A Guide to Customer Loyalty: How to Effectively Retain Your Customers
Many businesses have made mistakes that cost them their customer loyalty as well as retention and damaged the company’s image and financial standing.
Today, consumers have so many options when it comes to looking for service providers. That’s why the loyalty of our clients and their retention is more volatile than ever.
Since businesses can never be so sure if their customers will continue to purchase their products or services, the financial security of these companies is also uncertain. Anything can go up in smoke overnight.
There are two questions that you should pay attention to: “what is customer loyalty and retention?” and “how to build customer loyalty and retention?”
This article will try to answer these by answering the biggest question of them all: what is the most direct cause of customer loyalty and retention to effectively retain them?
Table of contents
- Importance of Customer Loyalty and Retention
- How to Develop a Brand that Attracts Your Target Customers
- What You Need to Know About the Millennial Clientele
- Understanding What Could Strengthen or Weaken Relationships with Consumers
- Why It’s Time to Adapt
- Learning from Netflix and Apple’s Communication Strategies to Build Customer Loyalty and Retention
- Authenticity and Honesty: How These Will Get Your Brand Through Tough Times
- Measure Customer Loyalty and Customer Retention
- Final Thoughts on Your Loyal Customers and Their Retention in the Long-Term
Importance of Customer Loyalty and Retention
If you’re a brand manager, marketing director, or account manager, then your role in the company is vital. You’re the one who knows how to build as well as maintain the relationship that the brand has with its customers. Such a relationship is built on trust, and keeping that kind of trust with the clients is a crucial skill that you ought to have.
When customers trust a brand, they are more likely to be loyal to it and thus continue purchasing its goods and services. It means that the business can enjoy an increase in the retention of clients and also maintain its sales and profitability.
Customer loyalty and retention are essential in ensuring the success of a business and lasting loyalty ensures a lasting business over time. You should strive to work on both loyalty and retention together instead of seeing it as customer loyalty vs customer retention.
How to Develop a Brand that Attracts Your Target Customers
Things are changing fast, and that means that the needs of the customers are changing as well. Unfortunately, customers expect more from brands nowadays than they did in the past.
If we think about what are some strategies for maintaining customer loyalty and retention, one of those is the ability of the brand to adapt and be flexible.
Just imagine, the needs of the GenX customers are no longer the same compared to those of Generations Y and Z. Needs and priorities are changing. New ones appear, and so new criteria for purchasing decisions should be something that businesses consider.
In a matter of five years, millennials are going to make up about 75% of the planet’s workforce, and they’re going to have that purchasing power. So, what does it mean for your business? It’s vital to have an understanding of what the needs of this new generation are going to be.
By knowing the priorities and needs of the millennials, your business can prepare how to accommodate such needs. When you start to ask, “what is the most direct cause of customer loyalty and retention?” The answer is:
Having an understanding of what’s important to your clientele and being able to provide it
The strategies on how to increase customer loyalty and retention are simple, but you need to be able to take concrete steps to make them happen. If customers like what they get from your business, then it’s more likely that they will be loyal customers. It will increase the profitability of the business and also strengthen its financial security.
What You Need to Know About the Millennial Clientele
For this section, we’re going to look into the characteristics of the millennial clientele. It’s a way for you to prepare the business for when they become avid customers in a few years. Doing so will allow your brand to thrive through these changing times.
They Have a More Conscious Purchasing Power
The first thing you need to know about the millennials is that the products and services they buy talks a lot about who they are as customers and that they don’t become loyal customers overnight.
Millennials are more inclined to patronize brands that have commitments, behaviours, and values that are aligned with their priorities. What does this mean exactly?
The millennial type of client does not simply buy a product or service. They begin and end their relationships with brands for personal reasons. Often, this is in relation to the company’s impact on society and the environment, whether positive or negative.
That’s why it’s crucial to have a deep understanding of millennial customers so that the brand can adopt a certain behaviour that will please them. These potential customers will be able to relate more to these businesses. Such a relationship will encourage millennial consumers to be loyal customers.
They are Concerned with the Environment
As you may already know, the top concern among Gen Z and Millennials is climate change and how to protect the environment. Other concerns include inequality and terrorism, but environmental concerns come first on the list among these two generations.
For your business as a brand manager or marketing director, if you wish to have a millennial clientele and to make your customers happy, it will benefit the company if you start implementing actions that will help in reducing the environmental impact the business has. Another is to communicate clearly what the concrete results of those actions are.
The goal here is for the business to lessen the negative effects that it has on the environment. Also, the brand should be able to share the results of the steps it has taken.
When you communicate these results to the target audience, the brand will become more appealing to the generations most concerned with the environment.
But more than that, other things that the company can do is to support environmental organizations to further increase the positive impact of the business. Also, the company can devote a budget for the development of a program that can address the many environmental issues in your country. The options here are numerous! Find one that suits your brand best.
They Have Expectations from Brands
Other than the environmental awareness of these generations, they also have certain expectations from the brands that they patronize. There has been a study that states that millennials see a gap between what companies do and what they ought to be doing.
For example, millennials and Gen Z customers believe that companies should lessen their drive to seek profit. Instead, they ought to focus on providing high-quality products and services, improve the skills of their employees, and protect the environment.
Of course, it would be challenging to meet all of these expectations of these customers. However, it’s a good starting point if you want them to become loyal customers. You can look into what the company can improve and take the necessary steps to address them.
If you start making innovative changes to the company’s priorities, it will definitely have an impact on attracting millennial and Generation Z customers. It doesn’t have to be drastic, but small changes can mean a lot if you want to win the favour of this emerging client base.
Understanding What Could Strengthen or Weaken Relationships with Consumers
It’s also important to look into the different criteria when considering the existing relationships that the business has with the millennial and Gen Z consumers.
As we have already established earlier, these generations are volatile. We can say that they are the type that can either deepen or end their relationships with companies.
Some of the factors that affect the relationship that these consumers have with businesses include advertising campaigns, diversity, political positioning, data management, and ethical behaviour. If you want to guarantee customer retention, these are some of the points that you should pay attention to.
There are also two interesting points here: the behaviour of the company leader and the management of personal data. Let’s delve deeper into these two.
Why the Company CEO’s Behaviour Matters in Customer Retention
37% of millenials think that business leaders have a positive impact on the world and around 29% of these consumers have ended relationships with certain brands because of the company leader’s behaviour.
If we look into this, we can see that there’s an opportunity here. If the millennials and Gen Z do not have confidence in the business leaders, then they have low expectations when it comes to their positive behaviour. It may actually be easy to surprise them then.
The point here is that since the consumers have shallow expectations of the company leaders, even just a small action headed toward the right direction can definitely help the brand in terms of image improvement.
What you can do is promote the business leaders of your company and ensure that they adopt the behaviours that the millennial and Gen Z consumers will find to be positive. This move might just boost the brand’s image and make the difference to increase customer loyalty.
Management of Personal Data
There was a survey that found that
73% of the millennials and Gen Z consumers are worried about the security of their personal data in companies. 79% of the participants are afraid to be victims of identity theft on the internet.
By having this information, it only makes sense that a third of the participants have already ended their relationships with particular brands that have requested too much personal data.
About a quarter of the participants also did the same since the companies were not able to keep the data secure or that they were over-monitoring the purchasing behaviours of their existing customers.
These consumers are obviously tired of the intrusions and how some companies force themselves on the customers because of the personal data that they have about their clientele.
An example here is when companies become very insistent in targeting their audiences. Ads are good, but if your brand appears on just about every platform, then people will get annoyed and customers expect some form of privacy.
This issue is something that businesses should also pay attention to because there’s an opportunity to adjust and improve so that the relationships with the existing customers can be further strengthened.
Companies may begin by being transparent and explain to customers how they use the data that they have. It would also be better if businesses can share what protection and security protocols that have in place. It’s vital to build a good reputation when it comes to personal data management.
If companies can do this, it can become a real asset, which will further attract millennials and Gen Z consumers. Remember that these customers prefer brands that have a reputation for being responsible in terms of managing customer’s personal data.
It is normal that you wish to have data and certain metrics on potential customers and follow their customer journey, but be mindful about just how in their face you are being. Try and avoid overly personal forms of communication such as phone calls.
Another characteristic that your business can develop in order to strengthen its relationship with the consumers is consistency. It’s crucial to understand these two generations. They grew up in an era of economic crisis. Many have become pessimistic about their careers.
These two generations are tired of a world that lacks consistency, where anything can change overnight. Businesses ought to take inspiration from this. If you can manage to establish a relationship of trust with these consumers on a regular basis, then you can position your brand as something that these customers can rely on.
Why It’s Time to Adapt
What we have learned so far is that things are changing very fast. Knowing this, businesses need to adapt to the desires and priorities of the two generations that will soon make up a considerable number of consumers.
With these changes, businesses that will succeed are going to be those that have been able to adapt to them. Failure to do so will make companies obsolete and old-fashioned.
With Sortlist, we can help you adopt effective communication strategies that match the current situation and audience. These techniques will be perfectly suited to your business, as well as the steps that you’re going to undertake.
The business environment we have now is so competitive in the field of marketing and communication that teaming up with the right people will significantly impact the success of the business. Sortlist can help you get in touch with the best marketing agencies so you can get started with the steps you need to take to reach your target audience.
The individuals that make up these two generations want companies who take on meaningful actions and become vehicles of change. They expect these companies to help in improving social situations and also protect the environment.
When businesses are able to meet such expectations, then they can definitely capture these target clients and start building their relationships with the millennials and Gen Z consumers.
Such action tells consumers that companies do listen to them and make the necessary changes to be the company that they expect them to be.
Learning from Netflix and Apple’s Communication Strategies to Build Customer Loyalty and Retention
Beyond knowing these unique characteristics of millennials and Gen Z consumers, businesses should also be able to develop a good and growing relationship with them.
Focusing on long-term customer loyalty and retention is integral to the success of the business.
However, you have to remember that it has to depend on your brand identity. It’s not simply adopting a particular tone of voice when you communicate with your audience. One company’s way of doing it may not work well for your business.
There’s an important distinction that needs to be understood here, and that is there are two types of relationships: peer-to-peer relationships and the dominant-dominated relationship. Depending on the type of relationship you have with your clients, the way you communicate with them will also vary. Let’s take a deeper look into these two kinds of relationships.
Peer to Peer Relationship
This type implies that you have put your brand on an equal footing with that of your customers. It means that your business wants to build a close relationship with its clientele. Netflix is one of the best examples of this.
When you check the Twitter page of Netflix, you’ll see how this brand communicates with its audience. It puts itself on the same level as its clients and communicates in humourous ways, which makes the brand endearing to its audience.
But we have to remember that this way of communicating is not the only determining factor for customer loyalty and retention. Another significant factor is the affordability of a Netflix subscription. Imagine being able to access so many movies and TV series for a low price. It definitely attracts a lot of customers.
We still have to give credit for the way that this brand communicates with its clients on Facebook, though.
By having this unique voice, Netflix is building its brand and also strengthening its position in the market.
If we think about it this way, any competitor can provide more movies to customers at a lower price. This would definitely challenge Netflix. That’s why communication strategies are essential because it is what builds customer loyalty.
Any business can copy another’s technology and sell it at lower prices. However, we need to remember that it’s not possible to copy a brand’s uniqueness. When your brand has set up its identity, no competitor can take it away from the company.
That’s why the type of communication that you will use for your brand will play an important role when it comes to building customer loyalty and retention. It allows customers to be emotionally attached to your brand.
With this type of relationship, the brand is positioned in such a way that it is superior to its customers. What this means is that there is a distance between the brand and its audience. The voice adopted here is less friendly compared to the other kind of relationship.
One of the best examples of a dominant-dominated relationship is that of Apple and its clientele. You won’t expect Apple to joke around with its audience on its Facebook page the way Netflix does. This brand’s identity has an air of seriousness to it compared to its competitor Samsung for example.
Nevertheless, Apple does use a light-hearted tone at certain times of the year. It’s known to have built particular rituals that its audience looks forward to. Apple knows how to make its audience anticipate and get excited about its new products.
Apple strategically keeps quiet so that when it does deliver a message to its audience, it creates a significant impact.
What’s great about this is that it also works when it comes to building loyalty. Your audience would want to know what products the company will be releasing next.
However, this strategy will only work if the brand is known for high-quality products, uniqueness, and an inspiring and charismatic business leader. You can see all these characteristics with Apple; that’s why the dominant-dominated relationship works so well.
So, whichever you decide on when it comes to the type of relationship to pursue with your customers, what’s important is that you position your brand in a unique way that will allow it to stand out.
The way that you communicate with your audience should also be perfectly aligned with your brand identity. Before pursuing any communication strategy, define the personality of the brand first so that you’ll have an in-depth understanding of how you want to present the brand to new customers.
Sortlist can help you do this by connecting you with the best branding agencies. These agencies will make the process much easier. Expert branding professionals will help you in making your brand stand out and become memorable to your audience.
Authenticity and Honesty: How These Will Get Your Brand Through Tough Times
Businesses have to be ready for crisis situations because it can impact the brand image greatly. At present, the dissemination of information is so fast that one mistake can reach millions of people in a brief moment.
And it’s not just about people knowing.
Audiences now have the power to comment about it and air their opinions about a situation.
But what does this have to do with customer loyalty and retention? Everything.
Your existing customers will become lost customers if they no longer wish to be associated with your brand and potential future customers will most likely crawl towards your competitor if they are not satisfied with your customer feedback.
There’s a Choice to Make
When companies face a crisis situation, they will be overwhelmed by the criticisms on social media. People may even call for a boycott.
If you ever find yourself in a situation where your business is going through a crisis, there are two ways that you can react: you can recognize what went wrong or be dismissive about it.
As a marketing director or a brand manager of a company under a crisis, the best step is always to recognize the mistake. While it’s tempting to escape from it all, it will actually make everything worse for the brand.
Hopefully your company will have an issue management plan already in place but, a business that can own up to its wrongs will act honestly and apologize to the appropriate audiences.
The brand will be seen as one that is mature and responsible. It’s more likely that these businesses will earn a positive reputation for choosing to face a crisis this way.
The reputation of the brand has already been damaged, and it’s up to you to handle this situation.
Weighing your options here, the company has better chances of recovering from the mistake if it acknowledges the situation instead of remaining silent and waiting for things to pass.
Let’s take a look at two examples of this situation: one company admitted its mistake while the other one kept silent about it.
How Delhaize Acknowledged Its Mistake and Used Humour
Delhaize is a Belgian supermarket chain that made a mistake by having a marketing strategy that went against the current trends. What it did was that for every purchase of 20 euros, the customer gets to receive plastic parts that are similar to Legos.
These plastic parts are meant to be toys for children. They can use the parts to build a toy store. The problem here was that the plastic pieces were contained in little plastic trays that were then wrapped in plastic bags.
Customers will then get two pieces of plastic that are wrapped in plastic. Remember that this marketing strategy was used at a time when consumers are already sensitive when it comes to plastic use.
The result of this tactic was that many customers of Delhaize reacted. The news was even covered by the national press and the company quickly found itself in the middle of a crisis that needs to be managed.
During this situation, Delhaize had two options. It decided to go for acknowledging its mistake and issued a public apology for it. This move was the best choice that the company had to preserve its reputation.
Also, Delhaize was able to manage the crisis by using humour by saying that “we got a little carried away.” Through this, Delhaize was able to manage to approach its customers and become open to discussion.
Such a statement stirs sympathy and would want to make the audience read the content of the apology statement. But the company did not stop there. It offered a concrete solution to its mistake by providing an explanation.
Delhaize stated that all of the plastics produced because of the marketing campaign could be recovered and completely recycled. And apart from that, the company announced its commitment to supporting an environmental organization.
Delhaize was able to manage to save its business and preserve its reputation.
BP’s Leak and the Fiasco that Resulted from Its Silence
As you may already know, BP is a British multinational company that is active in the petroleum industry. But on April 20, 2010, it experienced its biggest crisis. It was when the Gulf of Mexico suffered the biggest oil spill ever recorded in the history of the oil industry.
About 5 million barrels of oil were accidentally released into the water. As you can imagine, the effects of an oil spill this huge have been incredibly disastrous for marine life in the region as well as to the tourism industry and the local community.
This incident was the responsibility of the company, and the public did not like what it did about the situation.
One of the statements of Tony Hayward, the CEO, was that the oil that has been spilled was “relatively small compared to the enormous size of the ocean.”
Because of statements like this, consumers became angry at the company and the CEO. Hayward was consequently dismissed from his post. The lesson here is that three fundamental things were lacking in the way that BP handled the situation.
First, at no point did the CEO of BP apologize for the biggest oil spill in history. He did not take on that responsibility even if everyone was well aware that a mistake was made even if it was an accident, and they didn’t intend for it to happen.
And then, with the gravity of that situation, it was not properly addressed, and the CEO went against public opinion. It just made the consumers more aggressive toward the company and without resolving past problems, the company struggled to move forwards.
If we look at the open letter of apology from Delhaize, the company went in the direction of the consumers. They acknowledged that they were indeed right. The company then aligned itself with public opinion. Consumers want to be heard and understood. Delhaize succeeded in reassuring its audience while the BP CEO did not.
Honesty and Apologies Are The Keys to Customer Loyalty
The takeaway from these two examples is that recognizing the company’s mistakes will allow you to increase customer retention through a strong relationship. You will even have the chance to keep their loyalty and retention in the long run.
If your company ever faces a crisis, be sure to listen to the reaction of your stakeholders. What are the things that they’re blaming you for? Know and understand the mistake and why it happened. Once you do this, you will know where the problem is coming from.
Follows the apology. An explanation can lessen the aggression of the consumers toward the company. Of course, you should also state what you plan to do to resolve the problem and the actions your business will take so that it won’t happen again.
Being able to solve a crisis in business requires you to have particular skills. It’s not only about public relations but also the necessary skills for crisis communication. If you ever find yourself in a crisis, getting the right PR agencies will be an essential step.
Measure Customer Loyalty and Customer Retention
There are many different ways for a company to measure customer loyalty and customer retention and it all depends on what you consider as a loyal customer who is likely to come back and continue purchasing.
The most important thing to note however is that there are multiple factors to take into account when measuring customer loyalty. You will need to look at things such as the net promoter score, brand engagement, the customer loyalty index, customer churn, customer retention rate…the list goes on.
Our best advice is that you use Google Analytics to help you make these calculations if you have your business on a website. According to Loyalty Lion on the platform, you should take a look at:
- new vs returning visitor rate
- new vs returning customer rate
- time to purchases (time log)
- path length
Final Thoughts on Your Loyal Customers and Their Retention in the Long-Term
Every marketing department should have a way of measuring customer loyalty so that the company can benefit from interesting data on customer loyalty and retention in the long term.
To measure customer loyalty, you can create a customer loyalty program with your customers and track various factors including customer satisfaction, purchases and ask for feedback on a regular basis.
Don’t forget the answer to what is the most direct cause of customer loyalty and retention. Honesty is the best policy and all your customers really want from you is dependability and a place for them to be comfortable making their purchases