Customer loyalty defines repeat business and creates brand ambassadors.
Customer loyalty is the force that returns your customers to you after they have already reached the end of the sales funnel. It comes from providing those customers with consistently positive experiences and satisfaction and results in increased revenue and repeat business.
It is no secret that the cost of finding and nurturing new leads is significantly higher than the cost of actively retaining existing customers. But more than that, loyal customers help further the brands they believe in. Your loyal customers recommend your brand to their friends and associates. They are interested in trying your new products and services. They provide honest, actionable feedback. When loyal customers genuinely like you, they are invested in seeing you and your brand succeed.
To fully grasp the importance of customer loyalty, let's discuss Customer Lifetime Value (CLV)
Customer lifetime value (also called CLTV or simply CLV or LTV) is the measurement of how much revenue a specific customer will generate for your brand throughout their entire relationship with your business—from acquisition through final purchase.
CLV is an effective way to quantify the total business value of individual customers.
Customer loyalty is a powerful asset for any business, as it fosters a devoted customer base that can bring numerous advantages. Cultivating customer loyalty leads to a host of benefits that can significantly impact a company's success and growth. Some of the most impactful advantages of improved customer loyalty include:
Customers who have developed a strong bond with a brand are more likely to want to spend more with that brand. They trust the products and services and are willing to invest more in them and as new product solutions are introduced, loyal customers need less encouragement to give these new options a try. This leads to higher average order values and increased overall revenue.
When customers feel a sense of loyalty towards a brand, they are more inclined to return for future purchases. Repeat business not only secures steady revenue but also reduces the need for extensive marketing efforts to acquire new customers to account for customer attrition.
Satisfied and loyal customers often wish to share their positive experiences with friends and associates. Becoming enthusiastic brand evangelists, they actively promote the brand through word-of-mouth, social media and personal recommendations. This organic advocacy can amplify the brand's reach and influence potential customers.
Brand evangelism also delivers better returns on advertising and marketing spend. Potential customers are more likely to trust recommendations from friends or family than the less-than-objective encouragement from traditional advertising> As a result, marketing conversion rates increase.
Devoted customers provide valuable feedback and insights to the brand. Because they trust the brand, want it to succeed and are less likely to simply abandon the customer relationship when they encounter potential issues, they can act as an informal focus group. These customers can offer suggestions for improvements, identify user pain points and share insight and ideas for new products or services. This feedback loop helps the company fine-tune its offerings to better meet customer needs.
Of course, your customers do not exist in a vacuum; they likely also spend money with other businesses, probably even some of your competitors. To get a sense of how loyal your customers are, it is important to track share of wallet.
Share of wallet takes a look at the total amount of money your customers spend on all products and services within your industry and then identifies how much of that total they are spending on your products or services.
Share of wallet is one of the most reliable indicators of brand preference. It shows businesses how they compare to competitors—not merely in terms of sales, but in terms of customer loyalty.
Although we often talk about customer loyalty in terms of metrics and equations, the truth is that there are countless different factors that can influence how loyal a customer is to a particular brand. Many of these factors are relatively consistent across industries: Value, convenience and service are all essential elements in determining brand loyalty. However, just how loyal customers are may also be influenced by industry and channel.
Online customers may be more loyal overall than customers that prefer to shop in person and this loyalty may tie back into the rise of self-service and other support channels.
For many customers, being able to connect via their preferred channels is a major factor in having a positive customer experience. Physical stores tend to limit contact and support options—customers can only speak with a store employee or possibly call a support line. Online businesses have a wider selection of possible service and support options, unrestricted by store hours.
Google reports that 75% of online grocery shoppers are still shopping with the first retailer they tried for online grocery services.
The kinds of products and services being sold can also play a key role. In industries where every option delivers essentially the same service, oftentimes the only distinguishing elements are cost and service. For example, in areas where customers are able to choose between more than one internet service provider, customers will probably prefer the provider who offers the lowest overall price with the least number of hurdles. Should a different provider start offering a better discount and improved service, the customer will likely switch to the new service without much concern for loyalty.
On the other hand, industries that rely more heavily on providing a distinguishing customer experience (such as mobile device service providers) will see increased impact in customer loyalty rates.
Industries that offer products or services that customers purchase regularly are more likely to have increased customer loyalty than industries that only see customers make occasional purchases.
As an example, consider restaurants and grocery stores; as customers purchase food and other consumables on a weekly (or even daily) basis, they build relationships and develop brand awareness. As a result, they are more likely to return to the same business. Conversely, a manufacturing business might see decreased customer loyalty, as their clients only tend to revisit contracts and make new purchases on an annual or semi-annual basis.
Your industry and the kinds of products or services you provide can help determine how loyal your customers are, but it's not the end of the discussion. Even industries with traditionally low loyalty scores can improve by implementing customer loyalty strategies.
A customer loyalty programme is a structured marketing strategy that incentivises and rewards customers for their continued engagement and repeat business with a specific brand. These programmes offer benefits like discounts, redeemable points, exclusive offers or tiered membership levels to foster a strong emotional connection between customers and the brand—encouraging repeat purchases and brand advocacy in the process.
Customer loyalty programmes are effective because they create reciprocity, making customers more likely to choose the brand for future purchases as a gesture of appreciation. Additionally, customers are motivated to maintain loyalty to maximise their accumulated rewards. These programmes also promote a sense of exclusivity, fostering a deeper emotional connection with the brand and encouraging customers to spend more to access exclusive benefits and maintain their status within the programme.
Customer loyalty programmes offer a range of benefits that contribute to stronger customer relationships and improved brand performance. The following are some of the most prominent advantages of incentivising customers through loyalty programmes:
Customer loyalty programmes lead to increased customer retention and higher spending per purchase. As loyal customers continue to engage with the brand and enjoy exclusive rewards, their overall lifetime value to the business grows, resulting in more significant revenue over time.
Satisfied customers who benefit from loyalty programmes become brand advocates, spreading positive word-of-mouth referrals to their friends, family and social networks. These enthusiastic recommendations can significantly enhance the brand's reputation and attract new customers.
Loyalty programmes provide a platform for ongoing interaction and engagement—offering personalised rewards and tailored offers and keeping customers actively involved with the brand. This leads to a deeper emotional connection.
Loyalty programmes create a sense of commitment and attachment to the brand, reducing customer churn and improving overall retention rates. Customers are less likely to switch to competitors when they have a strong incentive to stay and enjoy programme benefits.
Customer data—when captured honestly, ethically, and within the boundaries of data-privacy regulations—can be leveraged to refine marketing strategies and improve the customer experience. Loyalty programmes facilitate the gathering of valuable customer data, including purchase behaviour, preferences and demographics.
With access to customer data from loyalty programmes, businesses can enhance their marketing initiatives with reliable, empirical user information. This enables personalised marketing campaigns that resonate with customers, leading to higher response rates and improved ROI.
Taken all together, the benefits of a properly implemented and well-designed loyalty programme set the brand apart from its competitors, enhancing perceived value and making the prospect of doing business with the company more appealing to potential customers. This creates a competitive edge for the organisation.
Understanding the different types of loyal customers is critical for tailoring effective strategies and catering to their specific needs and preferences. Each type of 'loyal' exhibits distinct behaviours and motivations. Although some customers may fall into more than one category, most brand-loyal buyers can be categorised as follows:
Satisfied customers
These customers exhibit loyalty simply because they are content with the product or service offered by the brand. They are generally pleased with their experience and have no strong reason to switch to a competitor. Unfortunately, other than their satisfaction with the product or service, they also don't have any additional incentives to stay, and may not hesitate to do business with a competitor should they encounter a better offer.Convenience loyals
Convenience loyals remain loyal to a brand primarily due to the ease and convenience of doing business with that company. They value efficiency, simplicity and hassle-free experiences, and even if the products aren't the highest quality and the prices aren't the most competitive, these customers remain loyal while the brand represents the easiest and lowest effort solution.Loyalty programme loyals
These customers are motivated to stay loyal because of the incentives and rewards provided by the brand's loyalty programme. They actively participate in the programme to access exclusive benefits and achieve a sense of recognition. Often, these customers enjoy the 'gamification' aspect of being involved in rewards programmes.Low-price loyals
Low-price loyals are loyal to a brand because it consistently offers the most competitive prices in the market. They prioritise cost savings over other factors and may switch to a competitor if they find better deals. These customers may come and go, regularly switching the businesses they frequent as they chase the best deals.Truly loyal customers
The holy grail of customer loyalty, truly loyal customers are deeply connected to the brand on an emotional level. They have a strong affinity for the brand's values, mission and identity. These customers remain loyal even if competitors offer similar products or services at slightly lower prices.
Customer loyalty programmes may take different forms, each designed to cater to specific buyer preferences and business objectives. Each of these programmes uses a unique methodology to incentivise engagement, reward loyalty and nurture positive long-term relationships between customers and brands. The most common variations of customer loyalty programmes include:
Point-based
In a point-based loyalty programme, customers earn points for each purchase or specific actions, such as referrals or social media engagement. Accumulated points can be redeemed for rewards, discounts or free products, motivating customers to continue engaging with the brand to earn more points.Tiered
Tiered loyalty programmes offer customers different membership levels based on their spending or engagement behaviour. As customers move up the tiers, they unlock more exclusive benefits, rewards and personalised offers, creating a sense of achievement and progression.Paid
Paid (or VIP) loyalty programmes require customers to pay a membership fee to access premium benefits and rewards. These programmes often provide unique experiences, early access to products or enhanced customer service, appealing to customers seeking exclusive treatment.Value-based
Not all customers are exclusively interested in things like savings, convenience or exclusivity. Organisation can promote increased loyalty by appealing to the other things their buyers value. Companies that invest in value-based rewards often allow users to apply a portion of their purchases to charities or other environmental or humanitarian efforts.Coalition (partnership)
Coalition loyalty programmes involve multiple businesses or brands joining forces to create a shared loyalty programme. Customers can earn and redeem rewards across participating businesses, encouraging cross-purchases and building stronger customer relationships.Game-based
Game-based loyalty programmes incorporate elements of gamification to engage customers and make the loyalty experience more enjoyable. Customers earn rewards or advance in the programme through challenges, quests or interactive activities. Game-based programmes may also include things like contests or sweepstakes, providing incentive to those customers who like the idea of winning something from those they do business with.
As previously stated, the three things at the heart of customer loyalty are value, convenience and service. As such, improving your customer loyalty rates is a matter of improving in one or more of these key areas. Here, we identify several strategies for improving customer loyalty:
By analysing customer interactions, businesses can gain valuable insights into the behaviour, preferences and pain points that play such a critical determining customer loyalty. Analysing customer feedback and service enquiries helps identify opportunities for improvement, enabling businesses to address issues proactively and enhance the customer experience. Predictive analytics based on customer data allow companies to anticipate needs and offer personalised assistance, reinforcing customer satisfaction and loyalty.
Additionally, evaluating the effectiveness of loyalty programmes through data analysis helps refine programme offerings and tailor rewards to align with customer preferences. By utilising customer data, businesses can enhance customer service interactions, identify brand advocates and make data-driven decisions that foster customer loyalty and long-term success.
The customer service you provide can make or break your business—particularly when it comes to customer loyalty. Your customers' experiences, positive or negative, will shape how they view your brand and will determine whether they want to do business with you in the future. There are numerous strategies for improving customer service, but most of them come down to how well you listen to the people you do business with and how you use that information to improve your customer service.
Providing excellent customer service is not a one-and-done task; it is an ongoing responsibility that incorporates nearly every aspect of a business. This means that as you make decisions throughout your organisational structure, the question of how these changes may affect the customer experience should always be top of mind. Collect feedback from customers as they interact with your product or service and then loop in the appropriate teams and departments within your organisation who can address the root causes. Click here to learn more about managing your customer service offering.
Delivering on customer needs is a sure-fire way to improve brand loyalty. Unfortunately, if you are only responding to needs as they arise, then you will always be a step behind. Anticipating customer needs should be an integral part of the product-design process, built on the problems you want your product or service to solve, as well as the audience you are solving the problems for.
As with most aspects of customer experience, anticipating customer needs relies heavily on your ability to listen to and analyse your customer base. This can be as simple as communicating with customers on social media or asking customers to fill out surveys or it may be as complex as performing in-depth search engine keyword research or implementing predictive analytics to identify trends.
As an example of delivering on customer needs, consider a digital service that experiences a brief outage. The customer might not even notice the momentary interruption of service, but you can proactively address the issue by reaching out to the customers who might have been affected and even offering them some compensation—such as a special discount or free credit. Proactively monitoring and acknowledging service disruptions helps demonstrate your commitment to the customer experience and can improve customer loyalty.
Humans are social animals, and customers are much more likely to do business with a brand that they feel a connection with. To promote that kind of connection, companies need to personalise the customer experience on an individual level. This means not only developing detailed customer profiles and segmenting audiences based on preferences and demographics, but also documenting and recalling all of the past interactions you have had with your customers.
Being able to speak directly to individual customers, using their names and referencing their past experiences and the products or services they use will help demonstrate that you are invested in their success.
Customers want more than just solutions; they want solutions without the hassle. Convenience reduces friction in the customer experience, allowing for more streamlined, anxiety-free interactions.
To promote convenience, take a look at the customer journey from the perspective of the customer. Is your signup process needlessly complex? What about at checkout? Are support options clearly available across multiple channels or do you force customers to use only one or two specific channels? Any part of the journey that slows down the process or creates confusion with your customer is an area that needs attention.
Unfortunately, there are times when your support agents themselves might be standing in the way of a quick resolution, simply by virtue of being another step in the process. The ServiceNow®️ Service Catalog offers a solution—centralising common, automatable support requests without involving an agent. These requests may include everything from resetting passwords to reporting lost credit cards. By streamlining service and support requests, you can reduce resolution times and provide a better overall customer experience.
Easy to say, potentially difficult to achieve, increasing customer loyalty is simply a matter of being better than the competition. Look at your key competitors. More importantly, look at their customers.
Read reviews to identify where your competitors are succeeding at providing exceptional customer service and where they are falling flat. Then it is a matter of matching what they are doing well and outpacing them where they could stand to improve.
Feedback is essential in creating an atmosphere of customer loyalty. Make it easy for your customers to contact you with any suggestions, questions, comments or concerns they might have, and do not hesitate to reach out to them as well. For example, creating an automated workflow that takes effect after the customer interaction concludes can help ensure that vital follow-up activities aren't overlooked, automatically sending out feedback surveys to those who recently finalised purchases.
As you solicit feedback, be specific about the kinds of answers you are looking for and always remember to follow up by providing any necessary solutions and thanking the customer for their honest critiques.
Loyalty programmes are a great way to say 'thank you' to those customers who stand by your brand. They are also a great way to encourage undecided customers to stand by your brand. Rewarding customers with discounts, special treatment, prizes etc. can help ensure that they keep coming back to do business with you again and again.
It can be easy to view the customer relationship as existing between two parties: your customers and your brand. But the reality is that the customer relationship includes several other individuals as well—namely, each one of your customer-facing employees.
In your customers' eyes, your employees are the embodiment of your brand. If your employees are unhappy with your company, that will show through in their interactions and your customers will not be happy either. Additionally, your employees will need the right tools, training and resources for providing efficient service. This includes everything from having easy, on-screen access to the right information, to incorporating machine learning to provide suggested solutions while they interact with customers. Treating your employees well, rewarding exceptional behaviour and giving them the necessary assets will inspire them to provide a more positive experience for your customers.
No matter how fairly you deal with your customers, they are always going to be more willing to trust their peers. The downside of this universal truth is that any mistake, real or perceived, that you make in dealing with your customers has a chance of spreading like wildfire across forums and social media, negatively affecting your standing with other customers. The upside is that you can use this desire for community to your advantage.
Building a community forum into your customer self-service portal will encourage customers to interact over their shared experiences with your brand. Positive experiences will strengthen trust among more of your audience and even negative experiences will give you the opportunity to step in and set things right before it gets out of hand.
ServiceNow has helped a range of companies create exceptional customer loyalty programmes.
7-Eleven
7-Eleven worked with ServiceNow Customer Service Management to create the 7-Help customer help desk. 7-Help brings together 20 different help desks—including HR, payroll, merchandising, IT and facilities management help desks—giving users a single platform for reporting issues. This has resulted in a 205% increase in resolution rates, a 75% reduction in response times and a 93% reduction in case volumes.
Capita Software
Capita Software was facing an issue with an overly complex customer support system, including 26 independent service desks and 23 different ticketing tools serving seven separate business units. ServiceNow proved to be an effective, enthusiastic partner who could provide the right functionality to create a simplified, standardised service desk for the entire organisation. As a result, Capita saw a 50-point increase in their Net promoter Score—a reliable measurement of customer loyalty and satisfaction.
With so much riding on customer loyalty and so many different strategies designed to inspire it, it only makes sense to measure how effective your loyalty campaigns are. Here, we identify and briefly describe the most effective metrics for measuring customer loyalty:
The Net Promoter Score (NPS) consists of an index ranging from -100 to 100, detailing the willingness of a business' customer base to recommend its products or services to others. NPS is straightforward, easy to use and provides a clear indicator of your overall customer loyalty.
Negative churn describes a situation in which your total revenue from existing customers is more than the revenue lost from downgrades and cancellations. Negative churn demonstrates that the business is working well with existing customers and that they are spending enough money to make up for any customers that you might be losing.
The customer retain rate measures the number of customers that continue to do business with your company over a predetermined period. Customer retention is an essential factor in determining customer lifetime value.
Repeat purchasers go together with customer retention rates. Comparing new, first-time customers against the number of return customers will give you an idea of how your customer retention rates are improving or decreasing.
If your repeat purchasers are regularly buying the same products, that means that they have faith in and loyalty to the product itself. However, if your repeat purchasers start branching out and buying your other products, that means they have faith in and loyalty to your brand. They are demonstrating their trust in you and showing that they enjoy the experience you provide.
The customer loyalty index takes into account multiple factors, including NPS, repurchasing, upselling and a customer focused questionnaire. Customers rate your business based upon how likely they would be to recommend it to others, how likely they would be to try more of your brand's products and how likely they would be to return and do business with you in the future.
How often do your customers engage with your brand across social media, leave reviews or simply visit your website? Tracking customer engagements across all available channels can help you develop a clearer overall picture of your customer loyalty.
Customer loyalty is a driving force behind business success. That said, it takes more than simply having the best prices or offering fun rewards to inspire true loyalty to your brand. Customer loyalty initiatives are generally exceptionally long term and require reliable analytics, deliberate strategy and clear coordination between every aspect of your business. Even more importantly, they demand constant improvement of the customer journey to quickly identify and resolve potential issues as they arise, creating an improved experience for the customers who come after.
When these factors are in place, customer loyalty leads to better feedback, improved revenue, increased repeat business and—best of all—enthusiastic brand ambassadors who are ready to share your message with others. ServiceNow, the leader in IT management and workflow automation provides the solution: Service Portal.
Service Portal empowers organisations to deliver exceptional customer experiences by providing a modern, easy-to-use platform accessible from any device, at any time. With its user-friendly interface, customers can easily access services, interact with personalised content and enjoy convenient support options, all contributing to a more seamless and rewarding customer journey. Additionally, Service Portal's capabilities enable businesses to harness the power of customer data, personalise interactions and proactively anticipate customer needs. By centralising common support requests and streamlining service and support interactions, businesses can significantly reduce resolution times, enhancing overall customer satisfaction and loyalty.
With ServiceNow Service Portal, you have everything you need to keep your customers coming back again and again. Request a demo today and make customer loyalty a defining factor in your organisation.