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Your Best Asset: What Makes Customer Loyalty So Important?

Max Freedman
Max Freedman

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

After starting a business, attracting customers is one of the most significant operational challenges. However, keeping your customers can be even more daunting. Excellent service can boost customer retention, but it’s not enough. 

Startups and small businesses need loyal customers to stand out and thrive. We’ll explore customer loyalty’s importance and share tips on building and maintaining a loyal customer base. 

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 with which they’ve had great customer experiences.

Customer loyalty is the relationship satisfied customers have with the businesses they frequent. Although superfan brand ambassadors are one aspect of customer loyalty, daily repeat customers are crucial. For example, consider customers who visit a specific ice cream shop monthly or have a standing weekly date at a particular local restaurant. 

Did You Know?

Brand ambassadors often use social media to boost brand visibility, generate more sales leads and increase sales.

Why is customer loyalty important?

Customer loyalty goes beyond ensuring customers are satisfied with your business’s services or products. Your goal should be creating brand advocates by delighting the customer.

Here 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 creates highly persuasive brand advocacy. We trust our friends and family when they recommend retailers, services or companies. We also often trust both negative and positive customer reviews and other forms of user-generated content when making purchasing decisions. 

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: Let’s say someone moves to a new city and decides to hire a landscaper to maintain their yard. Since landscaping is an ongoing expense, getting someone who will do a good job and be affordable is crucial. 

To find a landscaper that meets these criteria, the newly moved person asks their neighbors about who maintains their yards. They may also solicit opinions via local social platforms like Nextdoor or read customer reviews of various landscape businesses on Google and Yelp. Ultimately, they may receive several recommendations and choose the right landscaper for their needs and budget. In turn, the business owes its new client to recommendations from loyal customers.


Word-of-mouth advertising is especially effective as part of your local marketing strategy for building business in your community.

2. Loyal customers come back more often.

Often, loyal customers make repeat purchases based on wants as well as needs. This is particularly true if a business has built a customer loyalty program that rewards repeat purchases. 

For example, say a customer buys fresh-baked bread weekly from a baker and receives a free item for every five items purchased. In this case, the 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, to earn more free items and rewards.

3. Repeat customers spend more money.

Returning customers tend to spend more. According to Invesp data, current customers spend 67 percent more than new customers. While the likelihood of selling to a prospect is between 5 and 20 percent, selling to existing customers has a likelihood of 60 to 70 percent.

When customers have done business with you multiple times, they trust you to provide great products or services at a reasonable price and excellent customer service. For these reasons, they tend to spend more money with you. They may also buy your higher-priced products or more of the regular-priced items.  

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 the 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. 

Did You Know?

The survey data you acquire from loyal customers is highly valuable, helping you determine what you’re doing right and address problems before they become serious issues.

5. It’s more expensive to acquire a new customer than to keep an existing customer.

When companies fail to invest in building customer loyalty, they have a higher customer attrition rate. They end up needing to replace the customers who stop doing business with them. However, this is a poor strategy from a financial point of view. According to Invesp, acquiring new customers costs five times more than retaining current ones, making customer retention a crucial priority. Retaining your loyal customers saves you the costs of marketing, sales and onboarding to attract new customers.

6. Loyal customers make your ads more effective.

According to the marketing “rule of seven,” prospects who’ve never seen your ads and aren’t familiar with your company must view your ad an average of seven times before they take action. On the other hand, your loyal customers will already be attuned to your advertisements because they’re already familiar with your company and its offerings. 

How can you 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 to build customer loyalty.

Some businesses experience a degree of customer loyalty without investing in a customer loyalty strategy. However, implementing a rewards program is a straightforward measure for attracting new customers and strengthening your relationships with existing customers. Through such a program, you can incentivize customers to buy your products continually by offering future discounts or free items.


Loyalty program ideas include presenting unique offers for reward points, giving special rewards for referrals and organizing a prize draw for loyalty program members.

2. Implement a referral program to enhance customer loyalty.

Have you ever received a message from a business you patronize stating that you’ll 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 they trust it.

3. Strengthen your customer service to maintain customer loyalty.

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

If you have an in-person business, sustain and grow customer relationships by getting to know customers on a first-name basis. Additionally, learn more about them so you can recommend products and provide meaningful assistance. 

E-commerce businesses and larger companies can make customer assistance readily available by setting up a customer service email address or using one of the best live chat software solutions. Ensure that you or designated employees respond to inquiries within a specified time frame. 

4. Use customer data to inform your loyalty strategy.

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, pull customer data to investigate further. 

If you have a loyalty program and these customers are only making 10 percent more purchases than before — or their purchases are identical to past purchases — you should reshape your customer loyalty program.

Bottom Line

The best customer relationship management software can help you manage and track customer relationships and shape your loyalty program to their needs. 

5. Keep your quality consistent to maintain customer loyalty.

Just because your offerings have been available for a while doesn’t mean their product quality is as strong as when you first introduced them. Customers notice declines in quality.

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

6. Hire employees who care to maintain customer loyalty.

It’s easy to see your company as an extension of yourself. Your employees are also an extension of you and your business. Create a hiring process that prioritizes potential employees with customer service skills. Invest in hiring for a cultural fit to find people who will care for your customers as much as you do. 

Establish a workplace culture of caring for customers, communicate your values to employees and reward them for doing the same. You can set the stage with a code of ethics and conduct, but be sure that your messages and policies are consistent.

What’s the difference between customer loyalty and brand loyalty?

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

Customer loyalty measures how likely a customer will repeatedly spend money on a product or service a business offers. In contrast, brand loyalty measures overall trust in that brand.

These definitions may seem synonymous. However, brand loyalty measures the likelihood of earning repeat business from people willing to try your company’s other offerings before turning to competitors.

Earning customer loyalty is a sound strategy

While marketing to new customers is essential for achieving profitable growth, it’s crucial to nurture your relationships with existing customers. A successful business balances attracting new business while providing stellar quality and customer service to existing clients. 

With the above tips, your company can do the same.

Jennifer Dublino contributed to this article.

Image Credit: bunditinay / Getty Images
Max Freedman
Max Freedman
Contributing Writer
Max Freedman is a content writer who has written hundreds of articles about small business strategy and operations, with a focus on finance and HR topics. He's also published articles on payroll, small business funding, and content marketing. In addition to covering these business fundamentals, Max also writes about improving company culture, optimizing business social media pages, and choosing appropriate organizational structures for small businesses.