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What is customer loyalty: Building And Increasing Loyalty, NPS Index + Examples

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Hello! In this article we will talk about customer loyalty.

Customer loyalty is an important indicator of the company's performance. Many marketers and managers understand that it is easier to build a policy in such a way that the main money comes from a stream of regular, reliable customers than to try to attract new ones in affordable ways. In this article, we will talk about the definition of loyalty, why do something with it, how to measure it, and how to improve performance.

What is customer loyalty

In general, loyalty is a correct, trustworthy attitude towards someone or something.

Customer loyalty is a positive perception of the company and its products.

A loyal customer is ready to buy your products, recommend them to friends and acquaintances under any circumstances and regardless of the price / quality ratio of the products. There is an objective list of signs of customer loyalty:

A person over and over again turns to the company for a product / service.
The purchase frequency is higher than that of a buyer from the same target audience .
Such people try to take part in promotions and competitions.
Willingness to overpay for the purchase of a product of a favorite brand.
Now buyers have a lot of choice. The same product can be purchased from dozens of different companies. You can compare price, quality, see a lot of reviews on different sites. Getting someone to buy from you is very difficult. And therefore, large and medium-sized companies (and in some niches, small ones) are not concerned with simply attracting customers , but with making them loyal.

Stages of customer loyalty

Marketers identify 5 stages in the formation of customer loyalty:

  • First visit.
  • One time consumption.
  • Repeat visits.
  • Attachment to the firm.
  • Loyalty.

Let's take a look at each of these steps in detail.

First visit

A person who is not yet familiar with your products comes to you. Perhaps he read something on the Internet. Maybe one of his friends told him about what you do. He comes, gets acquainted with the assortment and service. There are three scenarios:

  • Don't buy anything.
  • Buy, but later.
  • Buy now.

The first option happens more often, but we are not interested in it. We just lost a client. Perhaps he did not need anything, perhaps he simply did not want to buy here and now, he will still compare prices, quality, and, if your company turns out to be better, he will return.

The second option is also unreliable. If a customer leaves without buying anything, it is likely that he may not return. Changes his mind, buys somewhere else, comes to the conclusion that he doesn’t really need the goods, etc.

The third option is the most preferred. This already suggests that the customer can become loyal. About 25% of people who enter an establishment for the first time and make a purchase become loyal customers.

First consumption

It is at this point that most people decide whether they will buy something from this firm or not.

The issue of quality is not only about the product, but also about the service. A banal example: I came to the store to buy a laptop for work. I approached three different consultants and named my requirements. And every time they called me a model more expensive than I looked after. And to my questions, β€œWhy is it better than this model,” they could not answer anything intelligible. In the end, I bought what I wanted, I am satisfied with the product, but I will not return to the store.

And this is what happens every time. A person can buy something from you, but if he was dissatisfied with the work of employees, he is unlikely to come again. And if they come, then for something specific and without distinguishing you from the competition.

We recommend reading: What is competition in business - the concept, essence, types, rules and levels of competition .

Return visits

If the client was satisfied with the purchase and the work of the staff, he will come to you again: look for promotions, participate in them if they are of interest to him. Roughly speaking, he will look at you.

Attachment to the company

This is already pretty close to loyalty. The client already understands that having come to the company for a certain product, he will find it there and buy it. Gradually, he stops looking at competitors and their products, giving preference to a particular company. According to statistics, such people make purchases 50% more often than primary buyers.

Customer loyalty

If a person is satisfied with the products of a particular company for a long time, he becomes loyal - he will buy goods exclusively in this place. But you should understand that as soon as you reduce the quality of products or unreasonably increase prices, your regular customers may go to competitors.

That is why it is necessary not only to create loyal customers, but also to keep them by the β€œprice-quality” ratio.

Types of customer loyalty

Marketers distinguish 4 types of loyalty, depending on emotional sympathy and frequency of purchases:

  • True loyalty. When people are emotionally attached to the company, its brand and products. They often make repeat purchases.
  • latent loyalty. When people are emotionally attached to the brand and products, but do not make repeat purchases. Most often these are people who do not have money for expensive acquisitions.
  • False loyalty. People often make repeat purchases but are not emotionally attached to your company. That is, they choose your products based on objective criteria, not personal liking.
  • Lack of loyalty. A person is not tied to the company and brand, and also does not make repeat purchases. Such a person did not like the company, he will not come again and will not recommend it to his friends. It turns out a kind of square:

How to increase customer loyalty

In order to increase customer loyalty, marketers have come up with loyalty programs.

A loyalty program is a set of activities aimed at the emotional and behavioral attachment of a client to a product or company.

There are 3 types of programs:

  • Bonus. For each purchase, the client receives cashback in the form of bonuses, which can then be spent on a real purchase or service. Examples - "Thank you" from Sberbank, a bonus program from the Sportmaster store.
  • Discount. Regular customers receive discount cards. The larger the purchase amount, the greater the discount percentage. An example is L'Etoile.
  • Cumulative. After making a certain number of purchases (or purchases for a certain amount), the buyer becomes entitled to a bonus product or service. A good example is coffee-to-go promotions where you buy 4-6 cups of coffee over a period of time and get 1 for free.

Loyalty programs can work in different ways, depending on the niche of the firm. The bonus comes when buying expensive goods, for change from which you can buy something else on the little things. The discount program is more universal. Customers can buy both expensive and cheap goods at a discount thanks to a plastic card. Savings programs are more suitable for small companies with a one-time purchase.

In order to understand what will work in each case, you can analyze your own feelings. For example, the conditional "Coffee to go" - it is much more convenient for me to see another cup of coffee than a discount of 10 - 15 rubles.

It is impossible to increase loyalty only with the help of programs. You also need to take care of the quality of the product, the qualifications of the staff and the image of the company. A program is just a set of specific actions that can produce results.

How customer loyalty is measured

A good marketer is also a mathematician. He tries to bring each behavioral indicator of a client under his own index, and loyalty is no exception. For calculations, the Customer Loyalty Index or NPS (Net Promoter Score) is used.

The loyalty index shows how many people out of your total number of customers are committed to your company, product or service, and will also recommend it to friends.

It can only be calculated through a survey. You can do this in the form of calling customers from your database or sending SMS. Write the following: "How would you rate our company on a scale of 1 to 10." And the next question will be: "What do we need to do for you to bet 10."

It is worth asking an additional question even for those who have already put 10 points. By this you show that you want to develop further and value the assessment of those who are already satisfied with everything.

Based on the results, we group customers into 3 categories:

  • From 1 to 6 points - dissatisfied customers. They will not recommend you to their friends and will only buy your products if you are much better than your direct competitors.
  • 7 - 8 points - neutral customers. They are happy with your product and service, but they see your shortcomings. Right now they won't recommend you to their friends, but if you work with them a little, they will start promoting your company in their circles.
  • 9 - 10 points - satisfied, loyal customers. They will recommend you to their friends and acquaintances. You should listen to their opinion and value such customers.

The Index value is calculated using the following formula:

NPS = (satisfied + neutral customers / total number of respondents) - (unhappy customers / total number of respondents).

The value can range from -100 to 100. Let's take a quick look at the values.

  • From - 100 to 0. A very poor indicator of customer loyalty. People are more likely to use the services of competitors and only in rare cases - yours.
  • From 1 to 30. Average customer loyalty. You have both critics and those who like your products.
  • More than 30. This is already a good indicator of loyalty. 30 to 50 are good averages. From 50 to 70 - the indicators of a good company that is above its competitors. 70 and more - indicators of market leaders.

But the value of the Index also depends on the niche. When assessing the loyalty of your company's customers, use the average benchmarks for your niche.

Numbers are cool. When you calculate the indicator and work with it, you can keep your finger on the pulse of customer relationships. But don't think of customers as just numbers. If a person leaves a review, even a negative one, this is already a great opportunity to interact with him.

Examples of customer loyalty

The most striking example of customer loyalty is fans of Apple products. Every time a new iPhone comes out, there are queues in major cities just to buy the new iPhone a few hours ahead of others. And there are a whole army of such people. They will buy a new product no matter how cool it is, what new things have been added to it, whether it is convenient, how much it costs, etc.

This year, people began to take their places in line 5 days before the official start of sales. Someone enterprising even started selling places in line for a new iPhone.

Let's take a second example from video games. You can also track customer loyalty there. There is a legendary series of Call of Duty games. The first games were a frank masterpiece and a breakthrough in the genre. They always brought something new and interesting. But now their games are not only disgusting, but they do not reach the old ones in terms of depth and implementation of new ideas.

At the same time, fans buy their games every time, even for a big price tag of $60. And this despite numerous criticisms and far from the most flattering reviews.

And the third example is more everyday. Take the banal barbershops near the house. You went there once, everything more or less suited you, and you will do it all the time. Even if they cut worse or raise the price. You will still be their customer.

This is already an everyday example of conservatism, however, such an example is also suitable for loyalty.

What will you achieve by increasing customer loyalty

If you develop and implement a customer loyalty program correctly, you can get a simple scheme:

  • A new visitor comes to you.
  • Buys a product.
  • Remains satisfied and comes again.
  • He brings you money and advises you to friends.

The benefit is not only that you will get a constant flow of purchases from one person. Perhaps even more important will be his recommendations to friends and acquaintances. After all, in real life we ​​often discuss questions like β€œWhere to buy this” or β€œWhere to go for this” with loved ones.

By developing and implementing a good loyalty program, we increase the number of customers exponentially. The more people become your regular customers, the more they advise and recommend you to their friends.

A good loyalty program is aimed not only at attracting new customers, but also at maintaining the loyalty of existing ones.

Conclusion

Customer loyalty is an important indicator for small and medium businesses . Working with a stream of loyal customers who will buy your products and use your services can bring in much more profit than targeting single buyers. That is why it is worth developing a loyalty system that will allow you to turn ordinary customers into regular customers.

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