ULTIMATE GUIDE
Improving
customer
loyalty
3 Introduction
6 The importance of customer loyalty 10 Building customer loyalty
17 Determine if your efforts are working
Table of
contents
Keeping existing customers is easier, and quite often more profitable, than trying to win new ones. But what makes a person stay?
People are loyal to a brand because they associate it with positive experiences – whether those stem from consistently high product quality, feeling connected to the brand’s values, or great customer service. Because their needs were met, these experiences were positive ones.
As a result of multiple positive interactions, people build up trust for your brand over time, and this trust can turn into loyalty. Earning customer loyalty pays off. After all, it’s what drives repeat purchases, prompts customers to choose you over a competitor, and encourages positive word-of-mouth and brand advocacy.
Introduction
Ultimate Guide // Improving Customer Loyalty
Customer loyalty
repeat purchases
choosing you over a competitor
brand advocacy
Introduction
Customer loyalty is a benefit – not something that should simply be measured. It should be fostered by listening to customers and understanding their needs and expectations. And then taking action to make sure every experience meets those needs and expectations.It’s important to note that customers can change their behaviors, perceptions, and attitudes based on a number of factors – some of which you can control and others, like environmental, competitive, and societal influences, are completely out of your hands. Companies that apply an ongoing process to understanding and tracking loyalty are able to be agile and adjust to these changes as they occur.
This guide will help you understand how improving customer loyalty makes your customer experience (CX) program stronger. You’ll also learn how focusing on customer loyalty – and not vanity metrics – delivers solid business outcomes.
Ultimate Guide // Improving Customer Loyalty
SECTION 1
The importance of customer loyalty
When people purchase products or services, they’re also buying an experience. That
experience doesn’t have to be groundbreaking; it can be as simple as the clean teeth and nice breath that you expect to get from toothpaste, or the ease and convenience that you enjoyed when you placed an order online.
The importance of customer loyalty
Expectations. That’s the key. Customers expect that the brands they buy will meet their needs and fulfill their wants. When brands consistently deliver, while understanding and listening to their customers, they are often rewarded with lasting loyalty.
The companies that understand how customers behave and act at every stage of the customer journey deliver better experiences. They don’t just react to problems as they occur; they
predict and mitigate those problems before they ever happen. And they build a brand that people will trust. This is the very essence of Experience Management (XM) – the creation of a culture of action that strives to constantly improve experiences and foster customer loyalty.
of customers will pay more for a better customer experience.1
1 IBM CEI Study.
SECTION 1 // The importance of customer loyalty
And loyal customers deliver incredible business benefits. It costs 5 to 25 times more to attract a new customer than to retain an existing one.2 By growing loyalty, you can spend less time and effort trying to replace customers who have left, and more time realizing results like:
The importance of customer loyalty
2 Amy Gallo. “The Value of Keeping the Right Customers.” Harvard Business Review.
3 Harvard Business Review. “ Are You Undervaluing Your Customers?” January- February 2020.
4 XM Institute. “The ROI of Customer Experience 2020.”
5 XM Institute. “The ROI of Customer Experience 2019.”
5 Yotpo. “New Data Reveals That Brand Loyalty Is on the Rise Among Consumers.” November 2019.
Greater revenue Revenue for loyalty leaders grows 2.5 times faster than that of their peers.3
Higher customer retention 94% of consumers who rate a company as very good in CX are likely to purchase again.4
Easier conversions
64% of consumers who are pleased with a company’s CX are very likely to try a new product or service immediately after its introduction versus 12%
who rate that company poorly.5
A competitive advantage Not only do loyal consumers pick you over the competition, but they are also 59% more willing to recommend you.6
SECTION 1 // The importance of customer loyalty
Loyalty also affords forgiveness. We all do things we regret from time to time. And the same thing goes for brands. Customer loyalty can withstand a few negatives – although too many could cause a break in the connection.
About three-quarters of consumers who rate a company as very good in CX are likely forgive that company for a bad experience, compared with only 15% who gave that company a very poor rating.7
Since customer loyalty is a gateway to better business results, you should make sure you’re taking steps to build it.
The importance of customer loyalty
SECTION 1 // The importance of customer loyalty
7 XM Institute. “ROI of Customer Experience 2020.”
of consumers who rate a company as very good in CX are likely forgive that company for a bad experience
SECTION 2
Building customer loyalty
Customer loyalty is a key indicator of a successful CX program. If loyalty is increasing, then your customers are satisfied. And that means you’re definitely doing something right.
But loyalty is more than just whether people are spending money with you. You may receive a large percentage of share of wallet – money a customer regularly devotes to one brand rather than competing brands – simply because the customer is tied to you through a contract or because it’s too much effort to shop around.
Building customer loyalty
SECTION 2 // Building customer loyalty
CX drives over two-thirds
of customer loyalty,
outperforming brand and price combined.
8Understanding your
products and brand Believing your offering to be a good value
Identifying with your product on a personal level
The three pillars of customer loyalty
8 Gartner. “Creating a High-Impact Customer Experience Strategy.”
Building
customer loyalty
SECTION 2 // Building customer loyalty
Building loyalty requires that you give customers what they want, when they want it, on a consistent basis. By following three steps, you can improve key moments in the customer experience and keep them coming back.
Listen and remember
What experiences are driving customer loyalty? Numerous factors along the customer journey impact customer loyalty, including whether or not:
• Customers’ needs and expectations were met.
• Your employees and contact center provided great customer service.
• Products and services met expectations, especially for value and quality.
• Customers generally had a good experience with your company.
• Customers were satisfied and happy.
• A specific point in the customer journey caused friction, resulting in churn.
• The experience was easy.
By listening to your customers in real time at each touchpoint, you can spot
patterns, such as areas where experiences break down and cause churn and which interactions directly correlate to a loyalty measure (e.g., average spend, repeat purchase, advocacy).
Building
customer loyalty
SECTION 2 // Building customer loyalty
Include your frontline employees – in-store staff, customer service teams, and account managers – in your listening program. They hear firsthand what your customers think about products, services, and promotions and can help your company quickly pinpoint and address serious issues. Because they are directly interacting with customers, they can offer ideas that will improve processes and policies that impact the customer journey.
Understand and process
Once you’ve collected feedback from your customers, you can begin to generate insight into the key drivers of loyalty, how to prioritize your customer base, and how to encourage customer loyalty. Combine operational data (O-data) like sales and win rates with this experience data (X-data) to surface answers to these questions:
• What makes your customers loyal to you?
• What trends are you seeing?
• What areas along the customer journey are failing and must be fixed?
• What areas are working that you can ramp up?
Building
customer loyalty
SECTION 2 // Building customer loyalty
Using X- and O-data gives you a complete picture of what loyalty means to each customer. From there, you can build rich customer profiles and segments that will enable you to deliver more personalized experiences at scale, increasing satisfaction and loyalty.
Create a culture of action
While it’s important to understand exactly why a customer churns or remains loyal to you, insight without action is meaningless. To successfully impact customer loyalty, you must be able to use what you’ve learned to take action – whether that be saving a customer at risk of churn or scaling the experiences that are generating loyalty.
tells you
what happened tells you
why it’s happening
Building
customer loyalty
SECTION 2 // Building customer loyalty
Inner loop
Immediate follow-up with
customers
1 2 3 4 5 6
Explain to customers why
you want their feedback
Collect feedback at specific touchpoints in the journey as well as at relationship level
Define rules around what will
trigger alerts
Define the closed-loop
process internally
Enable your teams with training, processes, toolkits
and resources
Deploy a ticketing or workflow system to manage
and report on progress
Outer loop
Organization
changes 1 2 3 4 5
Use key driver analysis to understand the most important
issues
Prioritize initiatives based
on volume and value of
customers impacted and business case
Launch initiatives to transform the
moments that matter most to customers
Ensure the initiatives are delivered using
project and program management
software
Measure the customer, operational and financial impact once the initiative
has been delivered
Closing the inner and outer loop
By combining the feedback from step one and the analytics in step two, you can use a
prediction model to spot the signals of customer churn, taking action before the customer even realizes there’s an issue or a breakdown in the relationship. This proactive intervention is often one-to-one: The signals are spotted, a ticket is raised, and an agent calls the customer.
Building
customer loyalty
SECTION 2 // Building customer loyalty
Because taking action on insight should not be an added burden, it’s vital that you have the capability to automate these actions and workflows, so you can scale your CX program and close the loop for twice as many people without doubling your headcount.
Preventing experience breakdowns
Once you’ve identified the areas along the customer journey where experiences break down, you can take action to fix these interactions for good. Use your analysis to identify key drivers for the actions you wish to amplify, like repeat purchases or upsell, and those you wish to stop, like churn.
Determine the root cause of issues. Could there be an inefficient process in place?
Is better communication needed? Does your product need an update or a pricing adjustment? Take action to fix these problems and prevent bad experiences from happening at all.
And empower your employees to improve experiences by giving them the tools to close the loop quickly and solve problems easily. After all, they are the people who can bring the customer experience to life in the moments that matter.
SECTION 3
Determine if your
efforts are working
Determine if your efforts are working
SECTION 3 // Determine if your efforts are working
To grow customer loyalty, you first need to know where you stand today. Because loyalty is rooted in emotion, it’s not an on-or-off, yes-or-no thing. Some people are more loyal than others. Some may be strongly loyal at certain times and become less so later on –
or vice versa.
Because of loyalty’s power and complexity, it’s imperative that you measure customer loyalty over time, so you can continually take steps to improve it.
Customer lifetime value (CLV)
This important metric helps you see the value of a long-term relationship, rather than a single transaction. It sums up the total worth of a customer to your business over the duration of their relationship with you – and quantifies the value of your CX efforts. Knowing your CLV helps you maximize profit margins by developing strategies to acquire new customers and retain
existing ones.
Determine if your efforts are working
SECTION 3 // Determine if your efforts are working
Key takeaway: Nurturing your customer relationships is how you can form lasting positive connections with customers – and boost your CLV.
Two key behaviors play heavily into the CLV
Repurchasing levels Multiple product purchases
Tracking the number of new customers versus repeat customers over time helps you understand increases and decreases in your customer
retention rate.
Tip: Measure these figures as a proportion of the whole, rather than absolute numbers, to avoid confusing results when overall sales rise or fall.
When a repeat purchaser buys multiple products, they likely have confidence in your business as a whole and are more engaged with your brand.
Tip: Track repurchasing levels and keep an eye on how many customers are broadening their purchasing range at the same time.
Determine if your efforts are working
SECTION 3 // Determine if your efforts are working
Customer loyalty index (CLI)
By recording a customer’s intent for future, rather than actual, behavior, the CLI measures the strength of a customer’s loyalty toward your brand. Derived from customer surveys, the CLI looks at a customer’s willingness to:
• Recommend a brand to family and friends
• Purchase the brand again in the future
• Try other products or services from the brand
The CLI is the average score of these three aspects. While it’s less reliable than measuring actual behavior, it provides an overall indication of how customers feel about all three loyalty values.
Key takeaway: By measuring customer intention scores and comparing them to reality over the customer lifetime, you can build a more useful picture of ongoing loyalty.
Determine if your efforts are working
SECTION 3 // Determine if your efforts are working
Other leading indicators of loyalty
As customer satisfaction is the underlying driver of loyalty, your CX program should track and monitor key satisfaction metrics. From here you can identify areas that need improvement, take action to close those gaps, and keep your finger on the pulse of changes in customer sentiment and behavior.
Net Promoter Score (NPS)
NPS can help you gauge how much of your customer base is likely to be loyal to you by asking them: How likely are you to recommend us to family and friends?
Respondents give a rating between 0 (not at all likely) and 10 (extremely likely). Depending on their responses, they’re classified as:
• Promoters – loyal and enthusiastic customers
• Passives – satisfied but not happy enough to be promoters
• Detractors – unhappy customers who are unlikely to purchase again and may even discourage others from buying from you
Determine if your efforts are working
SECTION 3 // Determine if your efforts are working
Relational NPS or customer
satisfaction (CSAT) Transactional CSAT or customer effort score (CES)
Provides a high-level view of customer satisfaction and loyalty
Addresses customer satisfaction or effort at a more granular level
Use it to:
• Learn the overall perception of your organization
• Benchmark against internal or external NPS data
• Understand overall customer loyalty
Use it to:
• Identify strengths and weaknesses for customer interactions along the journey at different stages or between different channels
• Create an individual metric for different teams
• Find actionable insights at the transactional level
NPS is intended to be used as a relationship metric – if someone records a low NPS score they are often expecting you to react. Leaving a low score unchecked or unanswered could drive churn, and at scale will impact customer perception and loyalty.
Key takeaways:
• Track and monitor improvements in your products, services, or company.
• Layer customer churn data with experience metrics to predict when a customer is likely to leave.
• Notice patterns in customer segments and find ways to improve certain touchpoints or experiences.
Determine if your efforts are working
START IMPROVING CUSTOMER LOYALTY TODAY Access your free expert-designed survey template
SECTION 3 // Determine if your efforts are working
Brand engagement
Engagement indicates enthusiasm for your brand, products, and services. It also demonstrates that customers believe you are listening and valuing them.
Examples of brand engagement
• Making a complaint
• Responding to marketing with a comment on social media
• Reviewing on a third-party site
• Participating in a loyalty program
• Contributing ideas, suggestions, and requests on your social channels
• Using online support and customer service
Key takeaway: Research what engagement looks like in your business. Relate engagement to key areas in your business, such as sales, referrals, and customer satisfaction. Put your findings into action and close the loop.
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