How to Build Customer Loyalty

Why Customer Loyalty is Important

Loyal customers are valuable customers. Increasing customer loyalty can lead to scalable growth with the best use of resources. Consider these numbers: 

• Most experts agree that acquiring a new customer costs 6-7 times more than keeping current customers. 
• Increasing customer loyalty and retention by just 5% can boost profitability by 25% 
• This can also increase profits by up to 95%. 

When you need to make the most out of your limited marketing resources, building customer loyalty leads to fast and efficient growth.

Loyal customers also become advocates of your brand, which can fuel exponential growth. People trust referrals, especially from family and friends. As you develop loyal customers, those people are much more likely to share your business with others, which can bring in a new wave of customers that come without you needing to pay additional marketing dollars. And the benefits keep coming: referred customers, in turn, are more loyal and spend more. They’re also more likely to refer your business, creating a ripple effect from the original loyal customer. 

Defining a “Loyal” Customer

How do you know if a customer is loyal? Is it someone who returns more than once or a customer who becomes a brand champion?

The concept of customer loyalty and its role within the customer retention process may seem pretty straightforward, but it’s much more nuanced. In fact, there has been ample research into understanding and defining customer loyalty.

Ultimately, most of the research ends up describing the customer-business relationship as a spectrum, with each customer experiencing a different form or scale of loyalty to a business. 

These categories are best described as:

• Habitual loyalty – Habitual loyalty is the weakest category because customers choose a business solely out of habit or convenience, without any emotional connection.
• Transactional loyalty – Transactional loyalty is stronger but still not emotional. Here, customers choose a business because they perceive added value over competitors, but they will switch if they find a better alternative.
• Emotional loyalty – Emotional loyalty is the strongest type of loyalty because customers have a psychological and emotional connection with the brand. They will defend and support the business openly, and this is what brands aspire for with customer loyalty. For example, think of die-hard fans of a sports team who spend a lot of money on the team and merchandise and will defend and follow the coverage of the team.

Strategies For Building Customer Loyalty

Consider the following strategies for building customer loyalty.

Focus on the Customer Experience

Focus on enhancing value from the very first interaction with the customer, through to the point of sale, and after the sale. Make it a regular practice to carefully analyze every aspect of the customer relationship by asking questions like: 

• Is our website easy to navigate, aesthetically pleasing, and updated regularly with meaningful content so that our customers want to return for more?  
• Do our customers hear a friendly, helpful voice when they call and are they greeted with a smile when they walk into our business?  
• Is what our customers see, hear, and smell upon entering our business consistent with our brand?

In addition, social media is a great way to provide customers with value far beyond the point of sale. Examples include investing in maintaining a continually updated blog with relevant content, posting interesting and aesthetically pleasing materials on Instagram, and regularly promoting products and services on a Facebook page. But even with all this activity, value will be created only if real substance is provided, instead of just fluff.

​​Create a Loyalty Program

It’s right in the name—a loyalty or rewards program is a great way to entice customers to return to and promote your business. Loyalty programs come in all varieties and don’t have to be complicated. 

Consider what actions customers need to take to show they are loyal, such as visiting the business several times, purchasing a set number of products, or spending a certain amount of money. Then give them a reward for proving their loyalty, such as a discount, free product, or exclusive service. 

Loyalty programs work because they feel exclusive and give customers a sense of belonging to the brand. Few people can turn away a good deal, meaning customers are often willing to spend more or interact with your business more to get a reward. 

Ask For Feedback

Feedback is one of your best resources to understand customers and learn ways to improve your business. There’s often a disconnect between how businesses think things are going and what customers actually think—collecting their feedback is a great first step to fix this disconnect. In addition, asking for feedback empowers customers, gives them a voice, and shows that you value their opinions, which further boosts their loyalty. 

Ask customers about their experience at the checkout counter, send surveys through email or text, or hold focus groups—there are plenty of ways to hear what is and isn’t working for customers. Customers who feel you care about their experience and opinion tend to feel a connection with your business and develop stronger loyalty. 

Address Complaints

Although you can’t make all of your customers happy, that doesn’t mean there isn’t a silver lining in customer complaints. When a customer approaches your customer service rep or manager with a complaint, it’s a great opportunity for you to show you care about their business. To make this possible, you must take care of the problem quickly, easily, and in a fair way for both you and the customer—especially the customer.

Next time you have a customer service issue, here is an easy acronym you can easily remember, teach, and use to turn upset customers into a lifetime customer—B.L.A.S.T.:

• Believe
• Listen
• Address
• Solve
• Thank

Believe the Customer

Most issues are dealt with by customer service representatives and/or a manager of some type. While it would be very easy for one of them to put up a wall when approaching a negative situation, they must focus on believing the disgruntled customer—this is where the age-old “the customer is always right” philosophy comes in. Even if the customer ultimately proves to be wrong, your business is always better off starting from a point of trusting the customer’s complaint first and then verifying.

Listen to the Customer

When you approach the customer, they’re most likely going to be upset somewhere on a scale between, “You screwed up and I want it fixed,” and “I hate your company and I’m never coming here again.” Just realize that the customer isn’t happy with the product, service, or situation and you need to begin with listening to them to understand why they aren’t happy.

Address the Problem Back to the Customer

After the customer is done venting about their situation, this is where you repeat the problem back to the customer to let them know you are listening and want to understand. If they are upset, this is a great first step toward calming them down.

Solve the Problem

There are many ways to solve the problem in order to change this negative experience into a positive one. Tell them how you’re going to solve the problem and then watch. You can usually tell by their response and body language if they’re happy with the solution.

Thank the Customer

If you’ve followed the previous steps right your customer should be happy with the situation. The last thing you want to do is sincerely apologize one more time and thank them for their business. Without it, you wouldn’t be in business—it’s as simple as that.

_{Information provided on this blog is for educational purposes only, and is not intended to be business, legal, tax, or accounting advice. The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of Lendio. While Lendio strives to keep its content up-to-date, it is only accurate as of the date posted. Offers or trends may expire, or may no longer be relevant.}