What is Customer Loyalty

Customer Loyalty refers to the tendency of the customer to continue availing the products, solutions or services from the previous supplier or seller, owing to satisfaction in the usage of the product despite situational changes. It is a measure of success for the seller as customer retention drives multiple positive impacts for a business. Customers could be loyal either to a specific product of the company or to the company brand as a whole.   

Here are some effects of customer loyalty:

• Expenditures on loyal customers is lesser compared to costs incurred on attracting new ones
• Loyal customers buy more thereby greatly increasing revenue
• Customer Loyalty directly reflects on the brand’s image. An enterprise commanding a large loyal customer base has higher brand value
• Loyal customers attract more customers
• Leads to growth and sustainability for a company

Key Drivers of Customer Loyalty

The reasons for a customer being loyal are many. These reasons range from the business perspective, product nature, product quality, marketing skills, business ethics, company reputation to the methods of service delivery and customer service, and determine customer retention.

From a customer’s perspective, other than all the points mentioned above, the reasons can dive deep into sociological and psychological aspects too. Despite being totally fond of a product, a customer could attempt to try new products in the market. A customer might withdraw buying a product due to financial reasons or shift to a new product based on better offers. Sociology has a big impact on loyalty, as it is the inherent tendency of people to support products which are renowned and hold a larger user base.   

Different Types and Degrees of Loyalty

• No loyalty at all  
• Loyalty based on past habits
• Loyalty that arises due to sudden situations like price decrease
• Complete loyalty where a customer always buys from the same brand regardless of the situations

Some Methods to Measure Customer Loyalty

• Customer Value
• Sales Per Customer
• Active Customer Volume
• Visit Frequency
• Retention Rate
• Net Promoter Score
• Engagement Index

Establishment of Customer Loyalty

Establishment of customer loyalty involves ensuring customer relationship management and determining the factors that affect the customer’s preferences. This is done by updating the products or service delivery approach and building a good brand image to attract the masses. Enterprises also deploy Loyalty Business Models to deliver the right quality of product or services leading to customer satisfaction, increased customer loyalty, and hence, ensuring profitability. Companies like Apple drive an almost legendary brand loyalty with its novel devices that even transcends into the emotional status of a consumer.

In a world of software solutions, some organizations provide customer loyalty software to better aid Customer Relationship Management for a client. This includes better feedback mechanisms and building online communities that better connect providers with customers and mechanisms to ensure customer retention like loyalty points, loyalty club or e-gifts.