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Definition of Customer Loyalty: Benefits, Examples, & use Cases

Building a stable customer base and ensuring a predictable revenue stream is one of the primary goals for businesses in different industries. For these businesses, tracking and improving customer loyalty is essential, but what is customer loyalty exactly?

The definition of customer loyalty tells us that it is a measure of how likely a customer will do repeat business with a brand. The significant factors that affect it include the value of the products or services, customer satisfaction, and customer experience.

In this article, we will help you familiarize yourself with the concept of customer loyalty but in the context of the modern business world. You’ll also discover the benefits of customer loyalty, a few examples, and use cases.

Customer Loyalty for Modern Businesses

Customer loyalty for Modern businesses is considerably different than the one for businesses just a few decades ago. How come? Well, the markets have significantly changed during this time. They’ve become oversaturated and volatile. The goods and services offered grew exponentially. Modern customers are a lot less patient.

Almost 80% of customers are ready to stop doing business with a company that provides poor customer service and go to a competitor. One more thing has changed. Customers have become a lot less trusting. Approximately 55% of customers trust companies less than they used to.

Modern businesses need to be more agile and competitive when it comes to creating customer loyalty strategies.

Innovation in the 21st Century

All that customers have to do nowadays is go online to search for products or services and compare prices. The innovation, driven by technology, enables customers to be more informed and make good purchasing decisions. Fortunately, 21st-century innovation also has the potential to align businesses better with their customers’ wants, needs, and expectations.

If we go back to the definition of customer loyalty, especially the factors that affect it, it becomes clear that technology can help. Some technological solutions are more than capable of assisting businesses in delivering better customer experience and taking customer satisfaction to the next level.

These solutions range from software toolkits able to help businesses more efficiently collect feedback from customers to those who enable modern customer loyalty programs. With more data, modern companies can now constantly personalize loyalty programs and provide a delightful customer experience.

Looking for a tool to measure your customer loyalty? Try the free version of our software.

4 Primary Benefits of Customer Loyalty

Given the definition of customer loyalty we’ve shared with you, it’s logical to assume that the primary benefit of customer loyalty is ensuring that the customer does repeat business with you, but there’s more to it. Here are the four primary benefits of customer loyalty you should know about.

Increased Profits

Customer loyalty and increased profits go hand in hand. Customer loyalty programs are designed to help increase customer retention rates. Even a slight increase in customer retention can result in profits going up anywhere between 25 and 95%. The probability of selling to an existing customer is 70% which is considerably higher than the probability of selling to a new customer, which is anywhere between 5 and 20%.

It’s Easier to do Business With a Repeat Customer

Repeat customers have already established a relationship with the brand they are buying from. They trust the company they are doing business with. It makes it easier for businesses to do business with them. In fact, a repeat customer will spend 300% more than a first-time customer. That’s most likely because they trust the brand enough to purchase the premium products and services that are often quite expensive.

Cut Down Expenses

Modern businesses have various strategies in place to help them save money. Loyalty customers can create a stable revenue stream and enable your company’s growth and expansion. The stats are very clear in this department. Keeping a current customer is five times less expensive than prospecting and converting a new one.

It Helps Communicate Strong Marketing Message

Finally, a strong and successful customer loyalty program perfectly synergizes with your marketing efforts. You can use your customer loyalty success to become more competitive in your market and attract customers on the lookout for a trustworthy and reputable brand.

3 Examples and Use Cases for Inspiration

Coming up with a loyalty program from scratch can be hard. Here are a couple of successful customer loyalty programs to inspire you and get you going in the right direction.

LEGO Loyalty Program

Lego is the world’s leader in the toy market. The company decided to reinvent its obsolete loyalty program based on passive discounts. Instead, LEGO implemented CrowdTwist Loyalty and Engagement loyalty programs. Today, LEGO asks the members of their loyalty programs to choose rewards on their own. The result – higher engagement rates and official recognition by Loyalty360.

Target Loyalty Program

As one of the world’s largest retailers, Target decided to build its loyalty program around value. The company introduced the REDcard to its customers. Shoppers who have the card have a 5% discount on every purchase, both online and offline. Additionally, the card owners have access to free shipping for all online orders and the ability to return the goods 30 days after the purchase with no fee attached.

Amazon Loyalty Program

Amazon shoppers can now sign up for a credit card they can use with the company’s loyalty program. The program is quite rewarding as it comes with a $30 gift card, 3% back on every dollar spent on Amazon, and 2% money-back on purchases made in drugstores, restaurants, and gas stations.

How to Start

The following blueprint will help you know exactly where to look when you plan on starting a customer loyalty program:

  • Research competition to see what they are doing
  • Ask customers for feedback to get valuable insights
  • Decide what actions you’ll reward
  • Make a portfolio of the rewards you want to give
  • Run your ideas with customers to find the one that hits the sweet spot

Conclusion

Now that you know exactly what the definition of customer loyalty implies and why it is crucial, you can get to work. Customer loyalty programs bring too many benefits to the table. Before you build your customer loyalty strategy, do your research, analyze the data, and opt for a strategy that first and foremost resonates with your customer base.