A three-step guide to improving customer loyalty and improving retention

Congratulations, you’ve managed to build your customer base. Now it’s all about keeping those customers engaged, so they keep on coming back. Increasing customer loyalty can be an absolute game-changer for your company. Increased profits, improved sales success, and sustainable growth are all guaranteed outcomes when you strengthen your relationships with your customers. 

Customer loyalty can take your business from zero to brand hero. Keep reading for more hard-hitting stats proving the importance of customer loyalty, plus steps to turn repeat buyers into loyal customers.

What is customer loyalty? 

Customer loyalty is the positive and long-lasting relationship occurring between a customer and a brand. Loyal customers usually fall under one or more of the following characteristics:

• Repeat or high-value purchases 

• High NPS 

• Willing to share their experience with others

• Increased engagement through numerous channels

Everyone is different, so customers will remain loyal to a brand for different reasons. There are six categories customers can fall into: 

1. Happy: These are your customers who are genuinely happy with the product/service provided. They’ve never complained and have purchased from you numerous times. 

2. Price-loyal: They are sticking with you, as they believe you offer the lowest price. However, they can be a flight risk if a competitor offers a lower price. Price-loyal customers are the easiest to retain by offering low prices or discounts, but they are not the most valuable. 

3. Loyalty program: These customers are part of your rewards program, and you are making their loyalty worthwhile, by providing perks and incentives.. 

4. Convenience loyal: These customers have found their experience with you to be easy, and that’s why they have stuck around. This can include an easy checkout process, easy to find or easy to resolve an issue.

5. Advocate: Here are your ‘ride or dies’. They have purchased from you many times and have shared their positive thoughts on a third party site or to friends and family. 

How customer loyalty and retention can boost your business's ROI

Investing in customer retention is the way to go if you want to see skyrocketing growth and a healthy boost in profits. Don’t believe us? Take a look at these stats. 

1. Over 75% of consumers have been in long-term relationships with specific brands for 10+ years. (InMoment)

2. It will cost five times more to acquire a new customer than retaining an existing customer. (Invesp).

3. According to a survey by Zendesk, three out of five consumers shared that great customer service is important for them to feel brand loyalty.

4. Loyal customers spend 67% more than new customers.  (Edelman)

5. Insights from Zonka, show that loyal customers are five times more likely to repurchase, seven times more likely to try a new offering, and  five times as likely to forgive over a poor customer experience.

6. Increasing your customer retention rate by 5%, will grow profits anywhere from 25% to 95%. (Bain & Company)

7. Customer experience is a key element in driving customer loyalty and retention according to 89% of companies surveyed. (Invesp)

8. When a customer problem is solved in a timely manner, customers are 2.4 times more likely to remain loyal to the brand. (Forrester)

9. The probability of selling to an existing customer is 60-70%, while the probability of selling to a new prospect is less than 20% (Invesp).

10. 75% of loyal customers will recommend a brand to family and friends. (InMoment)

The message is clear: If you want to boost your performance, spend more time on retaining valuable customers and less time looking for the next quick sale.  

How to retain your most valuable customers and improve profits

We’ve highlighted some steps below that, once implemented, will put you on your way to increasing customer loyalty — and driving profit at the same time. Win-win.

Step 1: Identify your most engaged customers

It’s time for a little predictive modeling with customer data. It sounds intimidating, but don’t worry — you don’t have to be a data scientist to uncover valuable insights, especially if you’re using Ortto. 

All you need are these three data points:

• How recently each customer made a purchase

• How often each customer makes purchases 

• How much money each customer spends

These data points will enable you to produce an RFM (recency, frequency, and monetary) model, which is similar to lead scoring.

The premise behind the RFM model is simple: Customers who have made purchases recently, make purchases regularly, or spend a lot of money on your products or services, are likely to respond favorably to future offers. 

Customers with high aggregate scores are your most engaged customers, while those with lower scores are your least engaged customers. At its core, RFM modeling is a segmentation tool which can be used to identify customers who are both engaged and disengaged, then segment them accordingly.

It’s also important not to ignore disengaged customers — in fact, you can gather powerful insights from this segment. These customers usually fall into 2 or more categories. The first set of customers likely disappeared after purchasing a single product. But the second set spent a significant amount of money on your products or services in the past, only to become disengaged recently. 

Preventing churn is critical for many businesses, and changes in behavior (for example, decreased product usage) can be a warning sign that a customer will disappear.

Step 2: Use marketing automation to prevent disengaged customers from leaving

Reconnecting with disengaged customers should be an essential element of your customer retention strategy. And now that you’ve identified opportunities to reconnect with disengaged customers, let’s talk about how marketing automation can help you win them back. Marketing automation enables you to send offers triggered by an activity or event, meaning you’ll never miss an opportunity again.

Here’s how it works: Using Ortto, segment several audiences based on your RFM data. You can define each audience by recency (e.g. customers who haven’t made a purchase in over a year), by how much revenue they’ve contributed to your business in the past (e.g. revenues exceeding $3,000), by frequency (e.g. customers who made purchases at least once per month during the period in which they were active), or other relevant characteristics. You can even create audiences based on a combination of data sets.

Once you’ve identified your customer segments, you can design journeys triggered by audience engagement. The idea here is to offer disengaged customers purchase incentives (such as exclusive offers, coupons, discounts, and deals) that encourage them to resume their relationship with your brand.

Step 3: Keep engaged customers happy

Of course, it would be a terrible idea not to pay attention to your happy customers. After all, they’re the ones who are exhibiting a commitment to your brand. To keep your most valued customers satisfied, create loyalty programs that reward them for their behavior. 

Loyal customers are the most cost-effective to serve. Why? Because they spend lots of money on your products or services, but only need a little investment to keep them happy. Their commitment to your brand also makes them less sensitive to price changes, less likely to switch to a competitor, and more likely to engage in recommended behaviors.

We now know there’s a strong relationship between loyalty and customer retention. So, how can you earn the loyalty of your best customers? By rewarding and keeping them engaged. We will touch on this in the next section.

How to turn repeat buyers into loyal customers

Many people wrongly assume that only repeat buyers are loyal customers. In reality, loyalty is about creating a connection between your brand and your customer. To accomplish this goal, you must develop brand affinity between you and your customers.

Below you’ll find four strategies and tactics for transforming repeat buyers into loyal customers:

1. Reward customers for desired behaviors

One sure-fire way to build customer loyalty is to reward customers for engaging in behaviors that help grow your business. For example:

• making a purchase

• following your brand on social media

• sharing product pages with friends and family

• publishing product reviews

• spreading positive word of mouth online

Because these behaviors benefit your business, you can afford to reward your customers for engaging in them. Suitable rewards include company gear or swag, loyalty points, discounts and coupon codes, and other perks.

Industry news and media company DTC is one example of a company that uses this technique. Their program rewards subscribers for engaging in one important behavior: referrals.

For an early-stage business that relies on advertising revenue, increasing their subscriber list is a clear win. After all, the more subscribers they attract, the more money they can charge. 

Here are a few other examples of customer rewards, done right. 

HelloFresh -  Behavior: Refer a friend
An incredible rewards program where free dinner box vouchers are continuously sent to customers to pay it forward to their friends, while also rewarding the customer with a generous kickback too. 

G2 - Behavior: publish a product review
Reviews are a major player when it comes to the consideration stage of a customer's journey. G2 is one of the main software review sites, offering a great incentive program to entice software users to leave a review of a platform they’re using. This builds G2’s review hub, cementing them as a leading review site. 

2. Identify and celebrate your promoters

Building loyalty in customers who’re already brand enthusiasts is another easy win. The Net Promoter System® can help you identify these customers, who are referred to as your ‘promoters’. They’re the ones who respond to the question “How likely are you to refer [company] to a friend?” with a 9 or higher.

Once you’ve identified these customers, the key is to celebrate them. Here are three ways to pull it off:

Create case studies

One powerful way to celebrate your promoters is to create case studies. Case studies give your promoters an opportunity to share how they achieved success with your product and/or service. In making their achievements public, they enhance their reputations, while you gain social proof and bottom-of-the-funnel content that can be turned into blog posts, webinars, live events, and more.

Celebrate their achievements

By taking a community-centric approach to your marketing, you can—quite literally—celebrate your promoters.

For example, a quick shout-out on social media recognizing your promoter’s achievements (e.g., reaching 1,000 customers or some other milestone) takes just minutes to compose, but helps build long-term, committed customer relationships. Plus, there’s a good chance they’ll reciprocate.

Invite them to be part of exclusive beta tests

Strengthen your relationships with your promoters by inviting your top promoters to test new products in beta—before other customers are given access.

Promoters tend to be power users, making them an ideal choice for beta testing. Plus, if you listen actively and respond to their feedback in a timely manner, you’ll continue to earn their respect and their loyalty.

Or, if you’re in the ecommerce world, send new product samples to promoters to test out before they’re released to the general public. Offering a behind-the-velvet-rope experience will strengthen your relationship with them. 

3. Recognize big and frequent spenders with exclusive perks

Another way to build customer loyalty is to give special recognition to your VIPs. Because these customers buy often and tend to spend more money, you can afford to offer them exclusive perks that aren’t available to other customers.

Here are a few ideas to spark your creativity:

• an additional discount on already discounted items

• an invitation to exclusive events hosted by your brand

• an opportunity to purchase new products hours or days before they’re released to the general public

It’s a good idea to create a VIP segment within your Ortto account for easy communications intended for their eyes only. Set up your VIP qualifying characteristics, for example customers who spend over $1,000 per year, so that any customers who reach this milestone will be automatically added to your VIP customer journey.

Don’t forget, in addition to offering VIPs perks, you’ll also want to acknowledge their status and thank them for their business.

4. Use customer care emails to build brand affinity

Customer care emails are an effective and free way to build good will. Here are a few ideas to stimulate your imagination:

• Celebrate customer milestones. Has your customer crossed an activity milestone? Have they spent a certain amount of money? Have they been a repeat buyer for a certain period of time? These are all occasions you should celebrate.

• Wish customers a happy birthday. There’s only one day per year when your customer is the center of attention, and it’s a fantastic opportunity for your brand to stand out. Recognizing moments that matter to your customers helps you build a relationship with your customer.

• Show a bit of gratitude. Saying thank you after every purchase demonstrates that you value their business. This simple two-word message can go a long way in earning your customer’s respect.

Customer care messages are also a great opportunity to get personal. Instead of sending an email, why not send a celebratory GIF via email or over social media, write a handwritten note, design a customized postcard, or send a simple thanks via SMS.  

The final word

Customer loyalty does not just happen overnight, but by setting up retention strategies and rewarding desirable behaviors, you will build a strong customer community in no time.