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Cultivating customer loyalty for long-term success

By Tara Ramroop, Senior manager, content marketing

Published March 10, 2020
Last modified March 10, 2020

Customer acquisition will always be important in business. For sales teams and marketing especially, feeding a healthy prospect pipeline remains a key performance indicator. Businesses can get so wrapped up in the lead generation part that customer retention—and by extension, customer loyalty—can end up on the back burner. At their own peril, it turns out.

Much has been said about the quantitative impact, namely the cost savings, of retaining customers vs. acquiring new ones. An article in the Harvard Business Review, citing research by Bain & Companywhich invented the net promoter score, or NPS—said that increasing customer retention rates by only 5% increased profits by 25-95%

The numbers on loyalty are also compelling, underscoring how loyal customers can drive success. According to the Zendesk Customer Experience Trends Report 2020:

  • 74%의 고객은 특정 브랜드나 회사에 충성심을 느낍니다.
  • 52%의 고객은 가장 좋아하는 브랜드로부터 구매한다고 합니다.

But there are also qualitative reasons for fostering customer loyalty. Customers that continue rewarding companies with their business—perhaps with generations of repeat business—send a message: that they find continual value in the products, services, and overall experience they have with a brand. As a business, there is no greater compliment. And as long as that continues to be true, positive business metrics are more likely to follow.

So, what is customer loyalty?

Customer loyalty is when customers reward a company with repeat business over a period of time. On the operational side, it means that the businesses' coordinated efforts at moving customers down the marketing funnel—from initial brand awareness to sales-making conversions—are successful. On the emotional side, it means that the business is successful at creating an experience that resonates with customers, as those customers are actively deciding to continue spending money on it.

Businesses always want to increase customer loyalty—still, many companies struggle to identify what it looks like, exactly. Many would factor in the length of time spent doing business with a customer, while others might think first of customers that have stayed with them through service interruptions, hiccups, or growing pains. Some organizations even quantify it with metrics like customer churn rate and retention rate.

One thing is for sure: Loyalty must be cultivated and maintained—it’s not something you can implement once and automate in years to come. When we asked customer experience leaders to give their tips for fostering customer loyalty, they were clear that many qualities we value in our personal relationships also applied to relationships with brands. Among them: consistency, listening to customers and acting upon what you learn, and being honest.

Taking a customer’s entire experience into account—from customer support to marketing to branding—the ideal formula is a mix between the operational and the emotional, including:

  • Reducing customer effort
  • Providing great customer service
  • Creating an emotional connection with emotional data
  • Reevaluating your definition of “customer loyalty”

Reducing customer effort

One way to drive customer loyalty is by reducing customer effort—that is, removing barriers between them and what they want to accomplish with the business. Making this experience easier for customers impacts their desire to return to the brand.

Providing “low-effort” experiences—using customer effort score as a yardstick—is more strongly correlated to an increase in customer loyalty than a high customer satisfaction score (CSAT) or even NPS. This was a key finding in an extensive study into customer service and loyalty by the Corporate Executive Board (CEB), which interviewed more than 97,000 customers across geographies and demographics to compile the data.

Furthermore, in a 2017 Harvard Business Review article, the authors argue that "performance is sustained not by offering customers the perfect choice but by offering them the easy one. So even if a value proposition is what first attracted them, it is not necessarily what keeps them coming."

While low-effort, convenient experiences is one factor in earning customers’ repeat business, it’s not the only variable to consider when encouraging customers to become repeat customers.

Providing great customer service

Consumer and business-to-business companies known for inspiring customer loyalty with great customer service say that being proactive is essential. This includes anticipating the customer’s next question and help them head off problems that may be imminent in coming weeks or months. In this way, a support team, by providing excellent customer service, positions the brand from the front lines as a strategic partner, not merely a one-off problem-solver.

Additionally, the behavior of “going above and beyond” is most strongly linked to good customer satisfaction scores (CSAT) and, ultimately, customer loyalty. While a well-trained customer support team can fix a short-term, immediate problem, agents who can also provide good customer service help build relationships that can grow into a true partnership in the long run. This is where the marriage between customer support and customer service comes into play.

Encouraging development of and hiring for a breadth of skills on a customer support team can help make this happen. That includes encouraging empathy and rapport, and even reconsidering whether traditional support KPIs are evolving with your business.

At Magnolia, for example, the number of tickets solved or time to resolution aren’t representative KPIs because the brand’s definition of customer service success encompasses much more than walking customers through billing or shipping issues. Magnolia customers are just as likely to need “transactional” support as they might want to share life experiences with customer service agents trained to be a kind ear.

image of hands and rainbows on bright background

 

Creating an emotional connection with emotional data

There many ways to create this type of emotionally resonant experience with customers. Perhaps unsurprisingly, even a top-notch reward program, offering a brand-specific credit card, or sharing "buy one, get one" coupons on social media aren't high on the list. Even strategic campaigns dedicated to customer loyalty marketing, including those leveraging the power of influencers, aren't likely to make an impact if the emotional connection to the brand, product, service, and overall experience is lacking or nonexistent.

Empowering front-line support teams to help design and execute what that looks like for your brand, is the Magnolia method. There is also tapping into the power of emotional data to help define your path forward, helping identify the behaviors of high-impact customers—those who present the most opportunity for a lasting relationship. A recent study by Deloitte found that smartly using emotional data can increase customer lifetime value and even turn customers into brand ambassadors—which is, in many ways, the ultimate customer loyalty program.

As in all relationships, you can’t force an emotional connection with consumers–with or without data. But the best way to connect with customers on an emotional level is to center their needs—and respect their needs—at all levels of the business. That means using their data wisely—for personalizing their experience vs. to sell that information for a quick buck—meeting them on their preferred channels of support, and maybe even organizing the business around their needs: by only making products they’ve expressed a desire for. Here, too, data can be an important resource in determining how to create a product or service that fills a need.

Reevaluating your definition of “customer loyalty”

Understanding what inspires customer loyalty isn’t a destination—rather than figuring it out and arriving at a conclusion, it’s an ongoing journey with factors that aren’t, and shouldn’t be, set in stone. Consumers—their demographics, needs, preferences, environments, and worldviews—will change, as will each business, the climate in which it does business, and the technologies that support everyone along the way. Earning a dedicated cadre of loyal customers will depend on a company’s ability to identify and respond nimbly to those changes.

Part of that process includes throwing outdated definitions of customer loyalty out the window if or when it makes sense for the business.

For example, a more traditional definition of customer loyalty might be unwavering dedication to one airline, one brand of shoes, or one car manufacturer for years on end. A more modern definition acknowledges that “disloyal” customers—those who pledge brand loyalty to several, perhaps even competing companies across multiple verticals—are more common, and forward-thinking businesses accept that that behavior is completely OK. Joel Percy, Chief Strategic Consultant at ciValue, and Julie Currie, SVP of Retail Product Leadership at The Nielsen Company, outlined customer disloyalty—as well as what retailers can do about it—at the 2019 National Retail Federation Big Show.

“In the age of disloyalty, it is the selfless retailer who will win over customers,” Currie said. “Throwing retail allegiances to the wayside, today’s retailers must be extremely well-informed and tuned into the needs and wants of the individual consumer—stretching beyond their core consumer and beyond targeting the masses. The selfless retailer will do everything they can to meet the needs of the individual consumer, regardless of the fact that they are or aren’t a current customer.”

Another point for businesses to consider in the long-term: that loyalty is actually a two-way street between businesses and customers. Companies always ask for loyal customers who will stay with them through the ups and downs, but brands don’t always meet customers halfway. Customers have plenty of options, and there are ways modern businesses can help ensure they remain at the top of the short list. Among them, demonstrating in-kind loyalty to customers, by responsibly using data to make customer-centric decisions—such as personalizing their marketing experiences—meeting them on their support channel of choice, and respecting customers’ time and effort.

It's a great honor when customers are inspired to bring a company along on their journey or evangelize for them in their free time. Putting customers' needs and preferences at the center of the business can help ensure that that loyalty remains in years to come.

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