What is Customer Loyalty and Why Is It Important?
She called the online company to return the boots purchased for her father.
He recently passed away, and she had no need for the boots. She explained the situation to the customer representative on the phone. The rep refunded her money, told her to keep the boots, and to give them away if she wanted.
This wasn’t what she expected. And even more touching was the flowers she received a couple weeks later from the customer rep. This act of kindness and generosity touched her so deeply she sent the representative a letter and a picture of her father.
This story is the epitome of customer service.
It’s vital that you care deeply about customers… the same customers who keep your brand in business.
Your company should look at buyers as real humans… people with needs and wants and struggles. Take care of your customers and you’ll have a loyal following of people who will buy from you over and over again.
What Is Customer Loyalty?
Millions of customers wait in line every day at Starbucks. They may spill secrets to the barista and ask for drinks like a venti, soy, no foam, latte with four pumps of cane sugar, and a dash of cinnamon on top.
Not exactly my cup of coffee. I’m simple — just give me a tall blonde, black, no room for cream.
Does Starbucks have the best cup of coffee? Maybe… maybe not. But they also have an addictive rewards program that hooks people into buying and earning rewards every day.
Customers scan their Starbucks rewards card at checkout to earn stars (Starbucks uses stars instead of points) with every purchase. A free drink, free bakery item, free shot of espresso… Starbucks offers all these and more for everyone in their rewards program. It’s a very effective point-based system.
“Build a loyalty platform with clear consumer benefits, and layer in customer-generated content to help build a community. With a great voice of the customer (VOC) strategy–including questions and answers, ratings and reviews, and visual content–your customers will feel right at home consuming and adding their own voice to your community.”
Use case: revamped loyalty program
Starbucks attributes a majority of the additional $2.65 billion in revenue to their rewards program. Reward memberships grew over 25% in the last two years and now have 16.8 million members.
Customers redeem rewards faster than the previous program and can redeem smaller amounts of stars for small things like a shot of espresso or an extra pump of sugar.
It really pays to be a member – free drink on your birthday, free in-store refills on coffee and tea, free bakery item after just 50 stars… the list goes on.
It’s also very convenient. Customers can order ahead, skip lines, craft personalized beverages, exchange stars for retail merchandise, and earn extra points on special Starbucks days.
Use case: the Reebok experience
Starbucks rewards customers mostly with gifts. Reebok has an alternative approach, and one that may cost the brand less money than a gift-based rewards plan. Reebok provides VIP experiences, training and wellness programs, partner rewards, and much more.
Members gain points for every interaction and transaction. As points accumulate so do the value of the rewards. Even going as far as providing access to partner events and product releases.
The Numbers Behind Why Customer Loyalty Matters
Why is customer loyalty important? Loyal customers spend 67% more on products and services than new customers. Even though your most loyal customers only make up 20% of your audience, they provide up to 80% of your revenue.
Since it’s 5x easier to retain a customer than acquire a new one, if you focus on existing customers, they’ll continue buying from you and will spend more over their lifetime with your company.
In an over-saturated e-commerce marketplace, loyalty matters now more than ever.
Connecting Customer Loyalty & Marketing
Many companies begin their loyalty programs siloed from marketing goals and the customer database. It’s no wonder customers get angry when they receive an email with 20% off coupons on items they just purchased.
An effective loyalty program connects to current marketing initiatives and has access to the customer database for a true omnichannel approach.
You don’t have to send to every channel right away. Start small by leveraging email and then build out the rest of your program.
Great customer service helps to show customers you care. In return these customers will become loyal and buy from you repeatedly. Forge a relationship with your current customers. They’ll continue to engage your brand and recommend your company to friends and family. True word-of-mouth marketing and customer loyalty go hand-in-hand.
Just know that a loyalty program should enable your brand to increase in value and drive up the LTV of customers. Not every loyalty program offers discounts. Some companies engage members through exclusive experiences.
Handpicked Related Content:
- 5 Data-Driven Customer Loyalty Programs to Emulate [Brand Examples]
- 3 Ways to Win Customer Loyalty Among Millennials
- RFM Modeling 101: Predict Churn, Purchase, & Retention with Simple Segmentation: Caren Carrasco [Podcast]
About the Author
Brandon is Marketing Content Manager at Emarsys. He is a results-driven marketer with experience in B2B and B2C where he has generated profitable growth by acquiring leads and converting them to clients.