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Your Best Asset: What Makes Customer Loyalty So Important?

Max Freedman
Max Freedman

Developing a strategy to boost customers' loyalty to your brand is critical to your business's long-term success.

Attracting customers is one of the hardest parts of running a business; keeping them is even more challenging. Providing good customer service is important, but that's not enough anymore.

So, how can a small business or startup even hope to stand out? By winning loyal customers, of course. [Related Article:The Perks of Being Loyal: How to Build a Customer Loyalty Program That Works]

What is customer loyalty?

Customer loyalty is a consumer's willingness and desire to repeatedly buy a product or use a service from a company they have had outstanding experiences with.

Customer loyalty is the relationship satisfied customers have with the business establishments they frequent. It can also extend to occasional repeat customers – for example, a customer who always visits a particular ice cream shop when he visits his mother every month.

What is the difference between customer loyalty and brand loyalty?

Both types of loyalty are crucial for developing and maintaining good relationships with consumers.

Whereas customer loyalty is a measure of how likely a customer is to repeatedly spend money on a product or service that a business offers, brand loyalty is a measure of overall trust in that brand.

These definitions may seem synonymous, however, brand loyalty measures the likelihood that repeat customers who have regularly purchased goods from your company will try other products from your company before turning to your competitors.

What drives loyalty to a brand?

An American Marketing Association study found that four factors drive brand loyalty:

  1. Dependability. When customers learn they can depend on your company for the products and services they need, they are more likely to return to your business first before considering others.

  2. Emotional connection. A company that forms a meaningful bond with a customer, whether by sharing a founding story to which a customer can relate or through another method, can achieve widespread customer satisfaction among its buyers.

  3. Superiority. If your brand can demonstrate superiority over competing products, customers may be hesitant to buy from other companies.

  4. Social media presence. Companies with a strong social media presence can further build a loyal customer base. Social media affords you a chance to share your company's story and show what you do and how you do it better than others. You can learn how to harness the power of an online community to increase the number of customers you have and grow your business.

Why is customer loyalty important?

Customer loyalty goes beyond ensuring that a customer is satisfied with the services or products your business offers. The ideal end goal is to turn a customer into a brand advocate.

Benefits of customer loyalty

There are four reasons why increasing customer loyalty is imperative for any business or startup.

1. Loyal customers spread the word about your company.

Word-of-mouth marketing is highly persuasive. We trust our friends and family members when they recommend retailers, services or companies to us.

Loyal customers believe in your company, and they're not shy about sharing their positive feedback with others.

Here's an example of word-of-mouth marketing: My mother used to go to the farmer's market on weekends. A friend of hers sold his produce there.

She would buy a few things, and he would give her free fruits and vegetables, as well as honey and preserves each week. I remember thinking, "How is this a good idea for the seller? He's giving his items away for free every week."

What I didn't realize, however, was that she would cut his hair at no charge every week and rave about his watermelons, apple butter, and Pink Girl tomatoes to her other beauty salon clients.

My mother was a loyal customer of his, and she showed her loyalty by promoting his products to her clients. He, in turn, was a loyal customer of my mother, never going to another barber or stylist for his haircut. The two established a mutually beneficial loyalty strategy – both for their personal needs and businesses. [Read related article: Baked to Perfection: The Secret Recipe for Successful Customer Loyalty Programs]

3. Loyal customers come back more often.

Sometimes, loyal customers buy a business's products and services more often than they may need to – especially if the store has implemented a loyalty rewards program.

Suppose, for instance, a consumer buys fresh-baked bread each week and receives a discount from a baker for a free item for every five items purchased, that customer will likely return to that bakery for every loaf of bread they need. They may also purchase other items, such as cookies, rolls, and doughnuts, from the baker to get their free items.

As a business owner, you will get to know customers on a first-name basis and learn more about them. That's the essence of a loyal customer-business relationship and why customer loyalty matters.

4. Loyal customers act as a focus group.

Who answers your surveys or responds to social media posts requesting opinions or customer feedback? Your loyal customers. They don't mind taking time to share their insights with you if they think it will help your business. They love your business and don't want it to go away. [Read related article: Build Your Tribe: How to Make an Audience Loyal to Your Brand]

How to build and maintain customer loyalty

Here are six suggestions to help you cultivate and maintain a loyal customer base:

1. Implement a loyalty rewards program.

Although some businesses experience a degree of customer loyalty without investing any effort it seems, you can attract new customers and strengthen the relationship with your existing customers by implementing a rewards program. Through such a program, you can incentivize customers to continually buy your products by offering future discounts or even free items.

2. Implement a referral program.

Have you ever received a message from a business that you patronize that you will receive a bonus for every friend you refer who becomes a customer? If so, you've seen a referral program in action.

Customers who are willing to refer friends to your business are crucial to your customer loyalty strategy. Sure, the incentive you offer existing customers motivates them to refer your business to friends and family; however, their willingness to recommend your business indicates that they trust your business.

3. Strengthen your customer service.

Customers are loyal to you when they know they can turn to you for help with their questions or problems, and your products and services are the solution to their needs.

To make this help readily available to your customers, set up a customer service email address or, if your business has the capacity for it, a live chat tool. Ensure that you or designated employees respond to inquiries within a specified time frame.

4. Use customer data.

You can easily use customer data to inform your customer loyalty strategy. For example, if you implement a customer loyalty program and fail to see significant increases in online sales, you can pull customer data to investigate further.

If you have a loyalty program and these customers are only making 10% more purchases than they were previously or their purchases are identical to past purchases, you should reshape your customer loyalty program.

5. Keep your quality consistent.

Just because your products and services have been available for a while doesn't mean their quality has remained as strong as it was when you first introduced them. Customers notice declines in quality.

As an additional step of ensuring customer loyalty, prioritize maintaining a high level of quality with the items you sell. Avoid becoming the company whose online reviews say that the formula changed or the product malfunctions more easily than it did previously – that's bad for both longtime customers and potential new ones.

6. Hire employees who care.

It's easy to see your company as an extension of yourself, and so, too, are the people you choose to hire. When you hire employees who prioritize attending to your customers, you further build customer loyalty.

Don't neglect longtime customers as you market to new ones. A successful business balances attracting new customers while providing stellar quality and customer service to existing clients. With the above tips, your company can do the same.

Additional reporting by Debra Carpenter.

Max Freedman
Max Freedman,
business.com Writer
Max Freedman is a freelance writer who covers best business practices for business.com and culture for publications including The A.V. Club, MTV, Paste, FLOOD, and Bandcamp. He lives in Philly and doesn't miss his native New York.