Customer Loyalty: definition, tips, best practices and measurability

What does customer loyalty mean?

Customer loyalty is the behavior of consumers who feel so attached to a brand, product or service that they are likely to buy or use it again and again. Furthermore, loyal customers are not actively looking for other providers, brands, products or service providers and do not even accept tempting offers from other companies. On the contrary: loyal customers recommend their preferred brands to friends and acquaintances and speak positively about them on social media. In addition, loyal customers are more committed, for example when it comes to participating in surveys, customer surveys or company innovation programs. Loyal customers also like to get involved in company customer communities, for example by providing support for other customers and giving valuable feedback for the development of new products or for improving existing products. Loyal customers are also less likely to be upset if there is a problem with a product or an employee of the company in question, such as support or customer service.

For the reasons mentioned above, many companies strive to improve customer loyalty, for example with customer retention and reward programmes, communities or via social media platforms. The degree of customer loyalty is therefore closely linked to the measures that companies take to satisfy their customers and, in the best case, also manage to inspire them and bind them emotionally to their own brands and products.

How do companies achieve customer loyalty?

There is, of course, no silver bullet for how companies can create customer loyalty. But there are some very good approaches, which we have compiled for you below.

Take a critical look at the customer journey and improve customer experiences

The customer journey, i.e. the “customer’s journey”, includes all contact points between the company and customers, from initial perception to after sales service. Create a smooth customer journey with many positive customer experiences at every single touchpoint. Inspire your customers on the path to purchasing your products. Identify weak points using touchpoint analyses by measuring customer loyalty at every contact point, for example using Net Promoter Score, Customer Satisfaction Score or Customer Effort Score.

→ Find out more about the customer journey

Ask your customers for feedback

Nowadays, customers want to help shape products and services. So give your customers a voice. Ask your customers what you do well, what you do poorly, what needs to be improved, what product features they want, how they perceive your brands. Conduct surveys, host focus group discussions and video chats. Invite participation in innovation programs. If your customers feel that they are truly involved in improving or developing services and products, then you are well on your way to creating customer loyalty that can be verifiably measured.

→ Customer experience management platform QuestionPro

Create a brand home for your customers with a customer community

More and more companies are relying on communities. Customer communities offer companies the opportunity for constant exchange with their own customers. And that's not all: committed, loyal customers actively support companies in product development, give valuable feedback and stimulate other community members to participate, for example by posting topics that can then be discussed in a lively manner. Valuable insights into customer wishes and needs can be extracted from community members’ comments. With the support of a community, companies can ensure that customers feel like they are part of the brand, which in turn creates loyalty due to the high level of identification.

→ Customer Insights Community

Segment your customers and make them tailored offers

Find out the different personas who buy your services and products and give them a clear profile. Only if you really know who your customers are can you tailor your market communication precisely to your target groups and put together tailor-made products and solutions. The more your customers feel understood and addressed by you, the greater the likelihood that they will become more emotionally attached to your brands.

Be visible and approachable

Meet your customers wherever your customers can be found, for example in social media or business networks. It is important that you do not just post articles that are purely promotional in nature, but also offer added value for your customers. It is equally important that such networks are not a communicative one-way street for your customers: Your customers comment on a posting but do not receive a response that individually addresses the comment, but rather prefabricated text modules. This frustrates your customers. You can only create customer loyalty if your customers have the feeling that they are actually important for your company.

Don't underestimate honesty and transparency

Most consumers do extensive research before choosing a brand or product, unless it is a convenience product. Customers know exactly what they need, what they want and what meets their needs and look for products and brands that offer just that. For this reason, customer loyalty goes hand in hand with the transparency of the company and the way it communicates with the public. The more honest a company can be with its customers, the better.

Create personalized customer experiences

Personalization is a valuable and important step towards customer loyalty. When you address your customers personally, whether by email, on your website, with precisely tailored offers that match your customers' profile or simply with a happy birthday greeting. Personalization makes customers feel understood and valued. To provide great customer service, you should find out what really matters to your customers. Ask your customers about this regularly and measure the improvements in your customer loyalty.

Reward and incentivize your loyal customers

Too many companies make it too easy for themselves by using incentives like iPads or gift cards. While these are nice, you risk engaging people who are more interested in the incentive and less interested in what you have to offer. Get creative and look for incentives that don't just relate to your product or service, but provide real benefit to the customer. Invite your best customers to your company, send them product samples before they hit the market, host customer events, or promote innovation programs. The goal is to increase customer loyalty and make them feel special.

Use customer loyalty programs

Customer loyalty programs are not new, but they are still highly effective when used. Today, customer loyalty programs can be found in almost all industries, even at the bakery next door or at the hairdresser. Who doesn't know the bonus cards that are lovingly stamped at the checkout counter. A well-thought-out loyalty or loyalty program is definitely worth it as it incentivizes repeat purchases and rewards the customer for it. Loyal customers generate more revenue than they try to cost, as is the case with acquiring new customers. Therefore, customer loyalty programs should definitely be considered.

Sources: IfH Cologne; ECC Cologne; Sitecore | February 2021 | © Statista 2021

Be loyal to your customers too!

Loyalty is not a one-way street. Show your customers that you are as loyal to them as your customers are to you. Never leave your customers alone with a problem. Always respond to requests and don't argue for a long time, for example in the case of justified complaints. Show your customers that you are always approachable, listen to them and understand them. Don't make your customers wait long, respond promptly and always conclude dialogues with your customers and leave no questions unanswered. This is how you create trust, and trust is the most important factor when it comes to customer loyalty.

Sources: IfH Cologne; ECC Cologne; Sitecore | February 2021 | © Statista 2021

Create high employee engagement and employee satisfaction

If your employees are happy and satisfied, then ultimately your customers will be too. Because satisfied and committed employees do everything for their customers. Therefore, enable your employees to make decisions in the interests of the customer and encourage them to be unconditionally customer-oriented. Communicate the values ​​and philosophy of your company to your employees and ensure that all employees know your own products and services inside out. Bring customers and employees together in a community to collaborate on new products, features, functions and improvements.

→ Create employee engagement

How can customer loyalty be measured?

There are 2 important methods for measuring customer loyalty. On the one hand, the Net Promoter Score (NPS), which questions your customers' willingness to recommend others, and the Customer Secure Index (SCI), which questions a combination of customer attitudes and behavior.

Net Promoter Score (NPS)

The Net Promoter Score consists of a single question that measures the likelihood that customers will recommend a company, brand, product or service to friends and acquaintances, on a scale of 0-10 or 1-10, or on a scale of 1-7 or 1-5.

“How likely is it that you will recommend our product to friends and acquaintances?”

Depending on the answer, a distinction is made between promoters, passives and detractors. On the following scale you can see the classification.

The NPS score is calculated from the sum of all answers. The better the value, the more likely you are to have loyal customers. The following is an example of an NPS meter with a breakdown of the response distribution.

→ More information about the Net Promoter Score

Customer Secure Index (CSI)

While the Net Promoter Score only questions one aspect of customer satisfaction or customer loyalty, namely the willingness to recommend, the Customer Secure Index is determined from 3 questions, namely:

• How satisfied are you with our company overall?
• Would you also buy our products in the future?
• Would you recommend us to friends and acquaintances?

If all of these questions have been answered positively by a customer, they are one of the “safe customers” of a company.

→ More information about the Secure Customer Index

Customer Loyalty Index (CLI)

Just like the Customer Secure Index, the Customer Loyalty Index can also be derived from three questions, each containing a scale of 1-6, where 1 stands for very likely and 6 for very unlikely (or “absolutely not”).

• How likely are you to recommend our products/brands/services to your friends or acquaintances?
• How likely are you to purchase our products/brands/services in the future?
• How likely are you to try other products/brands/services?

Each scale value is assigned a point value.

The higher the total point value, the higher the customer loyalty.

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KEYWORDS OF THIS BLOG POST

Customer loyalty | customer retention | Customer loyalty