What Is Customer Loyalty and How to Build It?

A friend of mine runs a snack shop in Chettinad. She is a stickler for quality and uses the best ingredients and processes to get the best version of the products she manufactures.

By virtue of this, she has priced her products higher than the local competition.

When I inquired about this, her response was, “I would get a set of customers who like my quality, and they would make repeat purchases, and thereby I would build customer loyalty.”

I checked back with her a few months later, and she said she is seeing much more traction now with repeat purchases.

That’s when I thought I would try and decipher what constitutes customer loyalty. Is it just repeat purchases, or is there more to it?

Is There More to Customer Loyalty?

I read several descriptions, and the one that I liked is:

Customer loyalty results from a consistently satisfactory experience, which leads customers to favor one brand over the others. Loyal customers stay true to one brand because of the emotional bond that they create with it. These customers are usually the ones to buy high-margin products and services.

This definition fits with the description that my friend spoke about.

Are there any contrarian views to this description of customer loyalty?

I was reading a LinkedIn post by Rajesh Srinivasan.

He writes thus:

If we gauge loyalty purely based on purchase behavior, I mean repeated purchases, we may go wrong.

People choose a brand not just because they like it but also because of the lack of alternatives.

I know it is disturbing. But that’s the truth.

Take the case of Ola & Uber. We scream about their service goof-ups on social media but still end up using them because of the sheer lack of options.

Product availability also affects our purchase behavior.

What he has written is very practical and authentic.

For instance, I used to buy Leo Coffee, Madras Blend for my coffee needs. Suddenly, it became unavailable at all the retail stores near my house.

Then, I tried multiple other brands and settled on Tata Grand for my coffee needs.

Does this mean I have switched my loyalty from Leo to Tata?

No. I switched to Tata because the product wasn’t available.

So, when you look at customer loyalty holistically, we will also have to consider limited availability and non-availability.

Assuming that availability is not an issue, let us look at the characteristics of a loyal customer

5 Characteristics of a Loyal Customer

1. They don’t actively search for different suppliers
2. They refer your brand to friends and family
3. They are open to exploring other products or services from your business
4. They are more understanding when issues occur, and they expect you to fix them
5. They will offer constructive feedback

How to Build Customer Loyalty?

Here are 5 simple ways that you can build customer loyalty.

1. Provide Your Loyal Customers with Discounts

Regularly throw in a discount for their purchases – share some of your profits with your loyal customers.

I keep receiving discounts and offers from Freshtohome regularly. That keeps me happy to shop only from them for all my meat needs.

2. Make Customer Experience a Priority

Ensure that the experience for your customers at all touchpoints is consistent with your brand promise. Also, ensure that the customer-facing employees have all the information they need to serve your customer efficiently.

3. Create Different Customer Segments and Prioritize

Prioritize your customers based on their relationship and the number of transactions they do.

For instance, I am a privileged customer of my bank. So, anytime I call them from my registered mobile, I don’t have to go through the complex IVR menu; instead, they connect me directly to a wealth manager. This allows me to resolve my queries faster.

4. Institute a Referral Program

Come up with a referral program that easily incentivizes a customer to refer your product or service to a friend or a family member.

Ensure that reward both the referrer as well as the buyer. Also, equip them to share information about your products and services across different channels.

5. Seek Feedback and Act On Them

Actively seek feedback from your customers. Most importantly, act on the feedback and keep them informed about the action taken on their feedback.

To develop customer loyalty, come up with innovative ways to communicate constantly with your customers. Show each customer how valuable they are to the brand by creating an experience that caters to their specific needs.