Customer loyalty: a complete definition to help you understand the issues!
Understanding the definition of customer loyalty means understanding how it has become a major issue for companies and the management of their customer relations. This is particularly true in an economic context where competitive pressure is becoming ever more important, particularly in the face of the digital boom.
Today, the adage "the customer is king" is more relevant than ever. Customers now have a choice, and thanks to the Internet, they can search independently for the product or service that suits them best.
What is the company's objective in this situation? To get customers to stop comparing and think directly of the company to meet their needs. In other words, to keep them loyal.
But what exactly is customer loyalty? What are its concrete benefits, and what does it mean for the way you approach your sales and marketing activities?
Stay loyal for a few minutes and find the answer in this article ;-)
What is customer loyalty?
Definition of customer loyalty
Building customer loyalty involves deploying a marketing and sales process and actions in order to :
- build a lasting relationship with them
- encourage them to repeat their purchases over a more or less long period of time.
A loyal customer is one who is won over, confident and sure of his purchasing choices. They buy regularly from the same brand because they are "attached" to it. All customer loyalty work therefore consists of creating and perpetuating this state of mind.
☝️ It's worth noting that these days, customer loyalty is not just about marketing, but also about customer relationship management. In fact, we are increasingly talking about customer marketing , which, unlike product marketing, is more attentive to consumer aspirations.
The different forms of customer loyalty
There are two main forms of customer loyalty, which do not involve the same challenges for brands.
Induced loyalty
In this case, the consumer has no choice. Loyalty is " suffered".
It may involve :
- a system of contracts binding the customer to the company,
- geographical constraints
- a brand monopoly, etc.
As a result, the customer is sometimes dissatisfied with the brand or company, but remains loyal to it.
The quest for loyalty
Here, customers are freer to make their own choices. Loyalty is built through marketing actions and strategies.
Targeted loyalty is the ideal situation, since here the consumer has established a sincere relationship with the brand as a result of his satisfaction.
This is the objective that companies need to achieve: it guarantees a more lasting relationship with the customer, rich in benefits.
And what are they?
The benefits of customer loyalty
Great potential, sometimes untapped
Most companies are looking to win over new customers in order to sell more and grow their business. But what if the secret was to sell better?
We know that :
- 80% of sales are generated by 20% of customers (Pareto law);
- converting a prospect costs 7 times more than retaining an existing customer (source: Reichheld F.F., The loyalty effect, the hidden force behind growth, profits and lasting value, Harvard Business School Press);
- investing in customer loyalty improves a company's profitability by 60% and stabilises its results (source: Deloitte Consulting).
Faced with these figures, it's easy to see the importance of capitalising on an existing customer database and maintaining a relationship with them that lasts over time.
Competitive differentiation
Competitors are numerous, and the range of products and services on offer is increasingly plentiful.
A robust customer loyalty strategy can make all the difference, and build a solid shield against the competition.
Continuous improvement of the offering
The customer data collected is invaluable, providing companies with a number of indicators that help them to better profile their customer base. The better the knowledge of the customer, the easier it is to implement actions to improve the existing offering.
☝️ It's worth noting that customers who are familiar with a brand's offering will respond more readily to its requests, since they will benefit directly from its corrective measures.
Free (good) advertising
A loyal customer is a satisfied customer. There's a good chance they'll become brand ambassadors:
- by spontaneously sharing their favourable opinion with others,
- if they hear someone else looking for a corresponding product or service.
Lower support costs
Loyal customers make fewer demands on customer support teams, because they are "regulars". So they cost less.
Ultimately, all the benefits of customer loyalty presented above lead to one and the same objective: to improve the company's sales and profitability.
What are the challenges of building customer loyalty?
Creating value
Today's companies need to create value that lasts. It can no longer be satisfied, for example, with one-off promotional operations as was the case before the 90s.
Deploying new techniques and new offerings, with customer satisfaction as the watchword, has become an imperative.
Think customer experience
But the product alone must not remain at the heart of a company's concerns. The customer must feel it too!
This involves actions such as personalising communications. Consumers expect to be pampered, to feel that the brand is providing a concrete and sincere response to their problems, by means of :
- an offer tailored to their profile
- relevant advice
- personalised communication through all the points of contact that link them to the company.
In other words, the implementation of a genuine customer knowledge strategy, with the aim of improving the customer experience, is now as high a priority for brands as the qualification of their offering.
Offer loyalty programmes
Of course, loyalty work goes hand in hand with the introduction of a loyalty programme, like the famous loyalty cards.
This should always be built in line with the customer-centric vision mentioned above, so as to stay in tune with customers' concerns and buying habits.
Include a CRM strategy and tools
Finally, when we talk about building customer loyalty, we also talk about a CRM (Customer Relationship Management) strategy. This acronym stands for optimised customer relationship management, the aim of which is to increase customer loyalty through better knowledge and management of prospects and customers.
To achieve this, the company's CRM processes need to be rationalised, and the answer lies in the use of appropriate software:
- centralising information
- segmentation of the customer base
- monitoring marketing and sales actions and their performance,
- identifying opportunities, etc,
These are all possibilities offered by CRM software, such as Sellsy CRM (perfectly suited to SMEs) or Microsoft Dynamics 365 (a relevant tool for large organisations).
Customer loyalty strategies to drive business growth!
Customer loyalty is therefore a process that needs to be carefully thought through by the company, because it is increasingly rare to have an absolute monopoly on a market.
More than ever, deploying a loyalty strategy is becoming a prerequisite for ensuring the long-term future of a business.
But how do you go about it? Our article explains the complete method for building customer loyalty.
Article translated from French