What is Customer Loyalty And Why It Is Important: 10 Reasons

It is not uncommon for customers to purchase new products from the same business they have shopped before. The reason for repeated purchases from a business is more likely due to the user experience they provide. Purchasing new products from the same brand arises due to customer loyalty.

In the United States and the United Kingdom, 55 percent of customers feel that they trust businesses less than they used to. As a result, 69 percent of brand executives are trying new strategies to build customer loyalty and retain them.

Quest Labs AI discusses what is customer loyalty and why it is important, offering tips to improve customer loyalty.

What is Customer Loyalty?

If a customer is loyal to a brand, they make repeated purchases. Even when a competitor has a better offer, customer loyalty helps businesses improve sales. Customer loyalty also encourages users to recommend the brand to others.

Let’s discuss the important KPIs to understand consumer loyalty.

1. Repeat Purchase Rate:

   The customer percentage that makes repeated purchases in a given time.

2. Average Order Value:

   It denotes the number of customers who spend money buying your products.

3. Cost of Acquiring Customer:

   The average amount to be spent in acquiring new customers.

4. Customer Lifetime Value:

   The monetary value that a customer has for a business.

10 Reasons Why Customer Loyalty Is Important

Wondering why is customer loyalty important? Here are ten benefits of customer loyalty that you need to know.

1. Loyal Customers Become Brand Advocates:

   81 percent of individuals rely on product recommendations from family and friends more than those from business advertisements. When customers are loyal to a business, they introduce it to their friends and family. This helps the business attract new customers and improve its performance.

2. They Spend More Than New Customers:

   Selling your product or service to new customers typically has a success rate of only 5 to 20 percent. However, with existing customers, the chances of making a sale increase to 60 to 70 percent. Additionally, frequent shoppers tend to spend more than new customers.

3. Customer Loyalty Causes Regular Customer Visits:

   Regular customers keep coming back to a brand for purchases, even in the face of competition in the market. This customer behavior is because the business can personalize their shopping experience based on their purchase habits and preferences.

4. Customer Loyalty Reduces The Need For Customer Acquisition:

   Businesses indeed have to invest more to attract new customers than to keep existing ones. However, when customers recommend products or services to others through verbal communication, the companies save costs in terms of acquiring new clients.

5. Loyal Customers Leave Positive Reviews:

   Around 71 percent of millennials and 66 percent of GenXers write positive reviews for brands, sharing their satisfying experiences. When potential customers see these reviews, they get excited to give your product a try.

6. Gather The Finest Feedback From Loyal Customers:

   Loyal customers are always ready to share their unbiased suggestions and feedback about a product or service, helping businesses to make it even better. These valuable inputs help businesses develop solutions to improve customer satisfaction.

7. Stabilize Revenue During Economic Downturns:

   When times get tough for businesses or during downturns, it becomes hard to attract new users and make sales. But, if a customer is loyal to a brand, they'll stick with the business during the challenges and contribute to sales.

8. Take Loyal Customers With You While Expanding Markets:

   As businesses expand to unchartered territories, it can be tough to start building a new customer base. But, having a loyal customer base allows you to extend to new markets, using their support.

9. Reduce Marketing Costs With Loyal Customers:

   Loyal customers share their good business experiences with others. Referral marketing works really well to attract new customers. When loyal customers share their positive experiences, it makes a big difference. This brings in new business for you. And the best part? You get this new business without spending a lot on costly campaigns

10. Customer Loyalty Improves ROI:

    Loyal customers are invaluable assets that significantly improve your return on investment. Here are four ways they do this:

• Repeated Purchases:

  Loyal customers of your business are more likely to make repeat purchases. This ensures a steady stream of revenue with minimal extra marketing effort

• Higher Purchase Values:

  Over time, loyal customers often increase their average order value. As they trust your brand more, they explore and buy additional products or services

• Lower Acquisition Costs:

  With a loyal customer base, you only need to spend less on acquiring new customers. This directly boosts your ROI.

• Referrals:

  Loyal customers often bring in new customers through referrals. This reduces your marketing costs and supports more organic, sustainable growth.

Suggested Read: Customer Loyalty and Retention: How to Boost Yours?

Tips To Retain Customer Loyalty

Ever wondered what is the most direct cause of customer loyalty? Find out what kind of experiences are customers loyal to.

1. Implement Customer Loyalty Rewards Program

You might wonder what a customer loyalty program is. Customer Loyalty programs give customers rewards and offers to engage with the product. When users benefit from a service, they continue to purchase from it for a long time. Therefore, these programs help businesses retain customers and reduce churn.

Also, businesses that offer loyalty programs stand out in the competitive market. With a lot of similar products and pricing available, businesses can attract customers to them through these programs and retain them for a long time.

Suggested Read: 10 Creative Customer Loyalty Program Ideas And Examples

2. Personalize Customer Loyalty Strategies

In the United States, a vast majority of customers affirm that they are more attached to businesses that offer personalized experiences. Companies have access to customer information on shopping behaviors and preferences. Based on this data, they can give their clients personalized rewards or benefits and make the user experience unique.

3. Improve Customer Support With AI

According to Microsoft's 'State of Global Customer Service Report,' 58 percent of customers think Customer assistance is 'very important,' 37 percent say it's somewhat important, and only 4 percent say it's unimportant. Therefore, businesses must put resources into improving customer support through artificial intelligence. AI helps in providing immediate help that makes customers happy and improves satisfaction among them.

Suggested Read: How is The Evolution of Chatbots Augmenting In-App User Assistance?

4. Start a Referral Program

In a nutshell, a referral program lets existing users tell their friends and families about a brand while bringing them into its customer base. By rewarding either one or both parties, the program motivates them to speak for the brand.

Surprisingly, a customer acquired through referral is reportedly more loyal than a customer that a brand acquires with other strategies. Moreover, referred customers are approximately four times more likely to refer more customers.

5. Never Compromise Product Quality

Unsurprisingly, product quality has a 10.1 percent impact on customer satisfaction. Consequently, 74 percent of customers, including 57 percent of Gen Z shoppers, choose product quality to be a paramount factor for brand loyalty.

Hence, businesses should take extra care to maintain product quality, ensuring it doesn't drop from the level it was when it was first launched.

6. Focus on Lapsed Customers

Brands find it more effective to engage existing customers than constantly attract new ones. However, they often lose customers due to tough competition, lack of engagement, poor customer service, and overwhelming communication. You can regain all your lapsed customers or prevent further lapses by adopting these strategies.

• Gamification:

  Keep users engaged and attract lapsed customers by presenting challenges and rewarding their participation.

• AI-powered user assistance:

  Utilize AI to guide your customers to the features that might interest them the most and provide support throughout their journey.

• User feedback workflow:

  Collect customer feedback and ensure that users' suggestions are valued at every stage.

Suggested Read: 7 Ways to Use Lapsed Purchase Campaign & Increase Customer Retention

Takeaway

The above section explains what is customer loyalty and why it is important, in detail and provides the most direct reason for it. Today, customers have too many options, making standing out quite challenging.

Hence, businesses must focus more on enhancing consumer contentment while implementing appropriate measures. To build the right strategies to improve customer satisfaction, you need to team up with an expert like Quest Labs AI. We can help you come up with personalized strategies for your business like nobody else.

Not sure which strategy is right for building customer loyalty in your business? Partner with Quest Labs AI. Together, we'll develop a plan that benefits customer loyalty.

FAQs

1. What are the benefits of customer loyalty?

Here’s the importance of customer loyalty:

• It reduces customer acquisition costs
• Improves the lifetime value of customers
• Improves business reputation
• Loyal customers make repeat purchases

2. Define customer loyalty.

Customer loyalty is a lasting positive bond between a customer and your business. It drives repeat purchases and makes customers choose your company over competitors.

3. Define customer loyalty program.

A loyalty program is a program from businesses that rewards customers for regularly engaging with your brand. Companies give out points or perks and elevate customers to higher loyalty as they purchase more.

4. What are loyal customers

A loyal customers is valuable customer who make repeat purchases and use what they buy. They engage with your business across channels and refer others to your brand.