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How do You Define Customer Loyalty

what is the definition of customer loyalty

Loyalty is a concept we use in our lives to determine our relationships’ strength. In business, loyalty relates to the relationship between the organization and the customer base. Loyalty is more than how much the customer likes a brand. Instead, it is a concept businesses can use to increase profitability and gain more customers when managed correctly.

How do You Know if Your Customers are Loyal?

Customer loyalty can be defined as a customer’s faithfulness and commitment to a business. It’s a personal, emotional connection between the customer and the brand. The measure of loyalty is often based on consumer preferences, the degree of satisfaction, purchase frequency, fidelity, price sensitivity, and brand advocacy.

Definition of Customer Loyalty

Most loyal customers have what is considered polygamous loyalty. As opposed to monogamous loyalty, consumers spend most of their time and money at one location and only that location; polygamous customer shops at a few locations offer similar products, but only in those few locations. Although monogamous loyalty is ideal, polygamous loyalty is not bad for business. In fact, it is better.how to attract new loyalty members

Better, in the sense that it is easier to attain. Gaining one hundred percent of shoppers’ loyalty is rare. One objective of business should be to make their customer’s loyalty as high as possible. Customers who are emotionally connected with a brand have a lifetime value that’s 306% higher than the average customer. (Source)

In the report, “Leveraging the Value of Emotional Connection for Retailers,” Motista collected data from 2016 – 2018 from more than 100,000 customers of more than 100 retailers across multiple sectors. The report reveals that customers who feel an emotional connection to a brand are far more valuable to retailers, sometimes spending twice as much, than customers who rate themselves as satisfied with the brand (CSAT). Additionally, these emotionally connected customers have a 306% higher lifetime value (LTV), stay with a brand for an average of 5.1 years vs. 3.4 years, and will recommend brands at a much higher rate (71% vs. 45%). In addition to higher spending, a strong emotional connection also translates into a greater wallet share and longer tenures for retailers. As a result, an emotional connection has an impact on customer lifetime value when compared to the satisfied customer metric:

Customer lifetime value is a key consumer metric because it tells companies how much revenue they can expect one customer to generate over the course of the business relationship.

If an organization focused strictly on monogamous loyalty instead of focusing on customers that may be very loyal to them and other competitors, their chances of growing their customers’ loyalty might decrease because they do not take advantage of polygamous customers. 

How do You Measure Customer Loyalty?

Customers’ loyalty is a predictor of business success, so learning to manage it is crucial for organizations to understand. Loyalty metrics are based on accurately measuring customer behavior and engagement. Metrics organizations use include:

  1. Total Membership

  2. Customer Lifetime Value

  3. Net Promoter Score

  4. Redemption Rate

  5. Active Engagement Ratio

  6. Breakage Rate

  7. Participation Rate

  8. Retention Rate

  9. Repeat Purchase Rate

  10. RFM (Recency, frequency, monetary value)

Loyalty metrics are always predictive of future consumer behavior. The more loyalty, the better behavior toward a brand. The better behavior, the stronger a brand’s bottom line.

Observing and recording customers’ behavioral and attitudinal loyalty can help a company recognize when customers are truly loyal instead of being loyal to your brand for convenience or another factor that would not signify a loyal relationship. Customers can easily switch providers when another, more convenient provider, becomes accessible; it is important to ensure that data is based on the correct behaviors and attitudes.

how to develop a tiered loyalty program

Measuring loyalty through behaviors suggests that a customer continually purchases products or services from your business. A great way to recognize and reward this behavioral loyalty is by using a loyalty program where customers are rewarded for their spending, 

Customer Loyal Statistics

  • The top 10% of your most loyal customers spend three times more per order than the lower 90%. And the top 1% spends five times more than the lower 99%. Source
  • Loyalty programs influence how much customers spend, whether they repeat purchases and recommend a brand. A 2020 consumer loyalty study found that members of loyalty programs are 72 percent more likely to recommend a brand, 78 percent more likely to continue doing business with a brand, and 64 percent will modify the amount spent to maximize the benefits earned. Source

how to build customer loyalty

On the other hand, attitudinal loyalty is measured by how customers speak of your brand, products, and services, not the behaviors they exhibit, like repeat purchasing. Attitudinal loyalty (likely to recommend) can be recorded by having customers answer one question, on a scale of 1 – 10: what is the likelihood that they would refer your company to a friend. Scores of 9 – 10 make your customer a promoter, which is beneficial. Customer loyalty research shows that consumers that are loyal to a brand are more than willing to refer that brand (59%) to their friends and family, join their loyalty program (59%) and spend more (36%)

Mayo Clinic, Johns Hopkins Medicine, University of Texas MD Anderson Cancer Center, and the Memorial Sloan-Kettering Cancer Center top YouGov’s 2019 US Advocacy Rankings.

The list below highlights brands that averaged the highest recommend score this year among the more than 1,750 brands tracked by YouGov BrandIndex. The brands advocacy score is based on responses to the question: “Would you recommend the brand to a friend or colleague or tell the friend or colleague to avoid the brand?” The score is compiled by subtracting negative feedback from positive.

2019 Top 10 Brand Advocacy 

top brands with brand advocacy 2019

2020’s Loyalty Leaders

During these troubled times, customer loyalty is being tested. Consumers want brands to know what they want, not just to meet expectations but to exceed them. Listed below are the top 20 brands for 2020. In parenthesis are their brand loyalty rankings for 2019. Brands that connect emotionally with consumers and that meet consumer expectations did better during the Covid-19 crisis.

The Brand Keys Loyalty Leaders 2020 List gives the loyalty rankings for the top 100 brands, out of the 833 brands assessed in a cross-category analysis of 85 industry categories in the 2020 Brand Keys Customer Loyalty Engagement Index.

The combination of the economic crisis, store closing, and COVID-19 impacted apparel retailers, automotive, fast-casual restaurants, and all travel categories, and eliminated brands that usually appear in the Top 100. For example, McDonald’s, Expedia, Under Armour, LinkedIn, and Delta normally appear in the Top 100 and did not make the cut this year. 

Who are the Brands with the Most Loyal Customers?

  1. Amazon: online retail (#1)

  2. Netflix: video streaming (#6)

  3. Amazon: video streaming (#7)

  4. Apple: smartphones (#8

  5. Domino’s: pizza (#15)

  6. Google: search engines (#2)

  7. Disney: video streaming (new)

  8. Home Depot: Home improvement retail (#37)

  9. WhatsApp: instant messaging (#12)

  10. Samsung: smartphones (#3)

  11. Instagram: social networking (#22)

  12. Nike: athletic footwear (#17)

  13. PayPal: online payments (#21)

  14. Amazon: tablets (#4)

  15. Apple: tablets (#5)

  16. Discover: credit cards (#18)

  17. YouTube: social networking (#35)

  18. Hyundai: automotive (#10)

  19. Hulu: video streaming (#32)

  20. Trader Joe’s: natural food retail (#9)

Updated November 3, 2020

Sallie Burnett
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