At one point during your sales meeting, someone has probably mentioned the 80/20 rule wherein 80% of your profit comes from loyal customers and 20% comes from new customers. The numbers may not be completely accurate but there is some truth to this old marketing adage.

Loyal consumers will always end up being a more profitable market. Compared to new customers, they willingly spend more and encourage organic growth at little to no extra cost.

Promoting loyalty among your consumers doesn’t have to be trial and error. In fact, there are 5 fundamental variables that determine customer loyalty.

So, what drives customer loyalty? Personalization, proactive customer support, beneficial loyalty programs, free value propositions, and community building are the best ways to inspire loyalty among your consumers.

In this article, we break down the basics of customer loyalty and reveal actionable methods for improving your retention rates.

Why Customer Loyalty Matters

Customers are the lifeline of any business, and it’s only logical that one of your main goals is to make sure they keep coming back. After all, loyal customers are happy customers — they are living proof that your customer service works, and that your products or services are relevant and valuable to your market.

The real value of loyal customers lies in the profit they bring to your business. In order to get customers, companies will spend resources on ads and content development.

But even with the highest quality content and hyper-targeted ads, not all leads you acquire will be ready to buy. At the end of the day, you might be spending anywhere from $10 to $100 per new customer and not get any new business in return.

Loyal customers, on the other hand, provide repeat business for little to no cost. When leveraged properly, your loyal customer base can drive growth faster than any marketing campaign.

Here are some stats that demonstrate how loyalty can be beneficial to businesses:

• Happy customers will share their positive experiences through word of mouth and refer the brand to an average of 11 people. 
• 93% of customers are likely to make repeat purchases with brands that offer great customer service.
• 60% of customers will make more frequent purchases from brands they trust. Similarly, 50% of loyal customers will make more purchases from brands they trust. 
• A 5% increase in customer retention can lead to at least a 25% increase in profit.

How to Measure Customer Loyalty

Thanks to sales metrics, customer loyalty can be precisely tracked and closely approximated. Instead of wondering how your buyers feel about their customer experience, you can derive information from shopping behavior and purchase decisions.

Using your customer relationship management (CRM) platform, you can track metrics like:

• Sales Per Customer: The easiest way to measure customer loyalty is by looking at repeat purchases. Are the bulk of your sales coming from one-time purchases or repeat purchases? If the average customer does two or more transactions (or has a recurring renewal if your product or service is subscription-based) you qualify them as loyal customers.
• Upselling Ratio: The upselling ratio is another great metric because it can reveal whether buyers are loyal to your brand. If they purchase something other than the product or service they regularly use, it’s a good indicator they have developed a loyalty to your brand.
• Repeat Customer Rate: This metric reveals what percentage of your customers are repeat buyers. Repeat purchases don’t always mean loyalty, so you can determine stricter parameters for a more accurate analysis. Instead of two to three purchases, you can increase the number of purchases before patients qualify as a repeat customer.
• Customer Lifetime Value: The customer lifetime value metric reveals how much customers spend, from the moment they make their first transaction up until termination. This metric can help businesses visualize what each customer is worth, and how the average customer shops.

For businesses without access to special tools, there are still free methods of keeping track of your customers. Although traditional methods such as surveying might no longer be appealing to modern buyers, that doesn’t mean customer feedback is completely obsolete.

You can easily tap into customer sentiment with the help of social media and online reviews. Forums, Facebook pages, and even on-site reviews are all viable methods of customer tracking.

Checking in on these platforms on a regular basis can give your business an advantage when predicting customer expectations and going above and beyond to meet their needs.

Customer Loyalty: 5 Ways to Keep Customers Happy

Loyal customers have practically infinite value. They’re the purest form of brand marketing; having happy customers is a great way to advertise your company to newcomers, even without the help of social media ads. They spread the word about your product or service through social media or word of mouth and help establish a good reputation organically.

As mentioned, loyal customers tend to make repeat purchases, and frequently, which provide a steady stream of profit for your business.

So, how do you convert a one-time satisfied customer into a long-time consumer? Here are some surefire methods of building customer loyalty:

1) Prioritize Personalization

A personalized level of service is more than just knowing your customer’s name – it’s remembering their preferences and making any customer support process easier. A personalized service tells your customers that you understand their needs and that you are willing to go above and beyond.

In some situations, a personalized service might be what sets you apart from your competitors. Think about it this way: would you rather work with a business that doesn’t acknowledge your loyalty or one that acknowledges your value as a customer, regardless of the amount you spend?

Personalization is a low-effort, high pay-off tactic that can take on many forms. The easiest way to add that personal touch would be to use personal information they’ve shared through forms, sign-up sheets, and subscription links. Use what you’ve learned about them and create individual marketing campaigns based on triggers like birthdays or when they first became a customer.

A more advanced form of personalization allows you to directly influence how your customer interacts with your business. If you have access to powerful tools such as customer relationship management (CRM) software, you can predict their purchasing habits and send them coupons and offers based on items they have purchased before as well as items they might like.

2) Focus On Great Customer Service

Modern buyers want simple, straightforward solutions more than anything else. Businesses that have complicated purchasing and onboarding processes – even if the industry calls for it – will find themselves losing to brands that have a more streamlined introduction process.

Most people think that great customer service begins and ends with a service representative, when in fact it encompasses every point of interaction a buyer has with your business. This means making sure that touchpoints such as apps, websites, and even phone numbers work efficiently and function as needed.

Of course, service reps still make up the bulk of the customer experience. And in creating great experiences, people expect businesses to take a compassionate approach when working through user issues.

Interestingly, problem-solving only comes second to friendly service. A study from American Express shows that 68% of buyers consider a pleasant experience as good customer service, while 62% consider a knowledgeable experience as good customer service.

This goes to show that customers will always appreciate a friendly, compassionate kind of service.

3) Launch Simple Loyalty Programs

Loyalty programs have been tainted by complicated redemption processes and disproportionate spending-to-reward ratio.

Asking for too much consumer information for too little reward is another example of a poorly structured loyalty program. No one wants to give their credit card information in exchange for a free item that doesn’t have any significant value.

Ultimately, these programs are meant to serve the consumer. If your loyalty rewards are based on ludicrous milestones (spending $1,000 in services and goods for a week, for example) chances are no one will redeem them in the first place.

As with most business elements, simplicity is key. Aim to create loyalty programs that provide straightforward and transparent value. A good example is offering discounted rates for re-subscriptions. The reward is immediate and clearly communicates the reward (a discount) in exchange for the value (another year of full subscription).

As your customer’s lifetime value grows, ensure that their benefits also scale. Ideally, you wouldn’t be providing the same benefits to someone who has a $ 10,000 lifetime value with another consumer who has $1,000. Offering exclusive discounts and inclusions are a surefire way to keep customers coming back.

4) Offer Free Value

Not every interaction you have with your customers has to be transactional. In-between transactions, you can offer valuable information for free in the form of newsletters, content, ebooks, and other marketing material.

Customers will always appreciate small little gifts, especially when they’re unexpected and unprompted. The best part? Keeping your customers happy doesn’t have to be gainless.

Developing high-quality content is an example of how you can offer value while simultaneously priming your customers for more purchases. When used strategically, free content can be used to upsell or attract new leads, without seeming too sales-forward.

5) Develop a Community

One of the most impactful methods of breeding customer loyalty in consumers is by encouraging user-based communities. Give them a platform to voice their opinions, share reviews with other buyers, and exchange insider tips and tricks.

Opening up your business to the community also makes you more accessible; your business will appear more customer-centric and less profit-driven. It also gives you direct access to buyer sentiment, which can allow you to mitigate any issues and rectify poor customer experiences.

Community-building can also be strategic when targetting markets that make decisions based on a company’s core values. Nowadays, modern buyers, specifically millennials and younger markets, factor in a company’s environmental friendliness and diversity when making purchase decisions. Developing a strong sense of community and accessibility opens up your brand to markets with more nuanced buying criteria.

From a purely practical perspective, developing a community matters because it can spread your brand like wildfire. A study found that customers with an emotional affinity with a company have a 306% higher lifetime value than the average customer. They are also likelier to make referrals to other consumers.

Building Customer Loyalty: 5 Ways to Increase Retention

• Don’t put “gates” on your transactions: Free content isn’t free if you’re forcing them to share their credit card details. Simply ask for their email in exchange; it’s non-invasive and pretty standard.
• Resolve issues quickly: The general rule of thumb is to answer general inquiries no more than 3 hours. For urgent issues and problems, consumers usually expect a response within 24 hours. Timely problem-solving is a must for service-based businesses and B2Bs.
• Stay in touch: Regularly asking for customer feedback is an easy way to stay in touch. Check in with clients through scheduled emails or personalized messages on social media.
• Make interactions seamless: From complicated user interfaces to unhelpful customer support, different things that could go wrong with a customer’s experience. Removing or at least minimizing these points of friction should be your top priority when increasing retention rates.
• Keep improving your product or service: You’ll always have new competitors who will offer bigger, better things. Stay on top of your competition by reevaluating the value you offer clients and by matching your competitor’s offers with your own inclusions.

How to Limit Customer Churn

Building customer loyalty is just a part of the bigger picture. On the other side of the spectrum is customer churn. Buyers that aren’t happy with your product or service terminate their contract, or worse, choose your competitor instead. Here are three ways you can limit customer churn:

• Use marketing materials smartly: As mentioned, staying in touch with customers is necessary, but that doesn’t mean bombarding them with promotional material. Keep marketing messages to a minimum and aim to have more conversations than transactions.
• Provide ongoing support: Your work doesn’t end after they sign the contract. Increase your average contract duration by providing consistently proactive customer support throughout their buyer journey.
• Define expectations and benefits from the start: Sometimes buyers don’t realize incompatibility until it’s too late. Provide a clear onboarding process and highlight the benefits of your product or service clearly.

Foster Customer Loyalty With Technology

Maintaining a personal, professional presence doesn’t have to be a challenge. With a customer relationship management software, your business can effortlessly build a personalized, more seamless level of experience with just one software.

Commence is a multifunctional CRM program suitable for businesses of all sizes. Get in touch with us today to schedule a free demo.