Whether you sell t-shirts online, run a pastry shop or a coffee shop, the old marketing adage holds true – it’s better to keep an existing customer than to find a new one. What’s more, it’s far easier to sell to a returning customer.
According to marketing statistics, the probability of selling to an existing customer is between 60% and 70%, but selling to a new customer – only between 5% and 20%.
In this article, we’ll go through the basics of customer loyalty, look at why it’s important, and learn how to avoid common pitfalls that damage your reputation. This information will help you to build relationships and turn one-time buyers into loyal, repeat customers.
If you’d like to find out more, read on as we discuss why customer loyalty will likely fall when you neglect and fail to foster customer relationships.
Let’s get started.
What Is Customer Loyalty?
In business, loyalty means having customers that will repeatedly choose a specific brand or product due to positive experiences they’ve had in the past. Customer loyalty will likely fall when you forget that it’s an ongoing emotional relationship between the business and the customer, that requires constant care and nurture.
Loyal customers:
- Happily purchase your products repeatedly
- Enjoy and use what they purchase
- Love to interact with you through social media and other channels
- Sends honest feedback
Just as with personal relationships, trust, openness, and mutual respect are equally important in business. The endeavor to build such relationships may seem like a daunting task, however, the challenge is worth taking on – it’s greatly rewarding, both emotionally and financially.
Why Is Customer Loyalty Important?
Customer loyalty plays an important role in fueling your success and driving your business forward. To better understand its critical importance, we should first look at the Pareto Principle.
This principle – often called the 80/20 Rule – states that for many outcomes, roughly 80% of output results from 20% of input. This basically means that 80% of a business’s revenue is generated by only 20% of customers. To take advantage of this rule, you need to identify the characteristics of these customers and do everything you can to keep them engaged and happy.
As you can see, this is a very important rule, which, when applied properly, can help you grow your business with much less work.
Another cool thing about loyal customers is that by simply having an emotional relationship with them, they’ll recommend your business at a rate of 71%, rather than the average of 45%.
Let’s not forget that the internet has dramatically changed the business landscape. The trust in companies has eroded – 65% do not trust advertisements. Today, 81% of customers trust recommendations from family and friends over those from companies.
And, once you get yourself a loyal customer base, you can seize the sale and use up-selling and cross-selling to increase your profits even further. Both of these are classic and easily applicable sales techniques that persuade customers to spend more money than they originally intended.
How to Measure Customer Loyalty?
Although loyalty is an emotion and thus a little tricky to measure, there are certain metrics that you can use to gather data and turn it into actionable insights. Despite the fact that measuring customer loyalty might seem a bit difficult at first glance, it’s absolutely worth the effort in the long run. The easiest way to start is by analyzing your customer feedback, repeat sales, churn rate, etc.
A quintessential customer loyalty metric is the customer retention rate (CRR). It’s vital for your company’s short-term and long-term success, because it shows what percentage of your customers stay with you over time.
To measure CRR, simply take the number of customers you have at the start (S), at the end (E), and customers gained during the period you’re measuring (N).
Here’s an example of how it should look.
CRR = ((E-N)/S) x 100
Let’s say you have 200 customers at the start of a month. In that month, you lose 20, but gain 30 customers. So the number of customers at the end of the period is 210, but at the start – 200.
((210-30)/200) x 100 = 90% CRR
In general, you should strive for the highest possible retention rate. The rule of thumb, however, says that a rate above 85% is acceptable while retaining 90% and upward is an eCommerce dream.
Customer Loyalty Will Likely Fall When You Do These Things
Now that we’ve understood the great importance of customer loyalty, let’s take a look at some of the most common pitfalls that entrepreneurs encounter while trying to build relationships with their customers.
Always remember to be kind, respectful, and genuinely helpful to your customers, especially those who have stayed with you for a long time. If you want to keep your customers happy, these are the things you should consider, because customer loyalty will likely fall when you do this.
1. You Offer Poor Customer Service
Good customer service goes a long way. If you are late with a delivery, your product somehow happens to be defective, or if you break your promise, make sure that the customer’s happiness is your top priority. According to a recent Statista’s worldwide survey, 57% of respondents said that customer service is the most important factor in maintaining their loyalty.
Even though most businesses often don’t prioritize responses to customer reviews, it’s important that you do. By learning how to respond to negative reviews, you can gain an advantage over your competition.
Did you know that about 33% of American customers say they’ll consider switching companies immediately following a single instance of poor service and that this percentage grows to 60% if a customer receives bad service two to three times?
If you want to improve the service you provide and gain customer trust and loyalty, always follow the so called 7 C’s of customer service – concern, consistency, creativity, courtesy, composure, commitment, and competence. By following these principles and offering good customer service, you can easily convert your one-time customers into recurring customers.
2. You Don’t Reward Existing Customers
A thing that many merchants neglect is loyalty and rewards programs. How does your brand stand out? Do you offer rewards programs that others don’t? Did you know that people wouldn’t care if 74% of brands they use vanished? They’re simply not memorable, nor do they offer valuable rewards that people can’t get anywhere else.
This, our dear merchant, is where you come in. Forget useless rewards. A good loyalty program builds an emotional connection by offering perks, benefits, and discounts. It rewards your most valuable customers, and it’s definitely worth the effort because 52.3% of loyal customers join rewards programs. However, if you fail to offer a useful loyalty program, your customer loyalty falls.
3. You Offer Low Quality Product
A surefire way to destroy customer loyalty is by neglecting your product quality. It goes without saying that offering high-quality products is an absolute must if you want to acquire new customers, keep your loyal ones, and increase revenue.
Are you afraid that you’ll start losing money if you increase your product quality? Don’t, because quite the opposite is true. Once you have a loyal customer base, 39.4% of loyal customers are willing to spend more on a product despite having cheaper options elsewhere.
You should always meet your customer expectations, because they – as well as you – are very well aware of the old cliché – buy cheap, buy twice.
4. Bad Customer Experience
Today, outstanding customer experience is more important than ever. As eCommerce continues to grow, so does the competition. If you want to attract new customers and keep existing ones, the experience that you deliver needs to be top-notch.
Your brand values as well as the impression you give to your customers are as important as the products you offer. Did you know that only 40% of consumers would consider doing business with a company that offers poor customer experience? If you want loyal customers, providing an excellent customer experience is a must.
According to FinancesOnline, here are some of their expectations.
- 68% of all customers expect brands to be empathetic.
- 66% of customers expect brands to understand their unique needs.
- 74% of Gen Zers say they prefer personalized products and services over traditional, standardized options.
Furthermore, convenience still reigns supreme – it is prioritized by 67% of Baby Boomers, 76% of Gen Zers, and 45% of consumers. The convenience of purchase or use is a factor that makes them feel loyal to a brand.
5. You Don’t Keep Promises
No matter how big or small your promise is, there’s power in keeping your word. If you really want to improve your customer satisfaction, acquire new customers, and ensure they return, make sure that you deliver on your promises. This way, your brand will grow in strength and numbers.
It’s self-evident that customer loyalty falls when they are made to feel like walking dollar signs. The best way to build brand loyalty is by creating an emotional connection with your customers and delivering precise and consistent experiences. In an age where more and more business interactions take place online, the human touch is more important than ever.
6. You Have a Negative Brand Image
Whenever you hear a particular company name – be it Nike, Tesla, or Amazon – you immediately have an emotional reaction. Based on your experience with the company, this reaction might be positive, negative, or neutral. We form our opinions through headlines, social circles, and our own interactions with the company.
To maintain a positive brand image, make sure that you provide excellent customer service, offer reward programs and only the highest quality products. Even if you’re mainly focusing on loyal customers, don’t neglect first-time buyers. After all, one day they might become loyal patrons.
Here are two interesting facts that you might find useful.
- After reading custom content, 82% of customers feel more positive about a brand.
- Video content is king – 54% of customers would like to see more video content produced by the brands they support.
7. You Increase or Change Prices Too Frequently
Let’s be honest – none of us like price increases. Have you seen the inflation rate lately? Well, I think you get the point. Sure, price increases go hand in hand with economic growth, but it still presents a bit of a headache for businesses and customers alike.
If you’re suddenly hit with a price increase by a company you’ve been loyal to, it might feel like your loyalty is being taken advantage of. Sometimes it might be true, but mostly it’s just the cost of doing business.
Even if you have to increase prices, it’s not the end of the world, because 86% of customers are willing to pay more for a better experience. Make sure to communicate the price increase clearly, and don’t do it too often. What matters most is your dedication toward your customers.
8. You Underestimate the Power of Loyalty Marketing
When it comes to brand loyalty, it’s all about building meaningful relationships through the smart use of marketing. Your actions speak louder than words – whatever promises you make, be sure to deliver.
Loyalty marketing is a strategy that focuses on growing and retaining customers by building trust and rewarding them for their engagement. This can be done through various channels and incentives (free gifts, discounts, exclusive access, etc.).
According to the eCommerce consulting company Invesp, these are the most effective channels for customer retention, rated by their effectiveness.
- Email marketing – 56%
- Social media marketing – 37%
- Content marketing – 32%
- Referral marketing – 26%
9. Your Competitors Offer Better Products or Services
The grass is always greener on the other side of the fence, and there are always better offers just a few clicks away. So, how can you win in the age of hypercompetition? Easy. You must always strive for excellence and find ways to stand out of the crowd. One way is by focusing on increasing customer loyalty.
Brand loyalty is a powerful tool. Sure, your competitors might offer products and services that are a bit better than yours, but if your brand is strong enough, customers will gladly overlook your shortcomings.
However, your customer loyalty will likely fall when you fail to show improvement, so don’t get too confident, and always try to improve your brand, products, and services.
10. You Don’t Use Personalization
If you want to make your customers feel appreciated, your marketing efforts should be personalized.
According to the marketing company Epsilon and market research firm GBH Insights, who surveyed 1000 adults from the United States, 80% of consumers indicated that they are more likely to do business with a company that offers personalized experiences. What’s more, 90% of these consumers indicated that they find personalization appealing.
However, always make sure that the experience you offer is well thought out, because 48% of consumers leave a brand’s website and purchase elsewhere after a poorly-curated experience.
When personalization is done right, it not only helps your business to survive, but also enables it to thrive. As always, mainly focus on your most loyal customers – targeting your existing customers yields a higher return than that of mass promotion.
Key Takeaways?
As the customer expectations are slowly – but surely – outpacing experiences, you’d do well for yourself, and your business, by shifting your focus on customer loyalty. Whether you’re a small online business or a world-famous brand, nothing’s more profitable than having a loyal customer base – your very own brand ambassadors.
Your customer loyalty will likely fall when they lose faith in your brand, therefore building emotional relationships with your customers is of utmost importance. With the aim of doing that in mind, here are the most important things you should never, ever neglect.
- A kind word works miracles – always provide outstanding customer service.
- Introduce a loyalty program. Everyone enjoys receiving a little extra something.
- A promise is a promise – deliver on your promises, no matter what.
- Whatever product or service you offer, make sure it’s of the highest possible quality.
- Never underestimate the power of loyalty marketing.
We hope that these do’s & don’ts will enable you to build better business relationships, help you to stand out among the competition, and allow you to earn the everlasting trust of your customers.
If you are able to connect with people on a deeper level and think that you’d do well building up their loyalty, print on demand and eCommerce might just provide the perfect opportunity to put your skills to good use and fulfill your potential. With Printify, you can open up your online store with just a few clicks. Our service is free, available to everyone, and incredibly easy to use.
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