share case studies and customer success stories
Case studies and customer success stories can have a great impact on customers during the sales process. Customers determine whether your product or service is the right choice during the first impression. Make sure that you share how customers have benefitted from your products and services and how effective is your customer service. Share customer reviews and testimonials from previous purchases. When brands share their prior customer experience, it has a positive impact on customer purchase decisions, further increasing customer satisfaction. When brands repeatedly make customers happy by providing exceptional services, it decreases customer retention rates.
How to measure customer loyalty and retention?
So how can you measure how happy and satisfied customers are? Or how long will your customer stay with you? Can you measure customer loyalty? The answer is yes you can measure customer loyalty and retention by various customer success metrics. There are many ways to keep track of loyalty, some are given below-
Customer retention rate
Customer retention rate measures how long a customer will remain with a brand. Brands can attract new customers to one brand but for how long customers will stay with them is a tricky question. Companies spend a lot of money and effort to attract a customer but the truth is that existing customers are less expensive than finding new ones. When customers stay with a brand for a long time, they tend to spend more on every visit than new ones. You get a better picture of what do your customers like or dislike, has a new product or service affected the retention rate.
Customer retention rate can be determined by-
The number of customers at the start of a period,
The number of customers at the end of a period, and
The number of new customers gained during a period.
Customer retention rate = ((The number of customers at the end of a period- the number of new customers gained during a period)/ the number of customers at the start of a period) X 100
Customer churn rate
Customer churn rate is the percentage of customers a brand lost during a given period. Brands can lose customers because of various reasons such as a rise in prices, lack of customer support, unmet customer satisfaction, etc. It is an essential metric for companies to keep a check on as the high churn rate indicates that the brand lost a high number of customers during a period. A low churn rate is essential for long-term business growth. Make sure that you keep the churn rate low; although every company has some churn rate as it is impossible to satisfy every customer every time.
To calculate customer churn rate you need-
The number of churned out customers during a period, and
The number of customers at the start of the period.
Divide the number of churned customers during a period by the number of customers at the start of the period. Then multiply it by 100 to get the percentage.
Customer churn rate = (The number of churned out customers during a period/ the number of customers at the start of the period) X 100
Net Promoter Score (NPS)
Net Promoter Score helps companies check the health of long-term business growth. It allows companies to measure customer loyalty through a survey. NPS can be determined by how customers are likely to recommend the company to their friends and family on a scale of 0-10.
Customers who rate their answer 9 or 10 are called promoters, those who rate the company between 7 and 8 are passive; while those who rate the company 6 or below are called detractors.
You can calculate NPS by subtracting the percentage of detractors from the percentage of promoters.
Plus, you can add questions such as how satisfied customers are with the products and services or customer support. You can also ask customers to rate the overall customer experience and satisfaction to know the health of your business.