4 Reasons Why You Should Never Underestimate the Importance of Customer Loyalty

Today’s consumer marketplace is more competitive than ever before, with upstart companies springing up each day that have a real chance to chip away at your market share. In this kind of environment, it’s impossible to overstate the importance of customer loyalty to ensure your long-term success.

Running a successful business is a busy, demanding task, and it’s understandable that some leaders simply don’t have the time to focus on nurturing customer loyalty. But make no mistake—you ignore this powerful tool at your own risk. To that end, here are four reasons why businesses should not only respect the importance of customer loyalty, but do everything they can to promote and improve it.

Source: zendesk.com.

4 Reasons Why You Should Never Underestimate the Importance of Customer Loyalty

#1: More Customer Loyalty Means Less Churn

Whether you realize it or not, one of your biggest operational expenses is customer churn, or the rate at which your existing customers leave and have to be replaced by new ones.

Just how much does churn cost you? As the Harvard Business Review points out, it can be as much as 25 times costlier to acquire new customers than to keep the ones you already have. That means you’re leaving money on the table with every customer with whom you fail to develop a loyal relationship.

It can be as much as 25 times costlier to acquire new customers than to keep the ones you already have. Click To Tweet

On top of that, a Bain & Company online customer loyalty report notes that, given the high costs of acquisition, most e-commerce businesses don’t break even on a one-time shopper. The “average online apparel shopper… wasn’t profitable for the retailer until he or she had shopped at the site four times,” which implies that retailers have to retain customers for 12 months “just to break even,” per the report.

#2: Loyal Customers Spend More Money

Loyal customers spend more money with their favorite businesses and brands.
Source: www.shutterstock.com.

So, focusing on customer retention and loyalty means you can reduce the amount you spend on acquiring new customers or, better yet, get much more from the same amount of spend, since you’ll not only still pull in new customers, but make more from your loyal base.

A number of studies note that loyal customers spend more money with their favorite businesses and brands. As another report on customer loyalty from Bain & Company shows not only do loyal customers “pay a premium to continue to do business with you rather than switch to a competitor,” the amount that they spend with you actually increases each year.

The American Express 2017 Customer Service Barometer agrees, finding that seven in 10 U.S. consumers will spend more money on companies that earn their loyalty via offering a great customer experience. The double lesson here is that the longer you can keep your customers loyal—and the better you treat them when they are—the more value you’ll get from each of them.

#3: Customer Loyalty Means Free, Built-in Marketing

Maybe even more than your head of sales or your go-to social media guru, your loyal customers are your best possible brand advocates. According to HubSpot, loyal customers not only “convert and spend more” with the brands they love, but they also “tell their friends and colleagues about those brands, which helps drive free referrals.”

In other words, by cultivating customer loyalty, you’re also gaining the best kind of marketing representatives: Those who recommend your business to their family and friends. And that’s perhaps the best type of marketing—not only because it come at no additional cost, but because it’s delivered on a word-of-mouth basis to family and friends.

“What people say about your company online today is almost more important than what you say in your marketing collateral,” as Seth Bailey writes at Entrepreneur. “So it pays to have a loyal base of customers evangelizing and advocating for your business.”

#4: Another Way to Beat the Competition

When you achieve loyalty among your customers, you’re making it that much harder for competitors to gain ground by winning them away from you—even in the face of enticements, such as lower prices or attractive introductory prices.

There’s another angle to this, too: The fact that your competitors may not be taking the importance of customer loyalty as seriously as you are. In retail, for instance, “executives recognize the importance of customer loyalty… but few are taking action,” as Katherine Black explains in a customer loyalty article for Forbes.

Most companies “have merely tinkered” with customer loyalty, Black adds, and “don’t have an accurate way of measuring” it. Focusing on customer loyalty, then isn’t just a good way to reduce churn and boost sales, but to win away customers from competitors who may be disregarding this powerful tool.

How Can You Achieve Customer Loyalty?

Now that we’ve established the importance of customer loyalty beyond all shadow of doubt, the next question is how to achieve it. From loyalty and rewards programs to the use of data and analytics to maximize your existing customer relationships, there are a number of proven, highly effective methods from which to choose.

Yet for businesses looking to maximize their customer loyalty, the first step is always the same: making sure you’re offering the best possible customer experience (CX).

“The way that you facilitate brand loyalty is by consistently meeting your promise to the consumer over time, again and again and again,” explains Daniel J. Howard, PhD in a video on the value of customer loyalty. And even better than meeting customer expectations, adds Professor Howard, is exceeding them, by surpassing their “expectations of what they thought they would receive.”

Easier said than done, right? The fact is, ensuring a great CX is no simple task, requiring, for starters, the employment of a team of expert customer service agents, the use of top-notch communications technology and the expertise to tie it all together into one, unifying strategy.

That’s why so many businesses are choosing to partner with on-demand CX solutions providers that offer easy access to all of the above components, and much, much more. Even better, industry leaders like Working Solutions deliver affordable, expert outsourced customer care that’s onshore, based in the United States and Canada, making offshore customer agents a thing of the past.

Deeper Dive: How to Build Customer Loyalty with On-demand Contact Center Solutions