How to Build Customer Loyalty in 7 Steps

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  • Customer loyalty is especially important during the COVID-19 pandemic, as consumers are extremely conscious of their budgets.
  • Repeat customers tend to spend more money on your brand than new customers because they trust your business.
  • Retaining customers is about five times cheaper than recruiting new customers.
  • This article is for business owners who want to increase their brands’ customer loyalty in the pandemic era.

As a business owner, you know your customers are the reason for your business. That’s why it’s important to consider your customers in everything you do. Your customers’ needs should be at the forefront of your business. This will not only drive more sales, but also build customer loyalty for the long haul. Here’s why cultivating customer loyalty is important and tips on building it.

Why is customer loyalty important?

Customer loyalty is a customer’s likelihood of doing repeat business with you. This stems from customer satisfaction and outweighs availability, pricing, and other factors that typically impact buying decisions. When a customer is loyal to a product, service, or brand, they are willing to wait for a restock or spend a little extra money for it.

“Customer loyalty means the difference between a one-time sale and a customer who comes back to you potentially for the rest of their lives,” said Tyler Read, CEO of personal training company PTPioneer. “If you put in the work necessary to build customer loyalty, those customers will … stay invested in your business. When your business is struggling, it’s the loyal customers who will help you stay afloat.”

This is especially important and evident amidst the global COVID-19 pandemic.

“I think the pandemic was a test of customer loyalty in that it forced consumers to honestly evaluate what service providers they trusted,” said Bill Zinke, senior vice president of marketing at BELFOR Franchise Group. “So, one of the key lessons from the pandemic has been [that], in good times, building customer loyalty can help you grow faster and more profitably, and in tough or challenging times, it can be the difference between surviving and going out of business.”

Customer loyalty is important for many reasons. These are the major ones:

  • Repeat customers typically spend more than new customers. Because they already trust your business and its products or services, existing customers tend to spend more money than new customers. In fact, the amount they spend typically increases with the duration of doing business with your brand.
  • Loyal customers yield higher conversion rates. Existing customers have an average conversion rate of around 60% to 70%, while new customers have a conversion rate of 5% to 20%. In other words, you get more value from loyal customers visiting your site.
  • Customer loyalty boosts profits. The more customer loyalty you have, the better your profits will be. In fact, just a 5% increase of customer retention could increase business increase business profits by 25% to 95%.
  • Customer retainment is cheaper than customer recruitment. While recruiting new customers is important, it can be expensive – around five times more expensive than retaining a loyal one, actually. Simply retaining loyal customers is much more cost-effective, as they bring higher profits at a lower cost.
  • Loyal customers shop regularly. Because they’ve already had positive experiences with your brand, repeat customers tend to shop much more frequently than new customers. This is especially true around the holidays, when consumers are purchasing gifts and spending more than they typically would during the rest of the year.
  • Customer loyalty helps you plan ahead. When you have loyal customers, you can make better anticipatory decisions and effectively plan your finances and marketing efforts.

Key takeaway: Customer loyalty can improve your sales and reduce your marketing costs compared to customer recruitment. It can also buoy your business in difficult economic times.

How to build customer loyalty in 7 steps

Customer loyalty isn’t something that happens without intentional effort. Here are seven steps to build customer loyalty.

1. Know your customers (and let them know you).

To cultivate customer loyalty, you’ll want to get personal with your customers. Learn their names, their stories and their buying habits. Treat each one as a person, not as just another paying customer. For instance, on a customer’s birthday, you could send them a personalized birthday message with a special deal. You should also send them emails you know would specifically appeal to them.

Erin Laine, owner and lead technician at Orlando West N-Hance Wood Refinishing, said that her team focuses on truly getting to know their customers so they “can anticipate their needs, solve their problems, and deliver quality results worthy of a referral. By taking the time to understand our customer – maybe they need more space for remote learning, for a baked goods side hustle, a spacious place to fit a growing family – we’re able to better provide recommendations and help make their lives easier by bringing their vision to life.”

For your customers to trust your brand, you’ll have to share information about yourself and your business as well. For instance, keep them updated on any business news (before it hits the press!), and don’t be afraid to admit to rough patches. This will help customers see the humanity of your brand, making them more comfortable about doing business with you.

2. Create a customer loyalty program.

A customer loyalty program is a great way to encourage and reward loyal customers. These programs typically have criteria for rewards (e.g., the customer must spend X amount per month), but the benefits for the customer usually outweigh these conditions.

“We’d all love to believe that customers will buy from us again and again, with brand love being the driving motivation,” said Herb Jones, chief marketing officer of Fracture. “Unfortunately, reality doesn’t work like that. Tiered programs ensure that you are recognizing your most valued customers and keeping them connected.”

There are various types of customer loyalty programs, such as credit card programs, punch cards and points systems. What they all have in common is the incentive for customers to spend more money on your products or services.

Consider Starbucks, for instance. When you join its loyalty program, you earn points each time you buy a drink or other item from its menu. When you reach a certain number of stars, you get a free purchase. This helps customers feel justified in their purchases, as they are working toward a reward they might not get elsewhere.

3. Set up a referral program.

Like a loyalty program, a referral program rewards customers for their engagement with a business. In this case, customers receive certain benefits if they refer your company to a friend or loved one. This not only helps attract new customers (referral marketing is both effective and affordable!), but also keeps your existing customers coming back for more, as they now have incentives to do business with you.

4. Play to your strengths and values.

What does your business do best? What are your unique offerings? What do you value most? Your answers to these questions will help you frame your brand, which is an important part of attracting loyal customers. To really connect with buyers, you have to stay true to your brand and focus on what you do best. Be a constant in your market – a business that consumers can always rely on to deliver.

You know what they say: “Don’t fix what isn’t broken.” Unless you are having trouble attracting and retaining customers, don’t switch up your offerings or become unrecognizable as a brand. Instead, stay as loyal to your business as you’d like your customers to be.

5. Engage customers on social media.

Social media is a great way to build relationships with your customers. In fact, if you aren’t present on social media, many consumers will perceive you as irrelevant. It’s important to have an active business profile on various social media platforms.

Sharing behind-the-scenes information about your brand and products or services, as well as interacting with your followers, will create a strong online community that encourages customers to come back for more. Think about the companies you frequently do business with and how they conduct themselves on social media: Do their posts resonate with their target audience? Does their brand voice align with their values and offerings? Do they engage their followers in an authentic way? Odds are you answered yes to these questions.

6. Encourage customer feedback.

To show your customers how much you value them and how you are willing to constantly improve, ask for their feedback. Send out surveys, request email reviews, and be open to the feedback you receive. Customers are more willing to invest in businesses that value their opinions and insights. Don’t just say you care about customer satisfaction; really implement customer feedback and market it to them as proof of your dedication. To cultivate their loyalty, you must be loyal to them first.

“Listen to customer feedback, use that feedback to improve your business, and then tell your customers that you heard them and directly implemented solutions to give them a better experience,” said Nerissa Zhang, CEO of The Bright App. “Even if you’re listening to customer feedback to make improvements, be sure to explicitly tell your customers about those improvements.”

7. Store customers’ data.

Businesses that store customer data make it easier for customers to shop with them in the future. For example, you could allow members to create an account on your mobile app or website that securely stores their shipping and payment information for quick purchase. That way, they have a one-touch solution for ordering rather than having to re-add their credit card number every time they want to make a transaction.

Consider Amazon, for instance. Prime members can make orders by simply clicking “buy now” under a desired product. Convenience like this could encourage customers to make frequent purchases from your business.

Key takeaway: Build customer loyalty through personalization, tailoring your messaging to customers as individuals. Leverage surveys and reviews to improve customer satisfaction further.