Generally, customer loyalty is derived from an established trust between the company and the consumers. Some companies are struggling since trust does not yet exist in their customer base, which ranges from content customers to extremely unhappy ones. To turn them into loyal customers, trust has to be established first.
Defining Trust
Trust is what holds the relationships that exist in business intact. It is a vital component in marketing and in business. If there is no trust, customers will not make a purchase. Trust is built through integrity and competency. Integrity is a company’s credibility and involves a business’ character and honesty. Competency means getting the job done right, and more thoroughly than your competitors.
Establishing trust does not come free. Trust is an investment and therefore, requires employing reliable individuals who you can train so that they can fulfill your customers’ needs. In return, there will be an increase in profits and creation of a strong referral base. Just by word-of-mouth, a business can generate new sales.
Building Customer Trust
Trust is established when there is constant interplay. Even the slightest interaction a business has with a customer can affect trust. At the end of the day, customers will likely return if they trust your brand.
In order to begin building trust, consumers have to first see three things within your business: dedication, competency, and honesty. Basically, the company should be making decisions that are based on their customer’s best interests, have the ability to fulfill its promise, and are genuine and credible.
There are pointers to consider when creating trust. These are:
- Show respect. Consumers want, expect, and deserve some respect.
- Be reliable. If the company’s shipment policy says that the product will be delivered in three days, fulfill this promise.
- Be consistent. This value pertains to the culture and character of the company.
- Avoid friction. This can be in the form of time-consuming line queues and complex documents to fill out.
- Aim for success. There is no such thing as a perfect business. It is important to strive for success, but occasionally failure is unavoidable.
Customer Loyalty
Customer loyalty is probably the most important business facet today. It is described as an inclination driven by behaviors and attitudes to prefer a certain product as opposed to others. Common reasons include customer satisfaction, the product or service’s efficiency and accessibility, and customer’s brand awareness. Customer loyalty will not only spur your customers to make frequent purchases, but also spend a great deal of money on your products or services over time. It also creates a positive shopping atmosphere which will entice and engage more customers to your brand.
Kinds of Loyalty
In comprehending customer loyalty, businesses have to recognize first the different kinds and levels of loyalty: monogamous, polygamous, behavioral, and attitudinal. Understanding these various concepts can help companies create a successful reward program that is aimed at increasing customer loyalty.
- Polygamous and Monogamous Loyalty
In reality, there’s no such thing as a 100% loyal customer. In fact, customers are polygamous in terms of brand loyalty. For instance, a consumer frequently eats at three different fast-food chains. He/She is loyal to these three diners only but not 100% loyal on each of them per se. A goal that is set to make customers fully loyal to the brand is just impossible to achieve. What companies should do is aim for the highest amount of customer loyalty as possible. - Behavioral and Attitudinal Loyalty
Loyalty can be identified based on the consumer’s buying behavior. When a person makes frequent purchases of a single brand alone, without considering his/her reasons, they can be considered loyal. At present, most companies use this concept in employing reward programs. As such, the more frequent the customer buy the company’s product, the greater is his/her rewards.
Another concept in customer loyalty is attitudinal loyalty. It is concerned with the extent of the customer’s psychological engagement or connection to the brand. However, it has its limitations. Do you consider a consumer loyal if he/she loves the product and refers it to others, but does not frequently buy the product himself/herself?
Classification of Customers Under a Loyalty Program
Consumers who are involved in a company’s loyalty program can be classified into four groups: Never, Light, Heavy, and Extreme. A customer is characterized as never if loyalty programs and associated incentives have no effect on them. Light customers are those who are part of the company’s reward program and are moderately affected by the associated incentives. Heavy customers are described as being very influenced by reward programs while extreme customers are the ones who are extremely engrossed with loyalty programs.
Customer Retention
It has been said that gaining new customers is five times more expensive than creating business transactions with a company’s current customers. In a recent survey conducted by Loyal360, three parts of the surveyed businesses said that a fifth of their new sales can be attributed to their existing customers. However, Ipsos Loyalty, a consulting firm, refutes that retaining customers is not always cheaper and more effective compared to acquiring new ones. According to them, the consumer base of a business is comprised of an extensive blend of consumers who have different acquiring and retaining costs.
Customer retention involves active consumer activity, and can be correlated with the business’ success. Therefore, the higher the customer retention, the more successful the business is. Customer retention is also dependent to the customer’s loyalty. Be that as it may, securing the customer’s loyalty towards the company’s brand is a challenge. There is the customer buying cycle, price point, and employee turnover to consider. Nonetheless, companies (especially B2B marketers) can employ simple steps in order to bolster customer loyalty. First, after the customer purchased the product, companies have to make sure that the consumer will actually use the product and enjoy it. Obtaining active users with real results is the primary step in ensuring customer loyalty. Next, generate new and exciting ideas that will put an emphasis on fresh and underutilized features of the company’s product. This can be achieved through the use of social media, webinars, blogs, or workshops. Establishing customer loyalty also involves building a strong community of users and employees, open communication, and competitive pricing.
To determine whether or not the marketing strategies for bolstering customer loyalty and customer retention are working, companies can use metrics such as Customer Retention Rate (CRR) and Net Promoter Score (NPS). CRR will tell the retention rate or the period in which the customer will stick around for your product while NPS measures the customer’s loyalty.