What Is Customer Loyalty? An Overview

According to Marketing Metrics, the chances of converting sales from an existing customer are around 60-70% versus a measly 5-20% chance from a prospective customer. This means it’s just as, if not more, important to invest time in nurturing your relationship with existing customers as it is to invest in the acquisition of new ones. So what is customer loyalty? We explore the different kinds of customer loyalty, how you can encourage it (including why packaging matters) and what the benefits are to your business. 

Different Types of Customer Loyalty

Customer loyalty is often associated with rewards, and some customers will be loyal to a brand for the perks. This can range from points rewards systems to free gifts with purchase. This kind of customer will continue to shop with a brand as long as they feel they are getting more than just a purchase out of it. Some brands will even feature loyal customers on their social media, and that’s enough of an incentive to get their customers coming back! 

For convenience customers, their priority is simply a brand that it’s easy for them to shop with. It could be their local convenience store — not necessarily the most affordable option but it’s on their route home. That’s not to say that customers loyal to convenience stores won’t shop online. In fact, an easy checkout process and safe, fast delivery are great ways to entice these customers initially and get them to return to you in the future.

The customer loyalty you have the most control over is satisfied customers returning because of the service they received. The satisfied customer and a truly loyal customer often go hand in hand. These are fans of your business that are invested in your journey and in supporting your brand. These loyal customers most likely connect with your values — your commitment to eco-friendly packaging, for example — and are the kind of customer that will sign up to your newsletter and engage with your online content. This kind of loyalty often stems from a great initial experience, so you want to keep customers in this category.

Encouraging Customers to Return

Incentivising customers to return can take many different forms. Some businesses offer loyalty cards (both physical and online), which are a great metric for the brand to measure customer loyalty, but also for the customer to work towards some kind of reward — be it a free coffee or online discount code. 

The most important way to encourage your customers to return is by providing them with an excellent customer experience that they want to have again and again. From the initial browsing experience to your packaging and delivery, you want to make the whole journey a part of your excellent customer service. We’ve previously explored whether or not customers care about your packaging, and great packaging can give your customer a reason to return. The confidence that a purchase will arrive in one piece, along with an elevated unboxing experience, are opportunities to get the edge on competitors and cement that customer loyalty. 

Benefits of Customer Loyalty

In exploring what customer loyalty is, we should consider how it benefits you as a business. From a cost perspective, you’ll spend five times more acquiring new customers than it will cost you to retain current ones. They are, to an extent, a captive audience. Customers that already have a positive experience with you will tell their friends and family about your service, providing you with free word-of-mouth advertising. As well as advocating for your brand, they’re also a great source of feedback. This is mutually beneficial as it makes customers feel valued, and you can get a helpful insight into areas of improvement as well as positive reviews. 

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