Your Best Asset: The Power of Customer Loyalty and Its Significance

What is customer loyalty?

Customer loyalty is when customers consistently — and eagerly — choose a specific company’s services over their competitors. A great customer experience is the foundation of true customer loyalty. 

Customer loyalty represents the enduring relationship between satisfied customers and the businesses they regularly support. While superfan brand ambassadors can help promote a business, true customer loyalty requires routine, repeat customers who swear by a business and its offerings. Customers who unfailingly visit a specific ice cream shop monthly or diners with a standing weekly reservation at a local eatery are examples of truly loyal customers.

Why is customer loyalty important?

Establishing customer loyalty involves more than just ensuring clients are satisfied with your business’s offerings. You must transform customers into advocates and fans through delightful customer experiences that engender and sustain loyalty.

Here are several reasons why it’s essential for businesses to ensure customer loyalty.

Loyal customers become ambassadors for your company.

Customer loyalty begets word-of-mouth marketing and true brand advocacy. Customers who are loyal to your company won’t hesitate to share their favorable experiences with others. This advocacy is highly effective for businesses because people tend to trust recommendations from their family and friends. Even strangers’ opinions matter; shoppers often rely on negative and positive customer feedback and other forms of user-generated content to inform their purchasing choices. 

“Loyal customers drive more business than you think,” Christina Garnett, chief customer and communications officer at neuemotion, told us. “Word of mouth is the one thing that will outlast any trend or ad budget. They will share their positive experience earnestly and passionately, which simply can’t be bought.”

For example, say someone relocates and needs a competent and affordable landscaper to maintain their yard. They’d likely ask their neighbors for recommendations, gather opinions via community-focused social platforms (e.g., Nextdoor), and read Google and Yelp reviews. In all of these cases, loyal customers will point them toward landscaping businesses that have provided excellent customer experiences. 

“Your customers and how they show up online and in person to share their experience are more trusted than any campaign,” said Garnett. “People will search reviews and believe complete strangers over an ad. Take care of your customers and they will be your ad engine.”

Recommendations fueled by customer loyalty are a powerful and inexpensive way to reach new customers and build your business. 

Customer loyalty cultivates regular patronage.

Customer loyalty often leads to repeat business and ongoing sales, particularly if a business implements a customer loyalty program that incentivizes regular purchases.

For example, say a customer buys fresh-baked bread weekly from their favorite bakery, which awards a free item after four purchases. The customer is incentivized to keep returning to the bakery whenever they need bread and will likely purchase other items — such as cookies, rolls and doughnuts — to earn more free items and rewards.

Loyal customers spend more.

Returning customers spend 67 percent more, on average, than new ones, according to a report from BIA Advisory Services. When customers have done business with you multiple times, they trust you to provide great products or services at a reasonable price, along with excellent customer service. They have a propensity to spend more with your business and may explore your premium products or make larger purchases of regularly priced items, further solidifying their loyalty. They are also more likely to spend more over a longer period of time.

Loyal customers provide valuable feedback.

When you seek customer feedback via your social media posts, your loyal customers are usually the ones who respond. These customers have a relationship with your business and are comfortable sharing their opinions, particularly if the feedback will enhance your business. Loyal customers are fond of your business and want it to succeed.

When seeking customer feedback, it’s also valuable to respond to users. Reacting to both positive and negative feedback can help you connect with your audience. 

“Brands tend to have escalation procedures for negative feedback from customers, but they should also have one when people love a brand,” said Garnett. “Imagine tagging a brand you love online and then their team comments back, or better yet, the CEO or founder gives them a personal thank you. That just made that person’s day.”

Customer loyalty cuts costs.

Investing in customer loyalty minimizes the risk of losing customers and avoids the costs of recruiting new ones. Acquiring new customers can be challenging and expensive. In fact, according to Invesp, the cost of obtaining a new customer is five to 20 times that of retaining an existing one. Keeping your current, loyal customers strengthens customer retention while minimizing the financial strain of marketing, sales and onboarding efforts aimed at attracting new customers.

Loyal customers make your ads more effective.

Maintaining loyal customers simplifies and amplifies your advertising efforts. According to the widely touted marketing “rule of seven,” potential customers typically require exposure to your messaging seven times before they take action. But loyal customers already trust your business. They tend to absorb and welcome new offerings, sales events and other promotions more quickly than new customers.

Because loyal customers are already receptive to your marketing, they’ll view your ads with immediate interest; you won’t have to rely on repetitive exposure for your ads to resonate. 

How can you enhance and sustain customer loyalty?

Consider these proven strategies for nurturing and maintaining customer loyalty.

Implement a customer loyalty rewards program.

Implementing a loyalty rewards program can help you attract new customers while strengthening bonds with your existing ones. Loyalty programs incentivize consistent purchases by offering discounts, freebies and exclusive deals. By rewarding customers for their ongoing engagement, these programs boost repeat business while showing your customers you value them, thereby encouraging long-term loyalty.

Additionally, well-designed loyalty programs can enhance customer satisfaction and foster positive word-of-mouth advertising, further expanding your customer base.

Start a referral program.

Have you ever been contacted by a business you regularly visit and told you’ll earn a reward for sending customers its way? This is a referral program in action. 

Sophie Musumeci, founder of Real Entrepreneur Women, said loyal customers become brand ambassadors who are highly likely to refer others who are a perfect fit for your business. 

“We foster loyalty through programs like our ambassador initiative, where we reward clients with special gifts and bonuses for bringing new clients to us,” Musumeci explained. “It’s not only the quickest way to attract new clients but also helps us retain and upgrade them into longer-term programs, turning a 90-day client into a 12-month-plus client for deeper transformation and ongoing results.”

Loyal customers who are willing to refer others to your business are essential pillars of your customer loyalty framework. Nurturing referrals with rewards reinforces their loyalty while creating a cycle of new and repeat business. Referral programs can bring in new customers while deepening your connections with existing ones, helping them feel appreciated for contributing to your business’s growth.

Bolster your customer service.

Excellent customer service plays a key role in fostering customer loyalty by sustaining and growing customer relationships. Customers must trust your products and services and know you’ll be there to answer their questions and resolve their issues.

Consider the following ways to enhance your customer service, foster customer loyalty, and reinforce how much you value your customers: 

• Personally engage customers by using their names (in person and via email).
• Customize upselling and cross-selling suggestions to align with previous purchases. 
• Make customer support readily accessible (for example, with dedicated email addresses, phone numbers and live chat).
• Ensure that customer inquiries are answered within a committed time frame.

Leverage customer data.

Data analytics are essential for optimizing your customer loyalty strategy. For example, if you implement a rewards program and don’t observe a substantial increase in online sales, you can analyze your customer data to determine what went wrong.

Similarly, if your customer loyalty program’s members are making only a marginal increase in purchases compared with their prior behavior — or their purchase patterns remain consistent with previous trends — you might need to fine-tune the program. 

To drive better results, use customer data to identify areas for improvement. For example, you could adjust the rewards, personalize your offers or enhance your engagement strategies.

Maintain consistently high quality.

Even if your products or services have been available for a while, their quality should not wane over time; a dip in product quality can significantly reduce loyalty.

In your quest to solidify customer loyalty, consistently uphold high-quality standards for your offerings. Don’t let your company be associated with declining standards. For example, you don’t want online reviews to indicate a new, lower-quality formula or increased product malfunctions. Such detrimental shifts can alienate loyal customers and deter potential new ones.

Onboard team members who prioritize customer loyalty.

Your employees represent your business and are on the front lines of maintaining and improving customer loyalty. Here are some tips to ensure your staff works to create and enhance customer loyalty: 

• Create a hiring process that values candidates with high-level customer service skills. 
• Focus on hiring for a cultural fit to find people who will care for your customers as much as you do.
• Establish a workplace culture of caring for customers.
• Communicate your customer-care values to employees, and reward them when they meet and exceed expectations.

Differentiate your company from the competition.

Customers will be less loyal to your company and your products if they consider you a commodity. If you don’t have a truly unique product, it’s important to stand out from the competition with an outstanding warranty, stellar customer service or another differentiating factor. 

What’s the difference between customer loyalty and brand loyalty?

Both customer loyalty and brand loyalty are vital to fostering and preserving connections with customers. However, these terms have nuanced differences. 

• Customer loyalty: Customer loyalty refers to a customer’s tendency to repeatedly patronize a business. It is a measure of how likely a customer is to continue doing business with a company. 
• Brand loyalty: Brand loyalty signifies a customer’s overall trust in the brand. It incorporates the potential to secure repeat business from customers who are open to trying out your company’s other products or services before considering competitors.

Cultivating customer loyalty is an effective tactic

To achieve profitable growth and ensure long-term success, businesses must nurture and grow customer relationships. By consistently focusing on customer satisfaction and engagement, businesses can attain loyal customers who generate repeat sales, serve as brand advocates, and drive word-of-mouth marketing and referrals. 

Thriving businesses masterfully balance new-customer acquisition with exceptional care for their existing customers, fully harnessing the power of customer loyalty. Loyal customers provide stability and opportunities for growth, making them a crucial part of any company’s strategy for sustained success.

“Customer loyalty is the ultimate moat,” said Garnett. “A loyal customer will pay more or go through additional inconvenience to stay a customer. They aren’t swayed by viral marketing or trends, but instead become a dependable source of revenue and engagement.”

Skye Schooley and Jennifer Dublino contributed to this article. Some source interviews were conducted for a previous version of this article.