Professionals agree: when you take away all trendy strategies and flashy tools and strip business growth to its core, only two ways of growing a company remain:

  1. Get more customers.
  2. Increase the total profit per customer.

If number one is challenging in the current climate, number two is pretty straightforward: nurture customer relationships and increase the Customer Lifetime Value of your shoppers. 

There’s this faulty approach in business: we look for fast fixes to get the shortest answer to the eternal question: How can I get more results with less effort? 

Customer Lifetime Value and, by extension, Customer Retention and Customer Loyalty are the answer to this question. 

While not a quick fix, customer loyalty is the way to fix your business: from repairing friction points inside the customer journey to becoming a genuine customer-centric company. 

If you agree with us, buckle up. We’ve prepared the ultimate guide on Customer Loyalty to help you become a company that uses CLV as the North-Star metric.

What Is Customer Loyalty: Customer Loyalty Definition

Let’s start with the basics.

Customer Loyalty is defined as a continuous and profound relationship between you and your customers. Customer Loyalty reveals itself by customers’ willingness to engage with your brand and return for repeat purchases – choosing you over your competitors. 

Loyalty is the outcome of constant positive customer experiences pre and post-delivery. 

Why Is Customer Loyalty Important?

Suppose we were to parallel customer relationships to personal relationships. 

In that case, we’d say this: one-night stands are fun when you’re in your 20s, but as you grow older, you start looking for that special someone who’s going to be there through thick and thin. 

It’s the same in eCommerce. What’s the point of acquiring new customers monthly if they never return?

Your long-term plan should focus on building a steady customer base. These customers become your community. People who stand by you, forgive your mistakes and help you improve and become better. Not unlike any other long-term relationship. 

Available data backs up this claim with an interesting study: loyal customers spend up to 67% more on your products than new customers. 

Even though not all existing customers are loyal customers, you can’t ignore the facts: loyal customers drive a significant part of your revenue. 

Customer Loyalty is challenging to earn, but the benefits greatly outweigh the efforts. Here’s what happens when you put in the time and resources to build customer loyalty:

  • Your customers are more inclined to share their feedback.

You probably know how difficult it can be to convince your customers to leave you positive reviews on your website and social accounts. 

While people quickly share negative thoughts, positive reviews are harder to earn. 

However, loyal customers will be more open to sharing their thoughts online – they love you and your brand, so they will make an effort to communicate it. 

Besides providing social proof, customer feedback will also provide valuable insights that can help you improve your business. 

You can identify opportunities to upgrade your website, product assortment, shopping experiences, and even your acquisition strategy through surveys and questionnaires. 

  • Loyal customers become brand ambassadors.

Word-of-Mouth advertising is the Holy Grail of eCommerce: it attracts new customers, doesn’t take up resources, and it’s verbalized in the customers’ voices. 

Besides, customer recommendations are more likely to stick. It’s a given that people place more trust in their friends than in organizations. The discrepancy is visible: referral audiences convert twice as more as non-referral audiences.

Therefore, it’s in your best interest to encourage customer recommendations and take advantage of shoppers’ satisfaction with your brand. 

Loyal customers are likely to bring their friends and family back when they return for a new purchase.

  • Your customers are more patient and willing to forgive potential mishaps.

No brand is perfect, and we all make mistakes in our lives: professional and personal. 

However, mistakes are expensive in 2022: 96%* of shoppers would leave if you deliver a bad experience

(*Forbes study)

On the other hand, loyal customers are more likely to forgive and stay with you, even if they experience a negative interaction with your brand. 

While this doesn’t mean you should get comfortable with low customer experiences, customer care teams have more chances to fix a mistake with loyal customers than new ones. 

  • More receptive to cross-sells and upsell campaigns.

Ads are intrusive – there’s no way around it. They’re unwarranted and interrupt people when they’re going about their days. 

Consequently, your audience either filters out your Ads or gets irritated by them.

Loyal customers are a different feat. People dedicated to your brand are more receptive to your Ads. They can explore products they might not have previously considered. 

As you can imagine, this openness significantly impacts the Customer’s Lifetime Value. 

In fact, studies show that loyal customers are worth 306% more across their lifetime than regular customers.

Non-loyal repeat customers might return occasionally, but purchases aren’t frequent or buy in small quantities. 

How to Measure Customer Loyalty

Ok, but loyalty is more of a concept than a metric – how can you measure customer loyalty when it’s so intangible? 

While there’s no formula to measure customer loyalty, you can still track important customer metrics that reveal commitment inside your customer base. 

  • Customer Lifetime Value (CLV)

The Customer Lifetime Value represents the total revenue generated by the entire relationship with a customer – including future purchases. 

The higher the CLV of a customer, the more loyal he is. 

You can calculate CLV manually for past purchases. However, using it as a predictive model gets you the most out of this metric.

It’s all there in your customer data. Use a tool like Omniconvert Reveal to predict how a customer’s value changes over time while determining each customer’s investment level.

The Net Promoter Score reveals how many customers are willing to recommend you to their communities. We touched on the subject briefly when we discussed the benefits of Customer Loyalty. 

NPS captures the current user intent and sentiment. High NPS suggests high customer satisfaction, the satisfaction that leads to loyalty if it keeps itself constant.

  • Customer Engagement Score

You can also look at engagement to measure loyalty. How often are customers using your products, and how engaged are they with your brand?

Customer engagement also predicts if your customers are likely to order again or purchase additional products.

  • Repeat Purchase Rate

Some organizations focus on acquisition, investing their marketing budgets primarily in search and display advertising. 

However, the majority of your revenue comes from returning or repeat purchasers.

As for the link between repeat purchases and customer loyalty: the more loyal your customers are, the more frequently they purchase from your brand.

  • Customer Effort Score (CES)

The Customer Effort Score shows how much effort your customers make to engage and interact with your business. 

You can measure plenty of interactions with the CES: from the effectiveness of your customer care department to the easiness of using your products.

To measure CES, you simply need to survey your customers. 

The logic behind using CES as a loyalty indicator is that the ease of the experience sometimes measures more than the satisfaction levels. 

  • Churn rate

Your churn rate shows how many customers leave after a certain period. 

Obviously, you want to keep your retention rates high, so thinking about customers leaving you might seem counterintuitive. However, churn rates signal problems that can affect your loyalty in the long term. 

To identify these issues, you need to pinpoint the main issues that cause customer decay. Trigger exit surveys, automated email campaigns, or even call your customers to find out why they left. 

After you fix their problems and see the churn rates dropping, you can rest assured you’re on your way to improving customer loyalty. 

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Types of Loyal Customers

A common misconception about customer loyalty is that you are or aren’t loyal. However, customer loyalty is more nuanced than that. 

Not every customer is created equal – this adage also applies to loyalty. 

While increasing customer loyalty is your end goal, you must understand the difference between loyal customers. 

Some love you and stay loyal because they get real value from your products, while others are loyal because they don’t have a better option. 

You can divide loyal customers in multiple ways, and none is better than the other. Let’s look at the types of loyalty from the internal motivation behind it. 

  • Convenience.

These customers are loyal to your brand because you’re more convenient than your competition. Maybe shipment is free, products arrive quickly, or the return policy is straightforward.

To keep customer retention for this segment, you need to pinpoint the perks they value and continue to offer them. It’s essential to control these perks and don’t leave them to chance. 

  • Coercion.

Coercion happens when customers don’t really have an alternative to your brand. It’s not really the type of loyalty you want. These customers will leave on the first occasion. 

Think about airlines in small cities, utility providers, or organizations monopolizing the market. 

If you’re lucky enough to have little competition, ensure you provide excellent experiences. Otherwise, you might suffer from high churn as soon as the opportunity presents itself. 

  • Cost.

For some, cost matters most in purchases. Others place devotion to brands higher than saving a few dollars. 

Be careful when customers are only loyal because you offer low prices. With inflation and the current rise in living costs, you might need to raise your prices. Besides, as customer acquisition becomes more expensive, low prices might not guarantee a profit anymore. 

  • Commitment.

Commitment to a brand is the purest and highest level of customer loyalty. 

When shoppers feel a genuine commitment to your brand, they don’t care about your prices, can deal with inconveniences, and won’t leave you, no matter how many other options they have.

To determine each type of customer loyalty, you need to conduct thorough customer research: interview, survey, and send questionnaires to your customer base.

Types of Customer Loyalty Programs

A Customer Loyalty Program is defined as a structured Customer Loyalty Strategy that incorporates marketing tactics, financial incentives, and communication strategies. 

A Customer Loyalty Program:

  • builds a stronger relationship with your existing customers, 
  • prevents customer churn, 
  • and helps you attract prospective customers without overspending on acquisition.

When customers are more fleeting than ever in fierce competition, and ad costs are surging, Customer Loyalty Programs are a great way to improve customer loyalty and satisfaction.

  1. Points Programs

Point programs are widely spread across the eComm industry, as they’re simple to use and understand: spend money, earn points. The more points you earn, the more significant benefits you unlock. 

Point programs have a tremendous sign-up rate but aren’t as successful as you’d think. Customers need to spend before seeing their value, so the incentive isn’t as strong.

Including a point program in your loyalty strategy ensures shoppers see the value first-hand. 

  1. Gamification

We all love to play games, don’t we?

eCommerce professionals took our desire to see the #achievementunlocked and turned it into tier-based loyalty programs. In these programs, members unlock higher levels of benefits and more perks as they spend more.

  1. VIP Member clubs

VIP programs offer exclusive (and high-value) benefits to only a limited number of members. 

Shoppers will pay a fee to join your VIP member club and receive exceptional services, discounts, or opportunities. 

VIP programs are tricky: you need to find the balance between offering a temptation behind the closed doors of the VIP club and over-investing in this program. 

  1. Value Based Programs

With value-based programs, customers don’t receive a reward directly. However, you can contribute to making customers feel like you’re fulfilling their values. 

Evidently, your loyalty program must be aligned with your customer’s values. 

For example, suppose you know your customers value the environment and are worried about deforestation. In that case, you can pledge to donate part of their purchase to an environmentalist NGO.

Value-Based programs significantly improve customer loyalty, since they help you connect with customers more profoundly. Unfortunately, the programs are also expensive, so you might want to reserve them for your best customers.

  1. Hybrid Programs

Hybrid programs incorporate all programs we have discussed so far. A hybrid program means you got creative and drafted a customer journey map that includes more than one type of loyalty program. 

Use a hybrid program to test all your crazy ideas and be different than your competition. But don’t forget to track customer loyalty to determine the success of your programs.

No matter which type of program you pick, think of it this way: these programs are a way to reward customers for their loyalty.

With this idea in mind (combined with thorough research and segmentation), you can craft a program that genuinely satisfies your customers and proves how much their loyalty is worth. 

Customer loyalty examples

  1. Point-based loyalty programs

Perhaps the most popular loyalty program comes from Starbucks: they have over 40 million members in their loyalty programs. 

Starbucks operates a simple point-based program: you earn stars as you buy, then you exchange the stars for discounts or Starbucks merch:

The genius of this program lies in the scarcity of the products: they can’t be bought from offline locations or ordered online. 

If you want the merch, you must drink Starbucks coffee and earn your stars.

  1. Gamification

A tier-based program comes from the beauty retailer e.l.f.

The more customers spend, the higher levels they reach, and the greater the benefits they unlock.

  1. Value based programs

A great example comes from the Beauty and Care retailer – the Body Shop. 

As you can see, this retailer built a relationship with customers by making animal welfare a part of their program.

  1. VIP loyalty programs

An excellent example of a VIP program comes from the American Booksellers – Barnes and Nobles.

Customers become VIP members with an annual fee of $25 and get free shipping, discounts, or unique birthday offers. 

How to Build Customer Loyalty

Out of all customer retention strategies, customer loyalty requires the most involvement and genuine care for your customers. 

After all, loyalty is built in the long run after repeatedly proving your worth.

Customer loyalty happens with intentional effort. Once you decide you want to invest time and resources into improving loyalty, you can move on to the next step.

To build a strategy that rewards and retains customers, you should start by seeking out their feedback. Send surveys and interview customers to identify what they need and value in your brand. 

Gather as much customer data as possible because this information helps you remove the blindfolds and improve your customer loyalty. 

Ways to Improve Customer Loyalty

  • Don’t be a stranger. 

Keep your customers in the loop about special promotions, opportunities, or other relevant news. 

And be omnichannel: use SMS, email, and pop-up notifications to inform customers about the products they’re buying. 

You should also engage customers on Social Media and let them see the human behind the brand.

  • Prove you know thy Customer.

Show customers how much you value them, by getting to know them. Know what they order, when they do it, and for what purpose. Then demonstrate this knowledge by creating special campaigns or offering unique rewards, tailored as detailed as possible. 

  • Be the first to show love.

Don’t wait until the customer returns for the umpteenth time to show your appreciation. As the metrics reveal a specific customer becomes loyal, initiate reward programs that make the shopper feel cared for and appreciated. 

  • Measure, measure, measure.

Behind every successful loyalty program, you will see a data analyst hunched over an Excel. 

If you don’t measure, you can’t improve, so make sure you’re tracking and measuring every new initiative. You have your KPIs – you only need to see them in action. 

Wrap-Up

All of us are customers – in one form of another. 

We consume; therefore, we know that value is quintessential in offering our loyalty to a brand. At the same time, we’re also aware of the fragile nature of loyalty. 

Before you jump headfirst into creating loyalty programs and surveying your customers, ensure your empathy is on. 

Treat thy customer how you’d like to be treated, and you’re one step closer to becoming a truly customer-centric organization. 

Good luck!

Frequently Asked Questions about Customer Loyalty

What is Customer Loyalty?

Customer Loyalty is defined as a continuous and profound relationship between you and your customers. Customer Loyalty reveals itself by customers’ willingness to engage with your brand and return for repeat purchases – choosing you over your competitors. 

Why is Customer Loyalty?

Customer Loyalty means your customers spend more in your shop, return for further purchases, and always pick you over the competition. Studies show that your loyal customers bring in up to 80% of your revenue – so it’s in your best interest to keep your loyal customers close and they care of them.

What is the value of a Loyal Customer?

Studies show that your loyal customers bring in up to 80% of your revenue. Besides their monetary value, loyal customers also bring in unquantifiable benefits: honest feedback, positive reviews, recommendations, and more patience when encountering bad experiences.

What is Customer Loyalty and why is it important?

Customer Loyalty is defined as a continuous and profound relationship between you and your customers. Loyal Customers will bring in up to 80% of your revenue. Besides their monetary value, loyal customers also bring in unquantifiable benefits: honest feedback, positive reviews, recommendations, and more patience when encountering bad experiences.

What is Customer Loyalty example?

Customer Loyalty is defined as a continuous and profound relationship between you and your customers. And example of Customer Loyalty is a shopper choosing you over the competition, even if your products aren’t the cheapest, or your delivery services aren’t the most convenient.

How do you promote customer loyalty?

Customer loyalty happens with intentional effort. You should start by seeking out customer feedback. Gather as much customer data as possible and use this info to create memorable experiences, as well as reward programs that deliver what customers need from you.