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The problem with customer loyalty is that it’s a bit, well, subjective. 

Unlike customer retention which you can measure with churn rates, or customer satisfaction which can be measured using CSAT or NPS, loyalty remains a bit harder to grasp. 

Even so, customer loyalty is fundamental to many businesses. 

High loyalty means high customer satisfaction, retention and engagement. It can drive customer acquisition, and even impact on revenue. 

So how do you capture loyalty, when it’s so elusive? Luckily for you, we’ve got you covered. 

This article shares how to measure loyalty, and why you should, before diving into the best customer loyalty strategies and how to set them up for your business. 

Off we go.

 

What is Customer Loyalty? 

Customer loyalty is when a customer is willing to engage with and repeatedly purchase from a brand, over the competition. 

Loyalty is built through positive customer experiences which create an ongoing emotional relationship between the customer and the company, and creates trust.

“Simply put, customer loyalty is when you deliver outstanding experiences that form a very strong, emotional bond with your customers that results in high engagement and repeat purchases,” says Arttu Haho, CEO of Trustmary US.

what-is-customer-loyalty

Measuring Customer Loyalty

Making the effort to build a loyal customer base can give high returns, but first we need to know how to measure it.

There’s not one hard and fast way to measure loyalty itself. Instead, many companies use a combination of different metrics.

It also makes a huge difference whether you’re in the B2B or B2C field.

Net Promoter Score (NPS) 

Measures how likely your customers are to recommend your product or service to a friend or colleague, and is rated on a scale of 0-10. 

NPS is calculated by subtracting the percentage of those who wouldn’t recommend your company (Detractors) from those who would (Promoters).

Repurchase Rate

Percentage of a cohort having placed another order within a certain period of time from the first order.

The repurchase rate is calculated by dividing the number of customers who have made more than one purchase by the total number of customers, then multiplying by 100.

Upsell Ratio

Measures the ratio of customers that make purchases above and beyond the initial product they set out to buy.

Upsell ratio is calculated by the number of customers who’ve bought more than one type of product divided by the customers who’ve bought only one. 

Customer Loyalty Index (CLI)

Combines multiple metrics for a more comprehensive picture of customer loyalty. 

The averages from the NPS scores, repurchasing rates and upselling ratios are combined into one metric, giving you a baseline measure for customer loyalty. 

Customer Lifetime Value (CLV) 

Measures the average revenue that is generated over the customer’s entire relationship with the company. 

To work out the CLV, first you need to calculate the customer value, and then multiply the customer value by the average customer lifespan in years.

Customer Engagement Score 

Measures how engaged your customers are based on their activity and usage of your products and services. 

Calculations for customer engagement scores can vary, but combining frequency of use, time spent, and specific actions taken, can give you a single metric that you can track over time.

6-customer-loyalty-metrics

Why is Customer Loyalty Important?

Why do businesses chase loyalty, especially when it’s so hard to measure? 

Because, a loyal customer can be your business’s biggest untapped asset. 

Here’s why:

Attracting New Customers is Getting Harder…

The cost of attracting new customers is much higher than the cost of retaining customers. 

Can you guess how much more? 

Maybe twice the amount? 3x, at a push?

It costs FIVE TIMES MORE to acquire new customers than to keep existing ones, and customer acquisition is getting harder.

Focusing on increasing customer loyalty can increase customer retention and drive efficiencies. 

…But Returning Customers Spend More

Customer loyalty is proven to drive revenue growth through repeat and upselling opportunities. 

Infact, your existing customers are 50% more likely to try a new product, and on average spend 31% more than new customers.

A loyal customer base is formed of people who already like and trust your brand. 

They’ve purchased from you once and are returning to do the same. These repeat customers are prime to explore new products and services. 

A study from InMoment found that 60% of loyal customers will even purchase more frequently from their preferred companies.

Loyalty Talks, LOUDLY

Customers who are loyal to your brand will talk about it. 

They will recommend your products or services to their friends, their families, and their colleagues. 

They’ll talk about your brand on social media. 

They’ll even talk about your brand for your own marketing purposes. 

This type of brand advocacy is invaluable and harnessing it really pays off. 

Word of mouth generates twice the number of sales than paid ads.

Why?


Because people trust the person making the referral.  And what’s more, 49% of people trust consumer reviews as much as personal recommendations

Securing Your Position

Customer loyalty does more than increase revenue and generate word of mouth referrals. It can also help you gain a competitive advantage. 

Picture this.

Atelier Ane and Bebe Boutique are both boutique fashion retailers in the same town. 

Atelier Ane has a large customer base, most of which make one purchase before churning. 

Bebe Boutique has fewer customers, but the majority of these are loyal customers that purchase many items regularly.

While on the surface it may seem as though Atelier Ane has the higher market share, Bebe Boutique’s customers make a purchase more frequently, and spend more. 

Unless Atelier Ane is able to get customers coming back, they may find that they are unable to stand the test of time.

secure-your-position-on-the-market

A Side Note About Retention vs Loyalty 

Why should it matter if customers are loyal or not, especially if they’re coming back?

As Janet Robinson, former CEO of the New York Times Company, puts it: “Repeat business or behavior can be bribed. Loyalty has to be earned.”

retention-vs-loyalty

A retained customer will return to your brand, but only until they find a better alternative. 

A loyal customer is one that is highly engaged with your brand, and their engagement can drive everything from revenue growth, to brand advocacy and even data collection.

Book a meeting with the Trustmary team to find out more about how driving customer loyalty can benefit your business. 

3 Great Examples of Customer Loyalty Strategies That Work

Now you know why customer loyalty matters, let’s dive into how you can start building it.

Before we start, let’s get one thing straight.


A great customer loyalty strategy is any strategy that turns customers into die-hard fans of your business. What works for one business, can’t simply be copied for another. 

But we can learn from what others have done. 

Here’s 3 of the most proven customer loyalty strategies, plus examples of how companies have made them work.

Customer Loyalty Strategy 1: Customer Feedback Loyalty Programs

Trust is the cornerstone of customer loyalty.

Trust in a brand is even more important than loving a brand, according to 88% of consumers. 

Someone can love your brand until the next great thing comes along, but trust in your brand has far more longevity. 

Trust and Social Proof

Sharing feedback from your existing customers is a great way to demonstrate how trustworthy your business is.

Why?

Because it builds trust. 

People look to others to confirm their belief in a product or service. This is known as social proof.

When 93% of customers say that they read online reviews before buying a product, they are looking for social proof – the experience of others to validate their own decision to make a purchase. 

online-review-stats

So, how can you use social proof to increase customer loyalty?

Collecting Social Proof 

There’s a couple of ways to get hold of positive feedback to use as social proof. 

The first way is to look through existing feedback from your clients to see if there’s anything that can be used as social proof.

For example, the qualitative answers from your Promoters in your last NPS survey may be a great source of positive feedback. 

net-promoter-score-reviews

Once you’ve got a few good quotes, make sure you follow up with the respondent and get consent for using the feedback in your marketing. 

The second way is by soliciting your customers directly for feedback. 

Believe it or not, most people are actually happy to give reviews and testimonials when they’ve had a great experience with a company. 

Your loyal customers are even more likely to do so. 

Here are 5 simple steps for collecting social proof from your customers:

1. Start by identifying your most loyal customers – Promoters from your last NPS, or customers who have made multiple referrals are a good place to start. 

2. Identify the best time in the customer journey to request a testimonial – Find the point when loyalty is at its highest, like just after a purchase. 

An independent seller using Amazon Marketplace does just that with a personal message that helps customers feel emotionally connected with the brand. 

amazon-marketplace-reviews

3. Be clear about what you want from them, and what you’ll be using their feedback for – Explain what type of testimonial you are collecting (video, written or audio), what is required from them, and how you plan to use their feedback. 

AirBnB’s request for feedback clearly states that it’ll ‘take a minute’, and will help both the host and future guests too:

airbnb-review-example

4. Make it easy to provide feedback – Providing a straightforward link, or an easy to use widget makes providing a hassle-free experience for your customer. 

Trustmary’s feedback widgets, for example, make it easy for your customers to provide video and written testimonials and reviews that can be displayed on your website. 

trustmary-reviews-display

5. Close the loop with customers who provide testimonials – Don’t forget to thank your customer for the time they’ve taken to provide the review. You could also remind them about how valuable their contribution is, and how you’re planning to use it. 

Displaying Social Proof

Once you’ve collected positive customer feedback, you can think about the right channels to display the social proof. 

Reviews and testimonials can be displayed across any number of marketing channels, from your website pages or mobile app, to social media channels and print materials. 

Intel’s Meet the Makers series uses video testimonials in its social media marketing strategy to tell it’s brand story about how it’s technology can be used for social innovation.

intel-meet-the-makers

What’s more, testimonials and reviews can also be strategically used anywhere that you need trust in your company to be at its highest. 

Booking.com uses a review banner on each individual hotel’s booking page to provide customers with a reassuring nudge to convert. 

booking-com-reviews

Sharing social proof utilizes customer loyalty to humanize the customer experience and in itself, create loyalty. 

Trustmary makes collecting and sharing reviews and testimonials easy. Sign up for a free trial to try out building your own customer feedback loyalty program

But wait, there’s more. 

Encouraging customers who already feel positive about your company to share success stories also helps to strengthen their loyalty. 

Your customers are already loyal before you ask them for a review or testimonial. 

The very act of asking them can make your existing customers feel valued while providing that much needed social proof for new customers. 

Nice job!

 

Customer Loyalty Strategy 2: Rewards-Based Loyalty Programs

Humor me for a moment. 

Open your phone apps, or your wallet. How many loyalty apps or cards do you have in there? A couple? More?

The average consumer belongs to 14.8 loyalty programs, and it’s easy to see why. 

customer-loyalty-schemes

Whether it’s collecting points, discounts after a number of purchases, or rewards for recommending a friend, customer loyalty programs are an effective way of capturing your customer’s repeat business and building on your relationship. 

Types of Customer Loyalty Programs

There’s no one-size fits all approach for customer loyalty programs so finding the right strategy that suits your customer, your market and your business may take a bit of trial and error to establish.

Here are 5 different types of loyalty programs that you can explore:

  • Spend-based rewards programs – With a goal to increase spend, customers earn points for every purchase that they make. Points are then exchanged for rewards like products or discounts. 

Costa, a coffee shop chain, uses a mobile app rewards program that also makes it easy for members to find and spend points in-store. 

COSTA LOYALTY EXAMPLE
  • Tiered incentives – A point-based system where loyal customers are rewarded when they pass certain spending thresholds. The different tiers may unlock special discounts or a bonus reward. 

Airlines often use tiered incentives – check out this example from Virgin Atlantic.

VIRGIN TIER SCHEME EXAMPLE
  • Subscription-based loyalty programs – Customers pay a monthly or yearly fee to join a VIP club which gives them access to exclusive services and discounts.

Online fashion retailer ASOS uses a delivery subscription to increase customer loyalty. 

asos-paid-loyalty-example
  • Value–based rewards programs – Loyalty programs aligned to customer values which reward certain behaviors, or purchasing choices. 

Duolingo uses the promise of supporting free education to increase customer loyalty and convert upgrades to Duolingo Plus. 

duolingo-plus-example
  • Partner programs – Customers benefit from a strategic partnership that adds value.

Back in 2015, Nike teamed up with Spotify to give users on its running mobile app a highly motivating user experience. 

nike-x-spotify-example

Creating a Loyalty Program

You may have decided on a points-based loyalty program, or perhaps values-based rewards is more your thing. 

Either way, there are a few tips to setting up a successful rewards program to build loyalty:

  • Understand your customer – The better you know your customer, the more accurately you’ll be able to predict what they want and be able to service those needs. Nothing builds loyalty like being heard and understood. 
  • Find the right incentive – Incentives need to add value to your customer. Your rewards could be meaningful (something your customer already likes and can use), or just something they really want (a discount or access to a community). 
  • The easier the better – If your customer loyalty program is too difficult for your customer to gain any value from, it will have the opposite effect. Make it easy to understand, make it easy to attain, make it easy to redeem. 
  • Get the right tools in place – There are plenty of tools out there that can help you get a handle on how your customer loyalty program is performing – from CRM systems that help manage customer interactions, to customer feedback systems.

Speak to a member of the Trustmary team to see how they can help you build a successful rewards program.

Running a Loyalty Program

And you’re off. 

Once your loyalty program is set up, you’re on your way to building long-term relationships. 

But don’t leave it all to chance – there are subtle ways that you can continue to encourage loyalty with your customers. 

For example, keep communicating with members of your loyalty program. 

You can show them the benefits of being part of the rewards scheme with a video testimonial, send them products they can spend their points on, or simply let them know that they are approaching the next tier. 

Frequent communications remind your customers of the value you are adding to their lives – plus gives you a good opportunity to upsell too!

But beyond building long-term relationships and giving you a chance to increase your customers’ spend, a successful loyalty program has a wealth of data attached to it.

Information about your customer’s favorite product or service, about how often they purchase and average spend, are all readily available. 

Make sure you have the mechanisms in place to collect it. This information can inform your product development, align your business strategy or even acquire new customers.  

And on the subject of customer acquisition…

Customer Loyalty Strategy 3: Encourage Customer Referrals

What if your best customers can help you get new customers in?

Your most loyal customers are highly satisfied with your brand. 

We’ve already explored how you can harness this for social proof in the form of reviews and testimonials, and how powerful rewards programs can be for building loyalty. 

Customer referral programs are a combination of both of these strategies. They maximize all the goodwill that you’ve built with your customers by incentivizing bringing potential clients to your doors. 

Infact, a new customer referred by a friend is 4x more likely to make a purchase, have higher CLV and retention rates than non-referred customers. 

Sounds good?

Type of Referral Programs

There are two main types of referral programs that most businesses utilize: one-sided or two-sided incentives. 

One-sided incentives: One person receives the reward for the referral. Either existing customers for sending the invite, or the new customers for converting. 

Penthara Technologies uses a one-sided incentive for talent referrals. 

Penthara-tech-one-sided-incentive-example

Two-sided incentives: Both parties are rewarded for the referral.

Cycleboard offers both existing and new customers $100 for referrals. 

Cycleboard-two-sided-incentive-example

Setting Up a Customer Referral Program

Here’s how to get started with a customer referral program:

  • Identify your ‘ideal customer’ – What does a good customer look like? What do they love about your business, what are their behaviors? Understanding how your ideal customer thinks and acts allows you to tailor your loyalty program directly to them. 

Wise gives away 90 Euros when you invite three friends to the money transfer app.  Crucially, these friends are validated as ‘ideal customers’ if they transfer over 250 Euros each. 

wise-referral-system
  • Establish the right incentive – Incentivizing existing and new customers alike is a key part of referral marketing strategies. Incentives can be discount-based, or experiential, but they could also simply be more product, giving customers a chance to really fall in love with what you do. 

Blue Apron gives members a free subscription to Calm Premium because the meditation app would appeal to subscribers of the food box service. 

BLUEAPRON X CALM EXAMPLE
  • Double down on customer experience – your existing customers may be forgiving of clunky UI or a disjointed delivery process, but new customers are unlikely to be as understanding. Refine your customer journey and set up feedback mechanisms to deliver the best customer experience possible. 
  • Reach out to your existing customers – Let your existing customers know about your new referral program. Explain the benefits to them if they refer your business to their friends and family. 
  • Track your referrals – Start tracking metrics that align with your referral strategy and your goal. Conversion rates and engagement rates are two great numbers to start tracking. 

How to Build a Customer Loyalty Strategy for Your Company

We’ve explored different loyalty strategies, but the fundamentals of growing loyalty remain the same, whichever path you take. 

Let’s take a look at how you can start building your own customer loyalty strategy

building-customer-loyalty-strategy

1. Get a Good Understanding of Your Customers

Understanding your customers can make the difference when you are building loyalty.

Without solid knowledge of what makes them tick, you’re essentially guessing about the right approach to loyalty building, and the right way to reward them. 

Qualitative research can help to steer your understanding of where you can add value and build a deeper relationship, but so can existing research that you already do. 

Customer feedback, reasons for churn, NPS and CSAT scores all help build a picture of what your customers love and hate about your business. 

2. Set an Objective 

We’ve looked at the benefits of building loyalty, everything from increasing retention, improving acquisition and increasing revenues. 

But identifying what your number one priority is helps guide your strategy as you build it. 

For example, your goal may be to increase repeat customers by 20% in Q2. With this in mind, you may decide a loyalty program that shares social proof is the right way to go. 

Setting an objective for your loyalty program helps build focus into what you do, and avoid escalating costs. 

Which brings us on to…

3. Define Tactics That Build Loyalty

Whichever strategy you use to increase customer loyalty, clearly define the tactics that will help build loyalty.

Thinking about the example above, a personalized email campaign to lapsed members that shares testimonials from previous customers, can support the goal to increase repeat business by 20%. 

Focus on activities that will help you achieve your goal.

4. Establish a Budget

Customer loyalty activities don’t have to be expensive, but heavy discounting can quickly eat into your margins. 

Start simple with a program that is tailored for your customers, that can be scaled up as you gain traction. 

For example, printing 500 paper stamp-cards, or hosting a series of exclusive training workshops for your high-spending clients, cost next to nothing.

By having a clear goal in mind, and ring fencing an amount you’re willing to spend, you can avoid creeping costs and the temptation to keep discounting.

5. Set Up Your Customer Loyalty Toolkit

Harnessing your customer loyalty does take a bit of time and effort.  

Having the right tools in place to monitor and manage your customer relationships, while capturing positive sentiment, can make the process easier.

You loyalty toolkit should include: 

  • Customer feedback systems to proactively request feedback, and display it in the key touchpoints in your customer journey. Trustmary helps you collect, publish and test written and video reviews – start a free trial today
  • Social listening tools to monitor how people are talking about your brand, product and services.  Positive conversations can be used for social proof, or formalized as part of your loyalty program. Negative sentiment gives you a chance to spot and address problems before they escalate.
  • Email marketing systems to build and send beautiful, personalized emails to your customers. Your email marketing system is crucial for communicating about your loyalty program!
  • Customer relationship management (CRM) systems to manage your customer relationships. CRM systems are centralized tools that connect the dots between the key customer-facing touch points such as sales, marketing, and customer services, so everyone can be alighted to your loyalty program. 

Best Tips and Tricks for Customer Loyalty Strategies

Psst. 

Now that you know the best way to set up customer loyalty programs, let’s share some best practice tips and tricks to help turn yours into a success. 

Tip #1: Customer Experience is Key

Customer experience is the number one differentiator for most businesses, and a critical factor when building customer loyalty. 

73% of customers agree that customer experience helps to drive their buying decision.

Every time a customer has a positive experience with your company, it builds a little trust and goodwill. 

Over time, this trust and goodwill develops into something that they want to experience again, or share with their own networks.

Tip #2: Personalize Your Approach

So arguably, personalization is a part of the customer experience, but it has such a huge impact on the way that customers view your brand that it needs its own mention. 

A personalized experience creates human connection. 

You’ve taken the time to learn about your client and address them on a personal level and it shows. 82% of customers feel more positive about a brand after engaging with personalized content.

Whether you make helpful recommendations based on past purchases, or use names in email communications, taking a personalized approach makes your customers feel seen and valued.

Tip #3: Frequent and Transparent Communication

Customers demand authenticity from the companies they buy from, and showing your humanness forges an even deeper connection. 

As a report from Forrester found that during the pandemic, empathy was key to fueling customer loyalty.

“Frequent communications give you an avenue to share the messages that are important, such as new product lines, or additional services. But it also serves as a reminder to your human connection,” says Arttu Haho, CEO of Trustmary US. “You can communicate your shared values, or your brand vision, or explain your side of a failure.”

frequent-communication-build-loyalty

After all, open and honest communication is fundamental to any healthy relationship, and relationships with your customers are no different.

Conclusion

Customer loyalty is harder to grasp than retention or customer satisfaction, but the benefits of building loyalty are well worth the effort. 

From increasing revenues, to bringing in new customers, the value that loyalty provides can give businesses a competitive advantage like no other. 

There are many ways to build loyalty, and we explored three of the best strategies, with examples from real companies who have tried and tested these methods.

Whether sharing social proof like Booking.com, running a points-based rewards program like Costa coffee, or setting up a referral program like Wise, the foundation of building loyalty is human connection. 

Understanding your customers, being authentic and personal in your communications, can all help create trust and a strong emotional bond with your brand. 

Building loyalty takes time and effort, but luckily, we’re on hand to help. 

Book a meeting with the Trustmary team today to see how we can help you build loyalty

FAQ

What is customer loyalty?

Customer loyalty is when a customer is willing to engage with and repeatedly purchase from a brand, over the competition. 

Customer loyalty can drive customer acquisition, and even impact on revenue. 

How much more valuable are loyal customers than unloyal customers

According to a Temkin Group study, loyal customers are 5x as likely to repurchase, 5x as likely to forgive, 4x as likely to refer, and 7x as likely to try a new offering.

Loyalty is hard won, but the time and effort it takes to build loyalty stands to deliver huge rewards. 

How do you measure customer loyalty?

There’s no quick way to measure customer loyalty, but a combination of different measures can give you a good picture of how loyal your customers are. 

The key metrics to keep track of are:

  • NPS
    Repurchasing rate
  • Upsell ratio
  • Customer Loyalty Index (CLI)
  • Customer Lifetime Value (CLV)
  • Customer Engagement Score

What are the best customer loyalty strategies?

The best customer loyalty strategy for your business is any strategy that turns customers into die-hard fans of your business, but the 3 that we recommend are:

  1. Sharing social proof
  2. Creating a rewards program
  3. Developing a referrals program

How do I get started with a customer loyalty strategy?

The 5 steps to building a customer loyalty strategy are:

  1. Get a good understanding of your customer
  2. Set an objective
  3. Define tactics that build loyalty
  4. Establish a budget
  5. Set up a customer loyalty toolkit
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