Customer service

Guide to Building and Maintaining Customer Loyalty

10 min read

It might sound too good to be true, but loyal customers cost much less to acquire than new customers and typically spend more than new customers.

In today’s hyper-competitive market conditions, customer loyalty is vital for any business's growth and long-term viability. And as inflation and fears of a recession impact customer appetite everywhere in Europe, customer loyalty has never been more critical.

Customer loyalty is the result of a strong emotional connection between a customer and a brand. This connection is created when the customer has a positive experience with the brand that meets or exceeds their expectations. Customer loyalty can lead to repeat purchases, positive word-of-mouth recommendations, and other forms of advocacy.

There are many ways to create loyalty. Still, some of the most effective include providing excellent customer service, offering high-quality products and services, and creating a brand that customers can connect with on an emotional level.

Creating customer loyalty is essential for any business that wants long-term success since they’re known to be your most predictable source of revenue for your bottom line, and they come at a next-to-nothing acquisition cost.

This makes them valuable assets to your business. A study by Frederick Reichheld of Bain & Company (who invented the net promoter score) found that increasing customer retention rates by 5 per cent can increase profits by up to 95 per cent.

The gist is, happy customers equal more money in your pocket. But competition is tough, and loyalty can be quite fickle in these circumstances. How do you build enough customer loyalty to put your business in the safe zone? And afterwards, how do you ensure that they stay loyal?

If you’ve ever pondered these questions, continue along as we go over the top strategies for building and maintaining customer loyalty.

What are the 3 Rs of customer loyalty?

Conceived by Paulo Claussen, an American marketing executive, the 3 Rs are a mnemonic for ‘rewards’, ‘relevance’, and ‘recognition’, which he deemed to be the three pillars of customer loyalty.

Understanding these three elements and how they fit together in building truly rewarding customer loyalty programs is a good starting point for anyone looking to unlock valuable customer loyalty.

Keep reading more about: Your Guide to SaaS Customer Loyalty [With Proven Tips + Metrics]

Rewards

Rewards are a good driver of loyalty. While consumers are quite understandably motivated by their needs in seeking out products or services, it’s with incentives that you can get them to choose your brand over competitors.

These rewards can be anything, from double points campaigns to discounts to early access. Typically, these kind of rewards programs must provide business enhancement or unique experiences to your customers.

One factor with rewards you have to watch out for is ensuring the simplicity of everything. If you design a rewards system that is too convoluted, consumers may simply determine that it isn't worth their time.

Airline miles, for example, are one of the earliest loyalty rewards. You simply accumulate enough points, and you can redeem them for flight tickets and hotel stays.

Relevance

The European Union is the second largest consumer market in the world after the United States, with an estimated $8.3 Trillion. Thousands of businesses are jostling for a limited number of customers, with a teeming majority of them having some customer loyalty programs in their business strategy.

For you to stand out to your customers out of this cacophony of businesses scrambling for customer loyalty, your service has to be significantly relevant to them. In The Customer Loyalty report of 2017, following a survey of North American consumers, researchers found that while the average consumer participates in 14 customer loyalty programs, they are only fully invested in about half of them.

For example, offering customers some Zara Larsson tickets in return for accumulated points might work if they are relatively young. But it might not be as successful with a customer base who has an average age of 60.

One easy way to fix this, especially if your customers are across a broad range of ages, is to offer choices. So, while a younger audience might choose concert tickets, your customers in other age groups may decide to exchange their points for other experiences instead. It also has the added advantage of appealing to a broader range of personalities within the same age group.

Maxo helps you organise this aspect of your customer loyalty as you can easily segment your customers, grouping the data along a set of customer profiles and then tailor your rewards to be relevant to each one of them — and that’s not even mentioning the sweeping impact of personalisation in your message.

Recognition

The final pillar of customer loyalty is recognising your customers and offering them more personalised options. In a digital market, customers still crave emotional relationships with the brands they patronise. It's not unusual to have people talk about their black cards and other types of loyalty perks.

Customers who expect perks like these will be incentivised to become loyal to your brand. And it's not just enough to recognise only the very best customers. By creating tiered customer loyalty programs, you can accommodate a wider variety of loyal customers who may even enjoy actively doing what they have to do to climb the ladder.

What are the types of customer loyalty?

Depending on who you ask, there are several ways by which customers are classified on the loyalty scale. But, regardless of your chosen method, categorising them will help you better understand your customer base. With these insights, you can design more intelligent strategies to incentivise customer loyalty.

Satisfaction-derived loyalty.

Customers in this class are loyal to your business because you provide them with adequate satisfaction. Simply put, you offer them a better deal than the competitors.

It’s an essential class of customers to have, but satisfaction is only the beginning of the customer loyalty roadmap; they will very likely move on to competitors as soon as they perceive they can get better deals. This is why you must get to work early, moving them further along the loyalty pipeline.

Price loyalty.

Not so dissimilar to customers in the satisfaction-derived loyalty class, these customers are loyal to your brand for the low prices that you offer. Their loyalty is even more fickle than the preceding class.

Prices change all the time — competitors may offer price slashes of any sort, or you may have to raise prices due to economic realities. And when this happens, they will cross over. So, even more work has to be done to deepen their loyalty to your brand.

Opportunistic loyalty.

Some stop by the coffee shop every morning on their way to work for their favourite cup of espresso and a croissant. And some pop into the shop only when they need to use the Wi-Fi or buy the cheapest cup on the menu and take up sitting space for hours.

Now, one of these kinds of customers is said to exhibit opportunistic loyalty, and if you’re thinking the latter, your guess is as good as ours. These customers only stick around for whatever benefits they might get - discounts, freebies, and everything else.

It’s essential to account for this kind of crowd when measuring the impact of promotional and customer loyalty programs. They won’t account for much of your sales but can, with the right nudge, be converted into truly loyal customers.

This is where your Maxo comes in. Morphing these habitual or opportunistic customers into loyal ones requires pulling at their heartstrings, providing extra value than your products or cheap price point — and you’ll need data insights to analyse to pull this off.

Perks like personalised product recommendations, exclusive or early access, and recognition on special days (for instance, birthdays) alongside reward points are a good way to delight customers well enough to secure their loyalty. By keeping an eye on metrics like customer satisfaction scores, or net promoter scores (NPS), you can also keep track of customer engagement levels and take necessary action when required.

Convenience-derived loyalty.

Continuing with the example of local coffee shops, there is yet another class of customers on the loyalty scale. They do not have a favourite type of coffee, or particularly any of your products or services; they just patronise because it's most convenient for them.

In the instance of a coffee shop, it might be because it's the shop that is best placed on the path of their morning trips to work. The major differentiator that is absent here is remarkability. The customers are loyal because it's convenient for them — they haven’t experienced the ‘wow’ factor of your business to unlock a deeper layer of loyalty.

To solve this, you might only just have to improve customer service. By taking advantage of the Maxo’s suite of human-powered, customer-centric features — take “the Extranet” — you can begin to build a deeper relationship with these customers, inspiring true loyalty.

The Extranet is the ideal tool for requests that demand urgent handling. The Extranet module enables customers to lodge requests and view the status of each request (whether solved or pending). It ultimately triggers an automatic response process that leaves customers satisfied with the speedy delivery and excellence in your customer service. This way, you give your customers more reason to stay truly loyal while you turn your support into a sales enabler.

True loyalty.

This is the holy grail of customer loyalty, the zenith of the customer loyalty pyramid. Customers in this class are not only actively involved with your business - making larger and more frequent purchases, but they are also a source of constant and free word-of-mouth marketing.

What factors affect customer loyalty?

As you must’ve gleaned from earlier sections, certain factors determine customer loyalty. Some may rave for your brand due to your perceived low price point, while others just appreciate the convenience you provide. We list some of these factors in detail below.

Convenience

How much easier is it for them to access and use your products or services compared to the competition?

Satisfaction

When customers decide to purchase your goods or services, they expect some level of satisfaction that is in line with your value statement that attracted them in the first place. These expectations must be satisfied before you can even begin attempting to make them into loyal customers.

Customer service

Surveys have shown that the costumes consider the quality of customer service so important that they do not mind paying extra for good customer service.

Rewards

As we’ve pointed out in the sections above, rewards are one of the 3Rs - the pillars of customer loyalty. With the right rewards, you can incentivise true loyalty. The best bit? They don’t necessarily have to cost too much.

Personalisation

The average customer understands that you have a good number of other clients but still expects some level of personalised relationships. It might not be a mandatory factor for achieving customer satisfaction, but it is key to building customer loyalty.

Thankfully, with technology, you do not have to employ countless customer relationship personnel. With CRM software, you can segment your customers based on shared characteristics and offer personalised messaging that resonates with them all the way from the first block of text to the final CTA.

How to improve customer loyalty.

Much like every other business trend, customer loyalty is not a monolith set in stone. With the right strategies, you can always move your customers to the furthest parts of the loyalty scale, from being just regular customers to fiercely loyal customers or even brand ambassadors.

The obvious way to improve customer loyalty will be to improve the quality of your customer service or products. But while this is true, to really build and maintain the kind of customer loyalty that precedes unicorns and industry giants, you need to incorporate CRM software into your customer retention roadmap.

Rather than spending valuable time sorting through the pages of excel sheets, with a CRM, you can leverage CRM-led strategies to help you to establish and nurture deeper relationships with your customers.

One such strategy is showing that you know your customer. Our CRM for customer service, for instance, has built-in capabilities to ingest data sources like your customer demographics and other sales-related data to provide insight into customer behaviour. You can then use these data sets to further direct your promotional efforts and product recommendations with your digital marketing solution, given the statistical likelihood that the client will accept these recommendations.

Our CRM can also help you capture customer feedback from sources like email surveys to act on concerns from their customers and provide better support, thus improving their customer experience. You’re also able to constantly measure and analyse customer behaviour in real time, positioning your sales or support team to make informed changes as soon as necessary.

CRM software promises a whole new frontier in managing customer relationships. Personalisation is just one of its many features; it provides many more possibilities. If you’d like to try it out, you can request a demo today — for absolutely free!