A complete guide to building customer loyalty

Professionals discussing customer loyalty

The more crowded marketplaces become, the more difficult — and essential — it becomes to win customer loyalty. Doing so is critical for increasing the odds that customers return again and again, which is essential to the long-term success of any business. Read on to learn more about how to understand customer loyalty and practical tips for fostering it within your own audience.

In this article, you’ll learn:

What is customer loyalty?

Customer loyalty is a sustained, positive relationship between your brand and customers who have come to trust you.

Besides making repeat purchases, consumers play an essential role in promoting your products and services through word-of-mouth marketing both online — in the form of social media posts and reviews — and offline. Major drivers of customer loyalty include product or service quality, price, and standout customer service.

Trademarks of a loyal customer include:

  1. Repeat purchases
  2. High engagement
  3. Willingness to overlook some mistakes
  4. Word-of-mouth marketing

Types of loyal customers

Essential to building customer loyalty is understanding that the reasons different consumers commit to your brand may vary. True, having a great product and customer service helps — and many would argue is essential — but not all shoppers prioritize the same qualities in a brand.

Happy customers

The happy customer is one who is pleased with their purchase but does not necessarily feel any special allegiance to your brand. Competitors could easily poach them with better pricing, faster service, more aggressive advertising, or a variety of other tactics.

Low-price-loving customers

These are the bargain hunters. While some can be fully converted to your brand — becoming less price-sensitive as a result — many are really just committed to whatever is most affordable. Count on these customers to keep coming back as long as you have the best deal, and to look elsewhere as soon as that changes.

Convenience customers

For some customers, time is scarcer than money. Expect these types of buyers to stick close so long as you offer them the quickest and most convenient shopping experience.

Loyal to loyalty programs

Not to be confused with your price-loyal shoppers (although there is likely to be some overlap between the two groups), these are the customers who live for the perks and freebies accumulated through rewards programs.

Truly loyal customers

The goal of all audience-building efforts, the truly loyal customer is committed to your brand for reasons that make them difficult for competitors to lure away. These shoppers will return continuously and support your business by promoting it within their own circle of influence.

Why customer loyalty is important

Marketplaces are unpredictable. Finding and retaining customers who are willing to stick by you through the inevitable chaos of doing business in a global economy is an absolute necessity — regardless of the industry. Here are just a few of the benefits of doing so.

Improved customer retention

Loyal customers are more likely to come back and purchase your product or service, granting you greater security in a world that is always in flux. The deeper those ties, the more resilient your brand becomes and able to experiment with new solutions, models, and more.

Repeat customers can also boost your bottom line by cutting overhead costs. Acquiring a first-time buyer is, in some instances, 5 times more costly than convincing a former customer to return, making loyal shoppers far more cost-effective than one-time purchasers.

60–70% probability of closing a sale with an existing customer

One reason for this can be traced to research indicating that the probability of closing a sale with an existing customer is 60–70%, versus just 5–20% among new prospects. They are also more likely to spend more and give you an increased share of their wallet, meaning the amount spent at your business compared to competitors.

5% increase in customer retention, 25% increase in overall profit

The more loyal a customer, the more understanding they will be of the occasional slipup, especially if proper measures are taken to set things right. The same cannot be said for non-loyal customers. For these shoppers, one bad experience may very well be enough to drive them away — possibly forever.

Given all of this, it’s perhaps not all that surprising that experts estimate that a mere 5% increase in customer retention can yield more than a 25% increase in overall profit, making them a holy grail of brand growth and resiliency.

Brand ambassadors

The benefits of creating a class of loyal customers don’t end there. That’s because loyal customers are more likely to promote your brand to their friends and family and leave the all-important positive online reviews. They are the essential cornerstone of your word-of-mouth marketing.

Increased customer lifetime value

Customer lifetime value (CLV) represents the total amount your average customer will spend on your brand, starting with their very first purchase and ending with their very last. The more loyal your customers are, the higher that number becomes. The reason — not only are they more likely to choose you over your competitors, but they’re also more likely to spend more each time they shop with you and even endure the occasional price increase.

How to measure customer loyalty

Because customer loyalty is based on emotion, it can be difficult to pin down. Far easier to measure are the behaviors that stem from it. Ultimately, which of those behaviors are most useful to your company will depend on its unique model. That said, here are a few metrics that are likely to prove handy in most cases.

Customer retention rate

Customer retention rate measures how many customers stay with you over a set time. It is arguably the most important metric for measuring loyalty among shoppers. As customers stick with your business, this number will increase.

Net promoter score (NPS)

Net promoter score for customer loyalty

Your net promoter score represents the likelihood that a customer will recommend your business to others. Calculate your own NPS by asking customers to rate how likely they are on a scale from 1–10 to recommend your business to someone else. Next, subtract the percentage of detractors (those who answered with a 4 or below) from the percentage of promoters (5 or above). The answer will give you an easy single metric for measuring not just your NPS but your customers’ overall loyalty.

Churn rate

Located at the opposite end of the spectrum from customer retention is your churn rate. It measures the percentage of customers lost over a set time. Calculate your own churn rate by identifying a specific window to measure. Then divide the number of customers lost at the end of that period by the total number at the beginning.

Some amount of churn is natural — your business cannot be everything to everyone. A healthy churn rate will depend on the industry you operate in. That said, lower will always be better and represents a clear signal that the majority of your customers are happy.

Purchasing patterns

Dig deeper into the details of your customers’ loyalty by pulling open the hood on their purchasing patterns. Although a more indirect measurement than those listed above, this measurement nonetheless contains valuable information as to why your customers choose you.

Note what your customers are buying, including whether they return for the same product or service each time or make a variety of purchases. If the latter, you can feel confident knowing your customers’ loyalty applies broadly to your brand and does not depend on a single offering. Similarly, customers’ increased spending over time is a strong indicator of growing trust in your business’s ability to deliver on their expectations.

While critical for understanding your customers, this kind of data can be difficult to obtain. Fortunately, there are powerful integrated tools designed to help you not just collect but organize and derive meaningful insights from this kind of information.

Engagement and social

Easier to track is how your customers are engaging with your brand online, including the reviews they leave on your own website in addition to third-party apps such as Google, Yelp, Tripadvisor, and more.

Social media, meanwhile, grants you direct access to conversations taking place about your brand, whether on your own accounts or through conversations initiated by other users. A quick caveat, however — people who aren’t loyal customers won’t necessarily interact with your brand online. Beware of making assumptions about your audience based on reviews and other online metrics alone.

In the end, there is no better way to measure the impact of online engagement around your business than to ask new customers directly how they heard about your brand. You can do this through easy-to-complete forms integrated directly into your purchase process. Here it’s important to keep in mind that not everyone will complete these kinds of surveys, leaving your data always somewhat incomplete.

The best way to overcome data shortfalls is to expand the metrics you include as you piece together a picture of your customers, including the more qualitative observations about your audience. Think of it this way — you’re a detective tasked with building an actionable profile of your audience. Every insight is valuable and clarifies every other discovery until, finally, you are attuned to not only your customers’ behaviors but what motivates them as well.

Adobe Experience Cloud customer engagement

Unlike detectives, however, your biggest challenge likely isn’t making sense of too little information — but too much. This is especially true as brands grow and amass a larger and more diverse customer base. Fortunately, there are plenty of tools designed to help you organize and make strategic use of audience insights. Adobe Real-Time Customer Data Platform is an example of one such solution. Use it to provide personalized experiences across channels and devices in real time.

How to increase customer loyalty

The key to customer loyalty is to understand what leaves today’s customers delighted. The answer goes beyond the quality and price of products or services to include their every interaction with a brand. Fortunately, ensuring successful interactions is as much a science as it is an art, with each of the below contributing directly to an overall positive experience.

Personalization

Customers today are accustomed to thinking of their relationships with brands as just that — relationships. Part of this is the need to feel understood by the businesses to which they hand over their money. That’s where personalization comes in. Use customer data to tailor messages, recommendations, promotions, and other content and experiences in such a way that each customer feels seen and heard.

The better your data, the better your ability to deliver these moments — so actively demonstrate and communicate to your customers that you are someone they can trust with their data.

Excellent customer service

It’s a classic that bears repeating. Treat your customers in such a way that they will want to return. This means being more than polite. Resolve issues in a timely manner, make changes where needed to avoid repeating mistakes, follow up on questions, and look for opportunities to go above and beyond for your customers.

Negative product and business reviews travel at warp speed in today’s world. It doesn’t matter if your product is perfect — people will avoid you at all costs if they feel like they’ll be treated with greater care elsewhere.

Engage with customer feedback

Online reviews are no longer one-way reports, but rather the beginning of (typically brief) dialogues between a customer and a business. If a restaurant-goer leaves a complaint on Google about a long wait for their dinner, the owner would do well to respond with an apology and explanation. Likewise, customers are doing businesses a favor when they leave a positive review and should be thanked for doing so. In either case, responses show you’re listening and care about the customer — not just their cash.

A flawless customer journey

It doesn’t matter how good your product or service is — if the process of purchasing it is a hassle, customers are unlikely to return. Every step, from onboarding to providing feedback, should be both seamless and simple. Take the time to map out each step in your own customers’ journeys and identify any friction points or redundancies that might be causing excessive customer churn.

Provide a benefit to the customer

That said, even the slickest customer journey can’t compensate for a poor product or service. You don’t have to offer the best price or biggest deal so long as your customers feel like the benefit to them is worth their investment, both in terms of time and money.

Unexpected benefits are especially powerful for instilling loyalty, be it freebies, a purchase that goes well beyond their expectations, or an especially positive experience. Loyalty programs are also a great way to increase value to your customers.

What a customer loyalty program is

Customer loyalty programs compound the benefits of each purchase, often through a points system that serves to both reward purchases and encourage future ones.

How a customer loyalty program works

A customer loyalty program gives the buyer a goal to work toward. In doing so, it encourages customer retention through periodic rewards.

The best customer loyalty programs are easy to understand and join and offer enough in terms of rewards that doing so feels worth it to the customer. Do this, and you’ve given consumers a reason beyond your product and service to return.

Most programs fall into one of the following categories:

1. Points-based. Customers earn points for each purchase they can redeem occasionally for a free or discounted product or service.

2. Tier-based. Customers gain access to additional perks based on a clearly outlined hierarchy often achieved through upfront payments or accruing points.

3. Paid loyalty. Customers pay an additional fee for access to exclusive benefits, from free shipping to ad-free music.

The benefits of a customer loyalty program

The most effective customer loyalty programs boost retention and the frequency with which customers make purchases. Done right, they foster an emotional connection with customers who feel appreciated for making the choice to return again and again through a reward they can’t get anywhere else.

Customer loyalty program examples

Some customer loyalty programs are so successful as to reshape entire industries. Amazon Prime, an example of a paid loyalty program, has created an entire generation that is unaccustomed to paying for the delivery of goods to their front door — even when they arrive that same day.

Amazon Prime logo

Credit: Amazon

Points- and tier-based systems have entirely remade the airline industry, whose entire operations —- from when they allow a passenger to board to foods and beverages available to them on flight — revolve around rewarding the loyal. Starbucks, meanwhile, has fended off major competitors successfully for decades, in part for its beloved points-based loyalty program customers can use to earn free drinks and food.

Getting started with customer loyalty

In a noisy world where brands of all sizes are competing for buyers’ attention, customer loyalty is central to decreasing churn and increasing profits. Start improving your own customer loyalty by first getting to know your customers through real-time data and a platform to help you organize and harness those insights. Only then will you be able to personalize your customer experiences effectively.

Adobe Real-Time CDP collects, normalizes, and unifies known and unknown individual and company data into robust customer and account profiles — that automatically update in real time. Marketers use these profiles to deliver timely, relevant, and personalized experiences to any channel, at scale.

Watch the overview video to learn more about Adobe Real-Time CDP.