Why is customer loyalty important

Why is Customer Loyalty Important?

There’s no magic formula to customer loyalty. You have to make sure being one of your customers is worthwhile, and that customers feel like they’re getting value for money. Always make sure your customer is top of mind, and loyalty will naturally follow.

catherine heath

March 21, 2022

7 mins read

While it’s mission-critical to attract new customers to your brand, it’s just as important – if not more so – to retain loyal customers who have been doing business with you for a long time.

It may seem boring to spend time wooing your existing customers. After all, they’ve already proved their loyalty and you can rely on them to keep spending with your company. So why is customer loyalty important?

82% of companies agree that customer retention is cheaper than acquisition. It simply makes good business sense to invest in your loyal, long-term customers rather than to chase the excitement of acquiring new ones.  By focusing on loyalty, your customer lifetime value will go up.

Loyal customers are like the faithful pet that you sometimes take for granted. You get so used to them doing business with you that you may not always appreciate their loyalty. Do your loyal customers know how much you value them?

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What is customer loyalty?

Customer loyalty is a customer’s willingness to repeatedly choose one company’s products and services over their competitors. They are not easily persuaded by price and they would rather benefit from the same great service of their chosen brand.

Loyal customers are in a relationship with your company. The business has consistently met or exceeded the customer’s needs and has earned their trust. Loyal customers are not likely to be lured away by your competitors and they will always come to you when they have money to spend.

These customer relationships need nurturing unless you want them to fall by the wayside. The most successful businesses invest in their loyal customers and keep them coming back for more.

Why is customer loyalty important?

First and foremost, loyal customers are in a business relationship with your company. The most important feature of a loyal customer is that they continue to spend money with you. In fact, the probability of selling to an existing customer is 60-70%, compared to a 5-20% probability of selling to a new customer. This means that a loyal customer is much more likely to buy from you because they already have a relationship with your brand.

Your loyal customers are your best customers, and they significantly contribute to your profits. A 5% increase in customer retention results in at least a 25% increase in profits. Loyal customers want to spend more with your brand and they’ll go to great lengths to do business with you. Loyal customers simply are more valuable and are well worth the effort to keep around.

Loyal customers aren’t easily drawn away by your competitors and you can rely on them for repeat business.

Retaining existing customers is cheaper than acquiring new customers. It costs seven times more to acquire a new customer than it does to retain an existing one. Your loyal customers are guaranteed profit and come at a much lower cost than it does trying to drum up new business.

There’s always someone out there who can offer customers a better deal than your business can. Loyal customers aren’t easily drawn away by your competitors and you can rely on them for repeat business. You can trust these customers to stick around with your brand even if they receive a better offer from someone else.

3 benefits of customer loyalty

1. Loyal customers promote your brand

Loyal customers will go out of their way to mention your brand to others. They can become word-of-mouth advocates which is a type of marketing that money can’t buy. Referrals from existing customers is a valuable way to bring new leads into the business, all with very little effort on your part.

88% of people had the highest level of trust in a brand when a friend or family member recommended it. Brand loyalty will lead your customers to make unbiased recommendations and share information about your products and services.

2. Loyal customers leave rave reviews

You can trust your loyal customers to leave rave reviews about your business on popular review sites. Online reviews communicate the value of your business and play a huge role in attracting new customers.

When an existing customer says “I have been a fan of this business for several years” that’s very attractive to new customers as it shows your business has been delivering great service for a very long time.

93% of customers said an online review influenced their purchasing decision. Customers today are actively evaluating your offerings and reviews are a key way that they make a purchasing decision.

3. Loyal customers share valuable feedback

A business can only improve its offerings if they collect valuable feedback from customers to find out what they’re doing well, and uncover the things that are not so good. You can conduct CSAT surveys with your existing customers to find out how satisfied they are with your business.

Loyal customers are much more likely to take the time to fill out your surveys because they are invested in your brand. These types of customers want your business to improve and are willing to help.

Long-term customers also have more insight into what works and what doesn’t, since they have been loyal to your brand for a long time. Their feedback is more valuable than that of a new customer.

The role of customer service in building customer loyalty

Just how important is customer service in building customer loyalty? The answer is, very.

Great customer service makes your business stand out from the crowd. Human interactions are what drives customer loyalty and gives the customer memorable experiences. It’s critically important that you make your support reps available to your customers and deliver the kind of service they expect.

Just take this famous quote from Maya Angelou: “I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.” Customer service interactions are your big chance to make a positive impression on the customer and earn their loyalty for good.

If customers are contacting customer service, there’s every likelihood that something has gone wrong. You need to take the opportunity to turn a negative experience into a positive one, and you do that by providing amazing customer service.

The data backs this up. 93% of customers are likely to make repeat purchases with a business that offers excellent customer service.  Customer service may not be the factor that initially attracts the customer to your brand, but it’s what makes them stay.

On average, customers who have their problems resolved by a business will tell four to six people. Great customer service gets your free publicity from your loyal customers and this is worth its weight in gold.

Offering great customer service lets your customers know that you appreciate them and will deepen their existing relationship with your brand. It shows you care about your customers even after the sale.

If your support reps are empowered to go out of their way to make a customer’s day, this will have a significant impact on customer loyalty.

How to create more loyal customers

Solicit customer feedback

Customers feel more engaged with your business and more invested in your brand if you proactively solicit their feedback. Send out surveys, conduct customer interviews, and do whatever you can to speak to your customers.

When customers take the time to leave their feedback, make sure you respond and let them know if you have made any changes based on their input. Be open to all feedback, positive and negative, and be sincerely appreciative of customers who take the time to share their insights.

Your business must go further than simply saying you value customer satisfaction. You must cultivate a culture of continuous improvement that puts the customer at the heart of everything you do.

Create a loyalty program

A customer loyalty program rewards customers for shopping with you and provides incentives to spend more money. A loyal program is a great way to show appreciation for committed customers, and create moments of joy for customers when they get something for free.

Usually loyalty programs have a set of criteria customers must meet in order to qualify for their rewards. This may be spending a certain amount of money per month, perhaps to earn a discount on their next purchase. You could have a points-based system where customers are entitled to a free item if they earn enough points.

75% of customers say they favor companies that offer rewards. Having a loyalty scheme makes customers feel like they are held in high regard, and that they are getting more value for money.  If your company isn’t operating a loyalty program, now could be the time to start.

Reward referrals

A referral scheme encourages customers to recommend your brand to others. You’re offering customers some kind of bonus in return for making a referral, and it’s a powerful way to show your thanks to customers for attracting new business.

By rewarding customers every time they make a referral, you’re encouraging them to have even more loyalty to your brand. Just think – they already like your brand enough to share it with family and friends, and recognizing their contribution gives them a powerful incentive to be even more committed to your brand.

If referral marketing isn’t part of your strategy yet, it should be. Studies show that customers acquired through referrals have a 37% higher retention rate than those acquired through other means.  

Get to know your customers

In order to cultivate customer loyalty, customers need to feel that your business is willing to take the time to get to know them as a person. You need to learn their pains, their desires, their buying habits, and most especially their name.

You have to value customers beyond what they’re willing to spend. You could make it a point to send your customers a personalized birthday email along with a one-time discount. You could make personalized product recommendations based on their buying history, or remind them to purchase another item if it’s running out.

80% of customers are more likely to buy from a company if it offers a tailored experience. You need to make sure your interactions with your customers are unique to them and take into account their personal experience. There is no one-size-fits-all when it comes to customer engagement.

Improve customer service

We’ve already talked about how important customer service is when it comes to retaining your loyal customers. Customer service is part of your brand promise to ensure customers are satisfied with the product they have purchased.

When customers contact your support team, they are looking for help only your company can provide. Making it your mission to ensure the happiness of each and every customer that contacts you will directly impact customer loyalty.

For 86% of customers, good customer service turns one-time buyers into long-term brand champions. By making just small improvements to your overall customer service offering, you can guarantee yourself a steady stream of loyal customers who will do whatever it takes to do business with your brand.

In summary

After reading this article, you should be thoroughly convinced of the importance of customer loyalty and the value it can bring to your brand.

Loyal customers spend more with your brand, are cheaper to retain than acquiring new customers, and are much less likely to be wooed away by competitors. They even recommend your brand to family and friends, which is a low-cost way to earn new customers.

You should be more motivated to spend time on these types of customers and actively promote more loyalty. Loyalty is something you can earn if you go about it the right way. Set up rewards programs, improve customer service, collect feedback, and make sure all communication with customers is personalized.

There’s no magic formula to get it right. You have to make sure being one of your customers is worthwhile, and that customers feel like they’re getting value for money. Always make sure your customer is top of mind, and loyalty will naturally follow.

catherine heath

Catherine is a content writer and community builder for creative and ethical companies. She often writes case studies, help documentation and articles about customer support. Her writing has helped businesses to attract curious audiences and transform them into loyal advocates. You can find more of her work at https://awaywithwords.co.

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