What Is The Most Direct Cause of Customer Loyalty?
by Dimitris Tsapis
December 5, 2020
In today’s world, brands seek to acquire customers by building meaningful relationships. With product availability and competition at an all-time high, the ability to create a loyal customer base is very beneficial:
- Repeat purchases make up 65% of the average company’s revenue.
- 86% of the customers with satisfactory customer experience will most likely repeat purchases in the future.
- A 5% increase in customer retention grows an average company’s profits with 25% to 95%.
- Acquiring new customers is 5-16 times more expensive than retaining (and nurturing) existing ones.
In this article, we will help you understand why customer loyalty is important and analyse the main factor that determines the effectiveness of the process. So keep reading to understand what is the most direct cause of customer loyalty.
Why is customer loyalty important?
- It influences the brand choices of younger generations
- It increases the Customer Lifetime Value (CLV)
- Offers cost-free word of mouth advertisement
- Makes customers willing to pay more for the same products
What is the most direct cause of customer loyalty?
The most direct cause of brand loyalty is a positive customer experience.
While other factors are also important in the decision-making process, customer experience is by far the most important brand differentiator. And customers are willing to pay a lot more to those who do it well.
There are several blocks that make up the customer experience journey.
Let’s talk about each part in further detail.
Quality of the product
The quality of a product (including design, features, and customer-perceived quality) is one of the foundational blocks when it comes to the overall experience of the buyer. Unfortunately, the importance of this element is often overlooked in modern customer acquisition strategies.
In their book, A Framework for Marketing Management, Kotler and Keller point out that the better a product’s quality, the higher the degree of customer loyalty. The authors further discuss that product quality is directly linked to a satisfactory customer experience which, in turn, leads to repetitive purchases.
This is exactly the reason why Apple can price its iPhone higher than any other Smartphone or why Gucci has T-shirts that cost well over $400 dollars. Over the years, both companies have built a reputation for superior product quality.
Loyal customers of reputable brands will not only buy more products, but they will also act as the strongest (and cheapest) promotional weapon. Just think of all the times you have seen a young woman carry her branded purse with pride. She is promoting a particular brand and she is well aware. But she can’t help it! The superior quality of the product affects her perceived status quo, making her feel good about herself and thus loyal to the brand.
Brand identity and values
We have previously discussed the importance of value-driven relationships between brands and customers. The story you say is often more important than the product you sell. This is why storytelling is such an imperative part of the customer experience.
According to RetailMeNot, 61% of consumers will recommend brands that align with their values. With an abundance of similar products available at all price ranges, the buying decision often depends on the brand’s ability understand its their customers’ needs.
Take online retailer Zappos, for instance. Due to public concerns about the fur industry, the brand decided to stop using animal fur for all their products. According to their official statement:
“The Zappos.com website is now fur-friendly and committed to staying that way. Thank you all for your feedback and participation in the Zappos Family Core Value #6: Build Open & Honest Relationships With Communication.”
Their emphasis on shared values and storytelling has made Zappos one of the most popular brands in the USA. They take into consideration their customer’s values, making them feel heard and appreciated.
As such, to improve customer experience and build a loyal customer base, brands should take the time to listen, understand and communicate with their potential customers. Thankfully, this is becoming increasingly easy with the software tools that digital marketers have available today.
The buying process
In short, the buying process refers to the steps a customer has to go through in order to purchase a product. For physical stores, this starts the moment a customer walks in the store and ends with them walking out. For e-commerce stores, it starts when a visitor lands on your website and ends at the moment of product delivery.
Some brands like to pamper their customers with over-the-top luxury service. Others focus on fast and easy purchases in a hassle-free manner. The latest is especially true for e-commerce stores that try to make the process as simple as possible through smart UX/UI.
The best way to optimize the buying process is to focus on efficiency and personalization. Here are a few ways to go about this:
- Utilize customer data - There are different ways to use customer data to your advantage. For example, certain online retailers will track their customers’ buying behavior in order to recommend particular products.
- Use geolocation tools - Information related to a customers’ geographic location can help retailers automatically translate a website in a target language or offer location-specific offers (e.g. free shipping). Once again, data is here used to optimize the experience.
- Analyze customer feedback - This can be done through social media groups, forums, message boards, and all other sources of big data that reveal how customers feel about a brand. Those wondering what is the most direct cause of customer loyalty will often overlook this important (but time consuming) factor.
- Reward your customers - The buying experience is elevated with unexpected pleasant surprises. This is why many big brands build loyalty programs. By rewarding their most loyal customers, brands are able to continually bring something new to the table, strangthening the relationship even further.
- Make it easy - Efficiency stems from simplicity. Try to eliminate anything unnecessary so that the audience can navigate the online platform intuitively. This is also applicable to physical stores. Make it easier to sign up for a loyalty program or to find the best-selling items in the store.
Even a negative buying process is a great opportunity
The great thing about the buying process is the large number of variables that can make or break the customer experience. This is why, when it comes to physical stores, it might be wise to train your employees to identify potential problems and use them to their advantage.
Chet Holmes’ The Ultimate Sales Machine gives a great example of how to turn a negative buying experience into an opportunity to build customer loyalty.
The example talks about a business traveler who needed to clean his best suit dry for an event he had to attend the next evening. On the morning of the event, the guest returns to the reception desk to ask for his suit. The receptionist realizes that he totally forgot to bring the suit to the laundry the previous night. After admitting to and apologizing for his mistake, he offers to personally drive to the dry cleaner with the suit and take all expenses upon himself. The suit was cleaned in time, and the guest left a heavy tip and an excellent review of the hotel.
The followup process entails everything that happens after the purchase. Since customer loyalty is built gradually, it is important to remain in your customer’s mind until they buy again.
This part is mostly implemented with the help of email marketing. Retail companies send newsletters and promotional offers to a list of email addresses that previously purchased items from your brand or retail store.
We have talked about the power of email marketing, as well as its applications when it comes to retail. When it comes to post-purchase efforts, however, every brand and audience is different. It is best to brainstorm on the different ways that the follow-up process can enrich the customer experience by asking the following questions:
- After the transaction is completed, what is done to make the customer feel special?
- What followup actions can this store/brand take to increase customer loyalty in an authentic way?
- What can be done to maintain contact with the customer without coming off as “spammy”?
- How are our top 2-3 competitors doing it?
The answers to these questions will help you better understand how to nurture your audience through different communication methods.
Brands do everything in their power to remain relevant while the collective attention span is drastically declining. Due to these efforts, newer generations have learned to expect more from the brands they follow.
Customer loyalty plays an important role in this process. By building a long-term relationship with their customers, brands are able to survive in overpopulated markets and remain relevant for a long time.
In this article, we briefly looked into the main factor that leads to a loyal customer base - the customer experience. After reading this post you should have a better idea of the different parts that constitute a good customer experience which, in turn, leads to customer loyalty.
Now that you know what is the most direct cause of customer loyalty, make sure you check out the most common problems associated with customer loyalty and how these can be avoided.
Frequently Asked Questions
If you wish to know more about the customer experience and how it connects to loyalty, make sure you check out the Q&A sections bellow.
Choosing rewards - What causes customer loyalty?
The choice of your rewards will obviously reflect on the amount of loyalty you will receive from customers in the long run. More specifically, if you want to understand what what is the direct cause of customer loyalty in terms of rewards, you will need to conduct a thorough investigation on your audience. Do not only look at the products and services they can claim through loyalty programs of their competitors - instead, find out what they actually use and why they find it valuable. Every person has different wishes and needs, and your ability to recognize this and translate it in a part of the customer experience will help you gain more authority and loyal fans.
Apart from personalized rewards, what causes brand loyalty?
The rewards towards your loyal customers are only one part of the equation. As we explained above, customer loyalty derives naturally from the ability to identify with your customers' needs and expectations, and offering an overall experience that is better than that of your competition. This involves all the stages of brand loyalty. Aside from that, you will. need to conduct a thorough review of the steps a customer needs to take starting from the awareness stage all the way to the retention strategies and how they respond to them. Each and every stage of the process is an opportunity to improve your chances of turning a new acquisition into a long-term "fan" of your brand.