How often do you order from the same retailer?
I’ll bet pretty often.
Whether you’re attracted to a brand because of reliable products, reasonable prices, or simply an affinity for the brand, we all have companies we buy from again and again.
Every brand wants loyal customers, the type who head directly to their website (bypassing Amazon and every other competitor) to click buy. After all, customers that love your brand bring in more revenue, spread the word, and give feedback to help you improve.
But it’s not enough to simply want loyal customers. Even if you have a nice base of fans who regularly open your wallets, you’ll need to put in some work to increase customer loyalty.
Thankfully, increasing customer loyalty is totally do-able. As experts in ecommerce, customer support, and customer loyalty, we’ve seen the difference it makes. In this guide, we’ll cover:
- What is Customer Loyalty?
- How Customer Loyalty is Different from Brand Loyalty
- Why Customer Loyalty Drives Business Value
- How to Measure Customer Loyalty
- How to Foster More Customer Loyalty
- Examples of Inspiring Customer Loyalty Programs
- Answers to FAQs About Customer Loyalty
What is Customer Loyalty?
Customer loyalty is a measure of how likely a customer is to do repeat business with your brand. It is influenced by overall satisfaction with your company, a positive customer experience, and the overall value the customer gets from what you sell.
When a customer is loyal to your brand, they are unlikely to leave for a competitor, even if the competitor works hard to get their attention. What they get from you works. They find the price reasonable, like the experience of doing business with you, and find no reason to buy from someone else.
How is Customer Loyalty Different from Brand Loyalty
Customer loyalty often gets confused with brand loyalty. In fact, when researching this post, we asked people on Twitter about customer loyalty, and many talked about their affinity for particular brands.
So, what’s the difference? Customer loyalty is related to customer spending– how much a customer spends with you over their lifetime, and how often they come back to you for repeat purchases. Brand loyalty is much more about how the customer perceives your brand.
Both customer loyalty and brand loyalty are important, but in this post we’ll be focusing on customer loyalty. That is, we’ll be sharing advice on how to get customers to keep coming back to your brand– again and again.
Why Customer Loyalty Drives Business Value
Customer loyalty is essential for your business. Here’s why:
Recurring customers bring in $$$
Loyal customers bring in more revenue to your business. It’s just a fact! According to Fundera, 43% of U.S. customers spend more with the brands and companies they are loyal to.
Improving customer retention rates has been proven to bring in more revenue. For example, Bain & Company reported that businesses that grew customer retention rates by 5% saw profit increases ranging from 25% to 95%.
Loyal customers spread the word
You want people gushing to their friends about you. After all, 92% of people trust recommendations from friends and family more than any other kind of recommendation, according to Nielsen .
Word of mouth marketing is one of the most successful ways to spread the word about your products. But customers are not going to gush unless they’re super happy with their experience. In fact,
Fans give feedback and help you improve
You can tap loyal customers for feedback and ideas. For example, many ecommerce retailers ask their most loyal customers– the ones who join their Facebook Groups, follow them on Instagram, and subscribe to their email list– for feedback on potential new offerings.
Words, ideas, and successes can be used in future marketing efforts
When happy customers share their positive experiences with products and brands, you can use their words, ideas, and successes for future marketing campaigns. After all, loyal customers can generate more loyal customers.
Here are a few ways to leverage the praise from your customers:
- Web copy – Copywriters swear by using the words real customers have used to promote products and services. You can use these words of praise as social proof on your website in the form of a testimonial. But you can also use these words for headlines.
- Case studies or customer success stories – A case study or customer success story showcases how your product transformed your customer’s life. These stories show prospective customers what life will be like for them after buying your product.
- Social media posts and ads – Rather than sharing photos of your products, share real customers getting value from your products. Loyal customers are more likely to create user-generated content… that you can then share yourself as posts or ads.
- Other marketing campaigns – Loyal customers can be featured in all kinds of marketing campaigns– from emails, to TikToks, to television commercials,
Important Customer Loyalty Statistics to Know
Loyal customers provide a lot of value, and there are numbers to prove it.
We’ve compiled some of the most compelling statistics here about customer loyalty so that you can understand just how much of a difference it can make for your business.
The Making of Loyal Customers
- 90% of customers are likely to purchase from a company more than once. (Source: HubSpot Research )
- Most customers (80%) say they fall in love with companies over time, while 15% say they experienced “love at first sight” and another 15% became loyal after they received a great recommendation from someone they trust ( InMoment )
- Customers with an emotional relationship with a brand have a 306% higher lifetime value and will recommend the company at a rate of 71%, rather than the average rate of 45%. (Source: Motista )
- 80% of customers gradually gained loyalty for a brand over time due to a variety of experiences. (Source: InMoment )
Customer Loyalty’s Impact on Profit & Revenue
- 65% of a company’s business comes from existing customers. (Source: Fundera)
- Increasing customer retention by 5% can result in a 25% increase in profit or more (Source: Harvard Business School ).
- Loyal customers spend 67% more of their dollars with a company than new customers do. ( Thanx )
Customer Service’s Effect on Customer Loyalty
- 33% of American customers consider switching companies immediately following a single instance of poor service. (Source: American Express )
- 42% of customers will abandon a brand if it doesn’t have a real-time customer support line. (Source: Fundera )
- Companies lose a substantial amount– over $62 billion each year– due to poor customer service. ( NewVoiceMedia )
How to Measure Customer Loyalty
You can’t improve customer loyalty until you know where you currently stand. That’s why you’ve got to measure it.
Here are the following measurements you should have a handle on as you work to improve customer loyalty.
Customer sentiment & satisfaction
Measurements of customer sentiment and satisfaction help you figure out where you stand with your customers. There are a number of ways to measure: choose one, choose all, but make sure you’re measuring.
Customer Satisfaction Score (CSAT)
The Customer Satisfaction Score (CSAT) is a measure of overall customer satisfaction, usually displayed as a percentage. Companies ask customers how satisfied they were with the company, and ask them to respond on a 1 to 5 scale.
Customer Effort Score (CES)
The Customer Effort Score (CES) is a measure of how much effort it takes customers to complete tasks with your brand. Customers rate you on a scale of 1-5 sharing how easy it was to work with you.
If customers have a seamless experience– getting questions answered and making returns easily without having to jump through hoops, you’ll have a high CES score.
Net Promoter Score (NPS)
The Net Promoter Score (NPS) is a measure of how likely a customer is to recommend you to friends and family. Customers rate you on a scale of 1-10, 1 being highly unlikely to recommend you, and 10 being extremely likely.
Repeat purchase rate
A repeat purchase rate is a measure of how many customers make repeat purchases in a given time frame, usually one year. That is, companies measure the number of customers who bought products more than once in 365 days.
Repeat purchase rate is a great measure of a loyal customer as it measures how many people continue to buy from you.
Customer lifetime value (CLV)
Customer lifetime value (CLV) is the amount a customer spends with you over their entire lifetime as a customer. Your average CLV is just that: the average.
For example, perhaps you know that the average customer spends $1500 over the course of their time as your customer.
You can calculate your CLV by taking the average purchase amount, multiplying it by the repeat purchase rate, then multiplying it by the average length of a customer relationship (in years).
A churn rate is a measure of how often customers leave your business. This metric is particularly helpful when you’re offering subscriptions. How long do customers typically stay subscribed?
To calculate churn rate, you need to divide your lost customers by the total number of customers at the start of a given timeframe, then multiply that by 100.
The redemption rate is a measure of the success of a loyalty program. For example, if you have a point-based loyalty program, you calculate your redemption rate by understanding how many points were redeemed versus how many points were issued.
A high redemption rate means that people are participating in the program, whereas the accumulation of points (without redemption) means that people may be spending money, but aren’t necessarily loyal.
Referrals & word of mouth
Referrals and word of mouth are notoriously hard to calculate, but they can be easily measured when someone buys a product from you.
As they’re checking out, ask them how they found out about your products or services. If they found out from a friend or family member, you know that you have loyal customers spreading the word.
Reviews and testimonials
Reviews and testimonials can help you keep a pulse on your customers. Search reviews and testimonials for words that indicate someone has bought from you multiple times. Words like “second time” and “multiple times” might be good phrases to start with.
There are also a number of software products that can comb your reviews and testimonials for sentiment analysis. These products include Brand24, Critical Mention , I BM Watson Tone Analyzer , and Brandwatch .
How to Foster More Customer Loyalty
There’s no doubt– customer loyalty is important. But once you’ve measured it, how do you foster more of it?
Offer top-rate products
First things first. You’re never going to get loyal customers unless you offer products that provide value to those who buy.
Apple doesn’t have a customer loyalty program, but they still have more fans than perhaps any other brand worldwide. That’s because customers love Apple products.
Be generous to your customers
Generosity goes a long way toward fostering continued loyalty. Here are a few ways you can be generous to your customers:
- Offer free shipping. According to a survey by Walker Sands , 90% of consumers say that free shipping is the number one incentive when they shop online.
- Be transparent . Customers don’t like to be surprised when they check out. According to Baymard Institute , 49% of consumers will abandon their online shopping carts when they see unexpected costs. If there are additional fees for shipping and processing, be sure to be transparent.
- Have generous policies. If a customer isn’t happy with a product, how do you handle it? If you’re generous with your policies, you’re more likely to encourage that customer to continue to buy from you. Generous policies include easy returns and extended warranties.
- Provide exemplary customer service. No matter your policies, you need to provide exemplary customer service. For more information on how to provide better service, take a look at this customer service checklist.
Create customer loyalty programs
Customer loyalty programs are popular for a simple reason: they work.
The Endowed Progress Effect, a psychological principle that says that when someone makes progress towards a goal they begin to double down on their commitment, helps explain why.
Basically, when someone is working towards a goal– and makes progress– they are more likely to continue. How does that translate to customer loyalty? If someone sees they have 100 points in a loyalty program, they’re likely to keep spending until they get to 500, at which point they can redeem them.
There are a number of different types of customer loyalty programs that take this principle into account. No matter which type you choose, remember what customers want out of a loyalty program. According to Shopify , customers want early access to sales and new products– outside of free shipping and discounts– from their loyalty programs.
Here are some that might work for your brand:
A Rewards program provides a general array of discounts and perks, often in exchange for creating an account.
Target Circle Rewards is an example of a Rewards program. When customers sign up, they get access to hundreds of deals, earn 1% back, and receive a birthday gift of 5% off.
Point-based loyalty programs
In a point-based loyalty program, customers collect points as they make purchases. When they reach a certain number of points, they can redeem them for products, discounts, or other goodies.
DSW, a shoe retailer, has DSW VIP, a loyalty program that offers points for each purchase. Customers get points each time they spend at DSW, but they also can get points for donating shoes, sharing their birthday, and for downloading the DSW mobile app.
Tiered loyalty programs
A tiered loyalty program separates customers into different categories based on their spending, and offers different benefits as they climb the ladder. In level 1, they might get free shipping. In level 2, they might get free shipping + regular discounts. In level 3, they might get free shipping + regular discounts + early access to new products.
ThirdLove offers Hooked Rewards , which has three tiers: Admirer, Enthusiast, and Devotee. Each level is based on how much a customer spends and has different benefits.
Paid loyalty programs
A paid loyalty program requires a customer to pay to get access to exclusive discounts and offerings. Payment is collected annually or monthly in exchange– this type of loyalty program is usually so valuable that it’s almost a product in itself.
Amazon Prime is a classic example of a paid loyalty program. Customers can pay $12.99 per month in exchange for speedy, free shipping, access to Prime Day deals, discounts at Whole Foods, and a number of other benefits.
Subscription-based loyalty programs
A subscription-based loyalty program encourages customers to put your products on a regular subscription so that they’re automatically receiving your products.
For example, Olipop, a beverage company, makes it easy to subscribe and offers perks for doing so. When a customer joins Olipop’s subscription program , they not only pay less and receive free shipping, but they also get exclusive perks like early access to new flavors and a dedicated support channel.
Incentive or progress-based loyalty programs
Incentive or progress-based loyalty programs offer rewards based on activities, accomplishments, or spending behavior. Often combined with point-based loyalty programs, an incentive or progress-based program encourages customers to keep participating by dangling goodies.
A classic example of a progress-based loyalty program is a punch card– buy 9 ice creams and get the 10th one for free.
Referral or “Refer-a-Friend” programs
A referral or “refer-a-friend program” takes advantage of people’s natural inclination to share the products they love with their friends. By spreading the word, both parties typically receive a discount (sometimes these programs are one-sided, but we recommend sharing the love with both sides).
Loveevery, which sells developmentally-appropriate activities and toys for children, has a Refer a Friend program where customers can give $20 and receive $20 for doing so.
Commissions or Affiliate Programs
A commissions or affiliate loyalty program rewards customers who promote products on your behalf.
For example, someone with a large Instagram following may recommend your products to their followers by sharing an affiliate link. When customers use that affiliate link to make a purchase, the affiliate makes a small commission.
Customer loyalty pro tip
: Give customers a head start
Did you know that people who are already on their way to achieving a goal are more likely to reach it? The Endowed Progress Effect, mentioned above, means that giving people a head start will make them more likely to participate.
In one study at USC , researchers handed out loyalty cards to customers at a local car wash. The cards offered a stamp for every wash purchased.
But there was a twist: Half of the cards had spots for eight stamps, with a free car wash offered for collecting all eight. The other half had spots for ten stamps, but two of the spots came pre-stamped.
What they found was amazing: the pre-stamped cards resulted in 178% more repeat business than the unstamped ones.
When you’re creating a customer loyalty program, consider giving your customers the equivalent of two stamps. This might be more points, bonus “dollars”, or some other incentive that makes them feel that completion is within their grasp.
Build communities for your fans
Community feels good. When loyal customers find each other, they share top tips, recommend certain colors, and generally share their joy about your products.
The Happy Baby Carriers Facebook Group is a perfect example of such a community. This lively community, created by the company founders, is a place to buy, sell, and trade Happy Baby carriers.
Not only does the community have 28,000+ members, but it receives about 2,500 posts each month. Parents share tips on how to best position children in carriers, share photos of the carriers they love, and respond to polls and questions about what they’d like Happy Baby to release next.
: Make your efforts mobile-friendly
Customers respond well to loyalty programs. But make sure they’re as accessible as possible. That means making them mobile-friendly, whether you create an app or simply offer a stelling mobile experience in the browser.
According to Bond , 57% of people want to engage with loyalty programs on their smartphones, but only 51% have an app that’s associated with their loyalty program.
Examples of Great Loyalty Programs to Emulate
Dunkin Donuts DD Perks
How it works: Customers earn 5 points every time they spend $1 at Dunkin Donuts. Each time a customer gets 200 points, they get a free drink. They also get access to other offers.
Type of program: Point-based loyalty program + incentive or progress-based loyalty program
Why it fosters customer loyalty: Everyone loves a free coffee, and DD Perks gives customers the opportunity to get beverage after beverage.
Sephora Beauty Insider
How it works: Each time customers buy from Sephora, they’re rewarded with 1 point for every dollar spent. Once they’ve spent $350, they become a VIB member, which gives them access to seasonal savings events, lower free shipping minimums, and exclusive gifts. When they spend $1000, they get access to even more perks.
Type of program: Tiered loyalty program + incentive or progress-based loyalty program
Why it fosters customer loyalty: The tiered nature of Sephora’s program encourages customers to spend more. The perks are valuable enough to the customer that they’re worth going after.
How it works: Customers pay $20 to become a lifelong REI co-op member. Once they become a member, they get 10% back as a member dividend, which is the biggest offered perk.
Type of program: Paid loyalty program
Why it fosters customer loyalty: In the course of a customer’s lifetime, they’re going to receive the $20 initial fee back. Customers like that it’s a lifetime membership. It’s a good exchange for the value they’ll get.
House of Wise #WISEWOMAN Ambassador
How it works: Ambassadors can join House of Wise’s affiliate program to generate revenue. They join the program, share their custom link with friends and family, then receive 20% of every order’s total when products are bought using their link.
Type of program: Commission or Affiliates Program
Why it fosters customer loyalty: An affiliate program takes customer loyalty to a whole new level. Not only are customers getting rewards for themselves, but they’re so passionate about your products that they want to sell them themselves.
How it works: Customers who join Croc Club receive an instant discount. They’ll also receive exclusive offers, a birthday discount, and early access to sales.
Type of program: Rewards program
Why it fosters customer loyalty: This loyalty program isn’t particularly flashy, but it allows Crocs customers to regularly get the footwear they love at a discount.
Tubby Todd Club Tub
How it works: Tubby Todd customers earn “bubbles” for shopping and other activities like leaving a review. Then, they can redeem their bubbles for Tubby Todd products.
Type of program: Point-based loyalty program
Why it fosters customer loyalty: Customers who participate in this loyalty program say it’s one where they actually get value. It’s manageable to earn enough bubbles to reap rewards.
Brooklinen Comfort Crew
How it works: Brooklinen customers who participate in Comfort Crew Rewards earn points every time they shop with Brooklinen. They can earn extra points by writing reviews or following the company on Instagram. Points can be redeemed for free shipping, sales, and more.
Type of program: Point-based loyalty program
Why it fosters customer loyalty: Comfort Crew is a fairly straightforward point-based loyalty program– and that’s why it works. It’s easy for customers to participate and earn points when they shop.
FAQs About Customer Loyalty
Why is customer loyalty important?
Customer loyalty drives an incredible amount of value for your business. After all, repeat customers bring in more revenue than new ones. They also spread the word about your products and give you feedback to help you improve. Plus, their words, ideas, and success stories can be used in future marketing and advertising efforts to attract more customers.
What are the different types of customer loyalty programs?
Some of the most popular and widely used customer loyalty programs are rewards programs, point-based programs, tiered programs, paid programs, subscription-based programs, incentive or progress-based programs, referral or “refer a friend” programs, and commissions or affiliate loyalty programs.
What type of software can help me create a customer loyalty program?
A number of different software solutions can help you support a customer loyalty program. Here are a few different types with some companies to consider:
Comprehensive customer loyalty programs
- Referral Rock
- Referral Factory
Measuring customer loyalty
- Qualtrics CustomerXM
- SurveyMonkey Enterprise
Can I get customer loyalty without a loyalty program?
Absolutely. Sometimes, all it takes to get customer loyalty is to deliver an incredible product that delivers an unbeatable amount of value. For example, Apple is one of the most beloved and successful companies in the world, yet offers no formal loyalty program.
Ultimately, when customers can’t get value anywhere else, they don’t need a loyalty program to stick around. They do, however, need you to continue to deliver on your promise to provide them with the best possible experience.