Customer Loyalty Concept, Principles, Significance and Dimensions

Customer Loyalty describes an ongoing emotional relationship between you and your customer, manifesting itself by how willing a customer is to engage with and repeatedly purchase from you versus your competitors. Loyalty is the byproduct of a customer’s positive experience with you and works to create trust.

Loyal customers

• Purchase repeatedly
• Use what they purchase
• Interact with you through a variety of different channels
• Are your biggest proponents, sending others to you and providing proactive (and reactive) positive feedback

Types:

People are loyal for various reasons, but it’s relatively easy to group them into six distinct loyalty categories.

• Happy Customer

These customers like your products or services, have never complained, and probably have purchased from you numerous times. But your competitors can easily steal them: all it takes is a better deal, a discount, or the formation of a new relationship.

• Price-loyal

These customers are with you only because of low prices. If they can save money elsewhere, they’ll leave. If you offer the best price again, they’ll return. It’s pretty easy to keep this type of customer, but at a tremendous cost.

• Loyalty program-loyal

These customers are not loyal to your company or what you sell. They are loyal only to your loyalty program, and in many cases, only because your loyalty reward offers the best deal.

• Convenience-loyal

This person is loyal only because your brand is easy to communicate with, easy to find, and easy to purchase from. A convenience-loyal customer isn’t swayed by price: Convenience is what keeps them with you.

• Loyal to freebies

These customers are not drawn to your brand because of what you sell but because of other things you offer. Free Wi-Fi or infant changing tables or free inspections are some examples. Customers who are loyal to your freebies may buy from you only sporadically and don’t contribute heavily to your revenue stream.

• Truly loyal

These are your customer advocates. They repeatedly purchase from you, talk about their great experiences with your company, and send their friends and family to you.

Principles

• Always deliver excellence

You are not expected to be perfect, but your effort should always be excellent. When customers can depend on that, you will be rewarded with their loyalty.

• Give to receive

Whether you are a restaurant that gives free breadsticks with every order or care service station that vacuums out carefully before you return the vehicle, go above the norm. When you give a little more, you receive a lot back in return.

• Know your customer

It is so rare these days to be on a first-name basis with your dry cleaner, mail delivery person, or the teller at the bank. Take a minute to acknowledge people by knowing their names. That moment of relationship building will create a foundation for mutual loyalty.

• Be accessible

Customers have far more faith in companies where they can actually reach a live body than companies that only have email and recorded messages. Make yourself accessible.

• Reward loyalty

For customers and vendors that have been with you since the beginning, be sure to grandfather them in whenever possible when you make shifts to your business model.

• Respond to customer feedback

If customers are willing to share their needs and wants, listen and respond. It’s a great way to show them you care.

• Lead with service

The customer should want to come back because of the service they receive, not because of convenience or price. In fact, many people are willing to pay more for a better customer experience.

• Know your business

Customers want to have confidence that you are an expert in what you are providing. So, make sure that you are.

• Appreciate your employees and vendors

Your employees and your vendors are the lifeblood of your business. You are dependent upon both to keep your business running smoothly and for representing your company. Make sure both feel acknowledged and supported.

• Maintain your principles

While loyalty requires some sacrifice and compromise, it should not come at the expense of your integrity. Be true to yourself and the mission of your company and you will engender loyalty.

Significance

• Loyal Customers Keeps Marketing Costs Down

Repeat business is cheaper than new business. In fact, acquiring a new customer is as much as 25 times more expensive than keeping an existing one. Long-time customers don’t require the extensive marketing efforts that potential customers do. Yes, an advertised deal or coupon might bring a loyal customer into the store, but they were already on the way there to begin with. You can depend on loyal customers to choose your business over others, so carefully craft campaigns to acknowledge their commitment – don’t oversell the loyal base.

• Loyal Customers Serve As Brand Advocates

Businesses can depend on their loyal customers to represent their brand. Loyal customers are knowledgeable about your product, experienced with the service you provide, and can be eager to talk about it. They serve as an unbiased source of information, no strings attached, which is even more convincing than your company’s marketing efforts. Brand advocates will bring you business, at no cost, simply through their recommendations. These leads aren’t just free, they are valuable: leads gained from advocates are 7 times more likely to convert than other leads.

• Loyal Customers Leave Fantastic Reviews

Nothing is more meaningful than an online review containing the phrase, “I’ve been a customer for over a decade.” This speaks volumes about the kind of service your business has been providing consistently year after year. It demonstrates that your business values its customers and delivers a product worth going back to. This type of testimonial is the kind that wins over the 86% of consumers who read reviews. An easy way to double down on this value and further demonstrate how much you invest in your customers is by responding to these reviews in a meaningful way.

• Loyal Customers Are More Likely To Buy Additional Products

Loyal customers come to your store regularly and fully trust the service you provide. With this trust already earned, it makes sense that they would try your other products. For example, customers who have had consistently great experiences with your sales team are more likely to give your service or parts department a chance. The proof is in the profit: existing customers spend an average of 67% more than first time customers. In fact, repeat customers make up only 8% of all customers but account for 40% of a company’s revenue. Loyal customers spend more money per visit than new customers, bringing us to number five.

• More Loyal Customers Mean Higher Profits

The ultimate reason why loyal customers are vital to small businesses: they lead to more profits. Spending more money per visit to your store adds up over time, so much so that increasing customer retention by just 5% will increase profit by 25%.  The effort it takes to create loyal customers has a great return value, and this value means sustainability. Repeat customers provide the sturdy foundation your business needs to not only survive but flourish.

Assess your business plan and make sure you aren’t getting distracted by the allure of new customers. Remember to allocate enough time and money into building and retaining loyal customers. With the right balance, you can maintain a base of lifetime customers, save money, and grow your business.

Dimensions

• Attitudinal Loyalty:

Can be described as customer’s attitude loyal or disloyal type behavior towards the product of interest. This type of attitude is constantly inclined towards continuous evaluation of competitor’s brands and the willingness to buy a product. However, this cannot be measured for obvious reasons, as we are unable to quantify the internal attitude of the customer when he/she buys our product or service.

• Behavioral Loyalty:

On the other hand has been more useful to determine the actual mechanics and techniques of managing the relationship. In addition and more recently, loyalty has also been identified as Situational.

• Situational Loyalty:

Has been defined as a dimension, that is measured on the basis of continuous and variety of purchases based on consumption situations. Word of mouth, intention of purchase etc could be used as examples here.

• Cognitive Loyalty:

Is also a dimension, where a customer actually understands the entire process, consults with peer groups, compares products and services on offer and makes a decision.

• Emotional Loyalty:

Another important dimension of loyalty, it is a result of customer’s feelings, interpersonal relationship with the employees of the company, expectations. These are developed through some sort of comfort which eventually builds trust and may also result in a long term friendship.