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Five Easy Ways to Enhance Customer Loyalty

2022/05/27

Customer loyalty can be a major factor in your overall revenue, as loyal customers tend to make repeat purchases, extend their contracts, and have a much higher LTV (lifetime value) than one-time customers. Moreover, you can cut down on a lot of the costs of generating new leads if you can develop loyal clients. In this article, we will go over how to enhance customer loyalty with 5 easy strategies.

1. What is customer loyalty?
2. Metrics for measuring customer loyalty
3. Why is customer loyalty important?
4. Advantages of high customer loyalty
5. 5 strategies to boost customer loyalty
6. Summary

What is customer loyalty?

Customer loyalty refers to a customer’s emotional attachment to a company and its products, and their willingness to repeatedly choose you over a competing brand.

Generally, a loyal customer will have many repeat purchases, actively use your products, and are more likely to refer your brand to their acquaintances. This loyalty could be explained by a number of reasons, however. For example, a customer could keep coming back because they are genuinely satisfied with your services OR they just choose you because it's the cheapest option out there.

By nurturing your customer relationships and strengthening their sense of loyalty, you can reduce the risk of customer loss to competitors. When loyalty is low across the board, you can easily lose a client to a competitor offering a better deal or a discount. In this article, we’ll go over specific ways you can encourage customer loyalty and minimize such risks.

Metrics for measuring customer loyalty

NPS (Net Promoter Score)

NPS stands for Net Promoter Score and is the most commonly used method for measuring customer loyalty.

It was originally proposed by Fred Reichheld, a fellow at the US consulting firm Bain & Company, in his book "The Ultimate Question." The question is: "How likely is it that you would recommend [Organization X/Product Y/Service Z] to a friend or colleague?”

Then the surveyee simply chooses a number between 0 (not at all likely) and 10 (extremely likely). Then, the results are broken down into three categories: Promoters, Passives, and Detractors. Promoters are those with a score of 9 or 10 and are the most loyal customers who are expected to advocate your service online and to friends. Passives are those with a score of 7 or 8, who are satisfied but would not go out of their way to promote your service. And finally, detractors are anyone with a score below 6 and are unlikely to have a repeat purchase from you, and may even discourage others from buying from your brand.

CSAT (Customer Satisfaction Score)

Another related metric is CSAT, or the Customer Satisfaction Score. Like NPS, CSAT is determined by asking a single question: “How would you rate your overall satisfaction with the [goods/service] you received?” Then the customer would choose a number between 0 (very unsatisfied) and 5 (very satisfied). Then you would count up the number of people who answered 4 (satisfied) and 5 (very satisfied) and divide this by the total number of survey answers to see the percentage of satisfied customers, aka the CSAT.

Compared to NPS, which measures customer loyalty in the long-term, CSAT can unveil the level of customer satisfaction in the here and now, and give you a sense of whether customer expectations are currently being met.

Both the NPS and CSAT surveys should also be supplemented with qualitative questions to determine exactly where your main areas are for improvement. This way you can take steps to boost loyalty after discovering how your clients currently feel.

Why is customer loyalty important?

Customer loyalty has only just started to gain traction as an important concept in business, whereas customer satisfaction has been tracked for decades.

With the expansion of the tertiary industry, including the service sector, companies began to pay more attention to this idea of “customer satisfaction” around 1980. They focused on generating satisfaction, such as "were they satisfied with the product or service?" rather than on productivity and efficiency.

However, as companies continued to conduct customer satisfaction surveys, they came to realize that highly satisfied customers do not = repeat customers. No matter how good a product or service is, if the customer does not fully utilize its functions or if it has a poor support system, naturally, the user will not purchase the product again. Even if they are satisfied with the product at the time, they may easily switch if another company launches a better product. This is where the concept of "customer loyalty" comes in.

Customers who have an emotional attachment to a product are much more likely to purchase the same product again or renew their contract. And once they become a fan of the brand itself, they will naturally want to try out other products from the same brand. Based on such purchasing trends, these days, companies put more emphasis on building customer loyalty rather than chasing short-term customer satisfaction.

Advantages of high customer loyalty

More repeat customers

Customers who are attached to a company or product are more likely to purchase the same product the next time around. Especially for consumable products, many customers may continue to purchase products that they are happy to use. If customer loyalty improves, even if there is a mountain of products on the shelves, customers are likely to keep coming back to the company's products because they can trust the brand.

Lower customer churn rate

As mentioned above, high customer loyalty will lead to continued use of the service. Therefore, subscription-type products, for example, have a lower churn rate when the time for renewal comes. If customers are so attached to a service, such as video or music distribution, that using the service becomes a part of their daily life, there will be no need to worry that they will easily switch to another company.

Higher LTV per customer

As customer loyalty increases, so does the cost-per-customer. If a product of a particular company or brand exceeds expectations, customers will want to try other products of the same brand.

For example, if the TV set they are currently using is easy to watch, they may decide to get a Blu-ray recorder of the same brand. Even if another company offers a better product in the same price range, if customer loyalty is high, they will tend to purchase the brand they have been using.

This can easily lead to "cross-selling" to purchase other related services or "up-selling" to select a higher-end product, thus increasing the annual purchase amount.

Organic word-of-mouth promotion

If users with high customer loyalty transmit their positive experiences with the company's products on social networking sites, word-of-mouth diffusion can be expected. They may even recommend the product to their family, friends, and other close associates.

Especially for BtoC businesses, word of mouth and diffusion through SNS have a significant impact. When a product is introduced by someone close to you, it increases the credibility of your product, and your family and friends may be more likely to become new customers.

Strategies to boost customer loyalty

1. Share case studies in sales meetings

First, during the sales process, make sure to highlight past case studies with companies that are similar to your current client. Review the challenges they were facing, and the exact methods they employed while using your service, to see results. If possible, go into detail about the methods used and discuss how this client can try something similar. Also, ideally, you want to share concrete numerical results as that turns into motivation for the client to put more effort into integrating your solution.

2. Have a solid onboarding process

The second method to enahnce customer loyalty is to have a solid onboarding process. After closing the sale, a customer success rep should initiate onboarding to help the client get setup and to teach their entire team how to fully utilize the product to get results. The style of onboarding differs from company to company, but you can start with 1-1 meetings either in person or online, and then incorporate some video tutorials to make the learning process more convenient for the client. However, meeting in person allows you to build a real relationship and is better for cultivating customer loyalty, so make sure to include 1-1 meetings to some extent.

3. Maintain a regular point of contact online

Even after the onboarding is over and the client is successfully using the product, you want to maintain a point of contact somehow. According to the mere-exposure effect, people tend to like things that they are familiar with and have been exposed to often in the past.

The same can be said about brands, and how people feel about them. The more often a customer sees your brand name and your content online (assuming it is quality content and not salesy promotions), the more they build a positive image of your brand. You can keep getting exposure by social media marketing or email marketing. Email is especially effective, because you can send personalized content and then track the metrics and see how each person is engaging with your content in an email tool or in your marketing automation.

4. Hold online seminars to further educate the customer

Another strategy to strengthen customer loyalty is to hold online seminars to teach existing clients new ways to utilize your service, share updated features, or offer general know-how that could help them in reaching their goals. These seminars could also be open to interested newcomers, and be a way of generating new leads - thereby killing two birds with one stone.

5. Collect feedback and listen to it

When conducting NPS and CSAT surveys, you can also ask questions like “What features do you think are lacking?” or “What features would you like to see added to XX product?” to figure out how to further improve your products, and also ask questions like “Are you satisfied with the customer service? Why or why not?” and “Do you feel like XX product is helping you achieve your goals? Why or why not?” to find other issues, especially in the onboarding process. It’s important to then take the feedback given and base your future direction off of this advice.

Summary

Finally, customer loyalty is a key component in whether you receive repeat purchases, and have long-lasting relationships with your clients. If customer retention has been a challenge for you, first figure out what the main issue is through a survey, and then listen to Voice of the Customer (VoC) and actually take measures to fix the problem asap. By really listening and putting in the effort to cultivate customer-centric services and you can develop a loyal clientele in no time.