Why should you strive to build a loyal customer base? Business growth is undoubtedly one of the main goals of a business. While one way to achieve this is by acquiring new customers, building a loyal customer base is another strategy.
We’ll explore the different types of loyal customers and the importance of striving to ensure that your existing customers become loyal. But first,
Why should you strive to build a loyal customer base?
Here are a few reasons why:
It is more expensive to acquire new customers than to keep the ones you already have. Various customer service statistics estimate that it is anywhere from 3 to 30 times as expensive to attract a new customer as it is to retain an existing one.
Worse still, even if you do get new customers, it will take some time for you to get a return on investment. Because it can be harder to convince a potential new customer of the value that your product or service can offer them.
When you have customers that are loyal to your business, you can focus more on improving your customer experience, and your product/service, instead of coming up with strategies to find new clients.
In addition to acquisition costs, new customers require a lot of support, before they get to understand your business processes. Customers who are loyal to your brand are already aware of your business processes. They will therefore not need as much support, which proves more cost-effective in the end, when compared to the support costs incurred by new customers. This is one of the reasons many businesses say their existing are the best customers.
Things do not always go well in business. Sometimes, technical difficulties or a simple mistake can occur. Customers with brand loyalty will be more tolerant during such times and give you time to fix the problem. If other customers begin to complain, they could actually begin to defend your brand.
Similarly, if the glitches are caused by a product that you are introducing and testing, loyal customers will be tolerant and share honest feedback.
Buffer against competition
When you have customers with brand loyalty, you can be less worried about competition. This is because, the loyal customers already love what you are offering, especially if you keep on making improvements.
Instead of having to resort to strategies like lowering prices just to keep customers, you can focus on ways to reverse engineer your competitors’ strategies and use them to your advantage.
Customers who are loyal spend more on your brand. They will follow your campaigns, offers, and even try to maximize discounts too. When it comes to customers, the Pareto principle applies. Customers who have brand loyalty are highly likely to form only 20% of your customer base but will bring in 80% of your income.
According to InMoment Retail CX Trends Report, 61% of loyal customers will go out of their way to buy from specific brands. More so, 60% of them make frequent purchases. Also to note, Millennials will make 70% purchases and 50% of these customers will buy more products.
Customers who are loyal will give you timely and honest feedback which you can then use to improve your products/services as well as customer experience. New customers may not provide honest feedback. Most of the times, they will not even give any feedback at all.
Most of the time, they will try out your product and if they do not like even a small aspect of it, they will try out another.
Customers who are loyal tend to be happy customers, and happy customers will share their great experiences with other customers. These customers are great for increasing word of mouth and are more prone to becoming brand advocates.
Meaning they may share their experiences with others and possibly create great user-generated content (UGC) for social media too. In fact, depending on their influence, and experience in the niche, as well as how long they have used your product/service, they may become micro influencers for your brand.
7 Types of loyal customers
When it comes to brand loyalty, we have different customer categories. Each category contains customers with unique characteristics that help you understand these customers, and how you can win them to become truly loyal.
Some are highly likely to jump ship if a competitor has a better offer even if it is in terms of price, while others are your die-hard fans. Let’s look at these categories:
These customers are those who you would deem to be ‘happy customers’. They do not have anything to complain about, and they actually like your products/services too. These ones will stay because they like you without any extra incentives.
The problem with these customers is that they will very easily purchase from your competitors if they feel that they have something better to offer. These customers are what could be called ‘fair-weather friends’ or ‘butterflies’.
Despite the fact that they actually buy from you, and generate a significant amount of revenue, they simply are not there for the long haul. They are just ‘hanging around’ waiting for the next deal.
2. Customers who are loyal to prices
These customers, if they keep buying from you, it is because you are probably offering the best-bargain. They will keep researching on the next lower price, and will not be moved by brands or loyalty.
For as long as you can keep your prices low enough, they will stick around (even if that means using a lower quality product for the time being). When a better deal shows up, they move on.
Also worth noting, that when you have the better deal again, they will come back.
3. Loyalty program ‘loyals’
These customers are loyal, but not to your brand or its offer. Rather to the loyalty program that your brand offers. These ones will max out all the discounts, offers and whatever benefits that come with being active members of your loyalty program.
A good example here is airlines. There are customers who will only use the airline because they can get cheaper tickets, or even free ones, depending on accumulated loyalty points.
4. Convenience ‘loyals’
These customers buy from you because it is convenient for them. For example, it could be because your store or business is conveniently located. These customers are not usually price-sensitive. Convenience is their priority, and will not even mind paying more from it.
A great thing about these customers is that they can easily become truly loyal if you find a way to do it. It could be as simple as improving your customer service, saying hi to them, and asking them for feedback.
A simple statement like ‘how did you like the coffee today?’ could make such a big difference.
5. Benefits ‘loyals’
Just like those customers who are loyal because of your loyalty program, these customers are loyal to the benefits that they get from your business. They rarely make purchases and will rarely show up at your business.
Their revenue will not make any significant contribution to your business. If you sell coffee, they will probably only buy one cup of coffee. And really they might not even buy the coffee because they like it, but so that they can use your wifi or restroom instead.
6. The ‘just because loyals’
These customers stay with you because it’s the lesser evil. They may not even like your brand, product/service, but choose to stay because it’s less work on their behalf.
An example would be someone who eats from a particular restaurant. He has been their customer for several years but does not like their food, prices, service, or even the decor of the restaurant. He, however, has not found another restaurant that can suit him. He continues to begrudgingly eat there. The day that he finds a better option, he will simply leave.
7. The truly loyal customers
These customers are loyal to your brand, its products, services, and all that you have to offer. They make frequent purchases, making a significant contribution to your business’ revenue.
They will talk about their great experiences, (aka free word of mouth marketing) for you and even bring in new customers. These are the ones that will sign up for your loyalty program.
If your company introduces new products or services, they will be the first to try them out and give you honest feedback. These ones are usually on your ‘early release list’.
Businesses should strive to have most of their customers in this category. However, some categories may end up being too costly to convince people to stay.
For instance, the price-sensitive or those that see you as the lesser evil. It is not possible to keep lowering your price just to keep customers around. It may also be difficult to convince the ‘lesser-evil’ category, and sometimes, it is better for customers in this category to leave, especially if they are vocal on social media, or go telling others about their ‘bad experience’ with your brand.
So, what is the recipe for building loyal customers?
After looking at the different categories of the customers that are loyal to your brand, you may be feeling a little disheartened. Well, all is not lost, and real brand loyalty actually exists. In fact, according to this 2018 survey by Yotpo, 90% of consumers are actually loyal to their favorite brands.
Here are a few more insights from the survey:
- At least 3 purchases are required for a customer to consider themselves loyal to a particular brand
- 55% of the respondents attributed their loyalty to product quality
- Customers are highly likely to become brand advocates once they ascribe their loyalty to a brand
- Fair pricing was the most likely reason that consumers were likely to try a new product
Now that we know how long it takes for a customer to become loyal (a minimum of 3 purchases), let’s look at what’s next.
Offer high-quality products
We have seen that high-quality products are the main reason for brand loyalty. Strive to ensure that your product is of high-quality and offers the benefits it purports to. Customers need to feel that you are offering them the best product that you possibly can.
One way to ensure that your products remain high-quality is constant innovation. Keep finding ways to improve, whether that means adding more functionality to them, or simply adding new payment systems that are more secure and convenient.
Keep your customers engaged
You need to frequently communicate with your customers. This way, they keep remembering you and create a connection with your brand. While communication is important, you also need to think about the mode of communication that would best suit them. Is it email or social media? What platform would best suit them? Facebook? Instagram?
You also need to customize your communication, so that it is personalized to your users. Your communication should never feel like a sales pitch. One way to make communication more personal is to communicate with your customers based on the actions taken with regards to your business. An example here could be an email that is sent when they sign up for your loyalty program. There could be another email when they move to tier 2 of the program, or when they refer a friend. This way, the customer stays engaged. How about when customers are celebrating significant milestones, for instance, their birthdays? An email from you will be highly appreciated.
Communication should never be one-sided. It should never be the brand that is always sending out messages. Customers need to be given a platform where they can interact and engage with the brand. Brands need to respond promptly to customer complaints and compliments. They need to give customers opportunities to interact with the brand. An example here would be a bank that asks its customers a question like “what financial advice would you give to your 20-year-old self?”
Constantly study your customer
It is not possible to effectively communicate with someone whom you do not understand. It is therefore imperative for brands to invest time to study their customer in order to understand their pains and joys. In the communication example that we have looked at above, a bank that posts such a question on social media needs to have properly studied the age of their customers, as the question particularly addressed people who are at least 20 years old. If the majority of their customers are 20 years old, they may not respond to the question or may even be offended.
Build a community
Closely related to communicating with your customers and studying them is building a community. You need to start by creating online communities on social media which brings your customers together. You then need to start interesting conversations and allow the customers to share their stories too.
It is a good idea to bring in value to the community by including community leaders and industry experts in the community. This way, customers can have their issues addressed, even by people who may not be necessarily affiliated to your brand, therefore, will bring in a more credible point of view.
Another way that you can build a community is by getting involved in some work that showcases your brand as one that ‘cares’. This could be via participating in community activities or projects, or CSR activities that actually make a difference.
Offer great customer service
According to the above-mentioned Yotpo study, customer service was the second reason why customers would stop purchasing from a brand. Customer service is about what customers feel. If they were well treated, they will be more willing to make repeat purchases, and even refer others. If they do not have a great customer experience, they will tell their friends and family too.
Your brand better be in the former category. Remember, customer service always begins with a simple smile.
Strive to build trust
One way to build customer trust is to keep your word. If there is a problem or complaint, and you promise to look into it, you need to ensure that you do so. If you promise to respond to a customer email or inquiry via social media, then go ahead and do so.
You should also genuinely and politely apologize for mistakes, and rectify them as soon as possible. The beautiful thing about keeping your word is that you can easily go beyond and do more than promised.
On the flip side, do not promise something that you cannot deliver. When you promise to do something, or if your product/service promises to deliver something, then you set your customer expectations at that level. You need to strive to meet and exceed your customer’s expectations. Failure to do this and you might find that you will lose trust.
Reward brand loyalty
You need to reward customers who are loyal to your brand. In comes loyalty programs. Customers will feel great after they are rewarded, and it will inspire more action – repeat purchases, make referrals and remain active members of your online communities and loyalty program.
Rewards can be points based, discounts, redeemable cash, exclusive access, or even free trips, depending on your brand. Most importantly, your loyalty programs need to have a sense of suspense to keep the customers engaged. They also need to be easy to use. There are brands that will even give their customers simple gifts and treats during their birthdays.
Don’t lose the human aspect of your brand
While automation makes things easier and more efficient, all while being cost-effective, you do not want to subject your customers to constant automation from the email response that they receive.
Everything from Facebook messenger response, to the robot who ‘picks up their call’. While in a few situations this may not apply, for example, in an e-commerce store, it helps to have a ‘human element’ when dealing with your customers. You could have a live chat button for instance, where customers get to actually interact with real staff members.
Keep your team updated
It can be quite frustrating for your customers if they need help. Or worse if some team members are not aware of the newest addition to your product, payment system, or loyalty program. The need for customer loyalty needs to be communicated, and staff members challenged to participate fully.
To sum it up
Customer loyalty success is one aspect of a business that should never be overlooked. We have looked at the reasons why you need to build brand loyalty, the different categories of brand loyalty. and how you can go about building a customer base that is loyal to your brand.
Which strategies can you implement immediately?