Guest post: Loyalty or retention? How to know the difference and optimise for both

In this blog, blubolt, gives their perspective on loyalty and retention, the differences between the two and what the future holds for these ecommerce essentials. 

Loyalty or retention; which is preferable? Are the two terms interchangeable, or at the very least, intrinsically linked?

While the differences are subtle, in order to get the most from loyalty and retention, it’s important to understand how these two customer characteristics vary, and to properly harness the unique potential that each offers.

Retention is a crucial component of most brand strategies, and can essentially be defined as the preservation of your customer base; people have bought from you, and they continue to do so. While this might sound an awful lot like loyalty, this is where misconception can creep in. A retained customer is simply one who hasn’t left you for a competitor… yet. Should an attractive offer be presented elsewhere, there is nothing tangible keeping your customer in that longed-for state of retention.

Loyalty is what provides the pixie dust. Bridging the gap, and giving customers a reason to remain in a state of retention, or even to become proactive advocates, recruiting others to your cause. If retention stops your brand base from shrinking, loyalty is what primes it for growth. They work in tandem; both have particular merits, but each should be respected and optimised for in their own right.

The exponential effect

The stage of growth that a brand finds itself at will have an effect on the role that retention and loyalty play within their strategy.

For fledgeling brands, a stronger focus on acquisition will typically be prioritised, as a customer base is built from the ground up. But as companies mature and start to have a base to protect, retention is more than desirable, it makes financial common sense.

It’s been shown that acquiring a new customer can cost up to five times more than reconverting a customer who has bought from you in the past. Not only that, repeating customers are known to make bigger purchases – returning customers spend on average three times more than a first-time buyer.

While familiarity and trust are clearly at play here, a customer simply needs to have had a past experience of purchase for this transformation into a higher conversion to occur.

Loyalty, as we might expect, turns things up a notch further, with customers falling into the “loyal” category spending up to five times more on average than a newcomer to your store.

So, not only are customers cheaper to retain than acquire but as conversions become more numerous, they’re also boosted in terms of the total value. This shows retention and loyalty working in partnership to exponentially win for brands from all angles. As customers buy more from your store, the bigger each purchase will tend to be.

The importance of brand value (and great tea)

In the thriving, crowded world of ecommerce, comparison is the thief of conversion, and just a click away at all times. Brands need to differentiate on more than price if they want to win true, die-hard fans.

At blubolt, we specialise in ecommerce builds for brand retailers – those selling their own products, under their own flag. A strong, well-communicated sense of brand value is especially crucial for retailers of this kind to lay the foundations that enable retention and loyalty to flourish.

Over the past 14 years, we’ve learnt that the seeds of retention are sown throughout each and every step of a customer’s journey, leading us to place customer-centric design at the heart of all our builds. Now that the value of getting a customer across that “first purchase” line has been established, its vitally important to remove any friction from the process of making that conversion happen.

To do this, ecommerce sites need to be more than intuitive online experiences. They need to be rewarding in their own right, seamless, with all barriers removed. All touchpoints need to be carefully considered, functioning not only in their own right but working in harmony with each other to create an instant sense of familiarity, reassurance and trust (the basis of any long-standing loyalty).

Upsells and repeat purchasing are a much more natural inclusion for these bought in buyers – VIP clubs, subscription packages, early access to sales, and of course, the kind of highly effective loyalty schemes offered by LoyaltyLion.

A great example of a strong brand retailer making fantastic use of their character, personality and online experience are our clients TeaPigs, who place their tea-loving customers at the heart of the buying process.

Teapigs Ux

Product categorisation is unconventionally and imaginatively ordered on their site, enabling customers to pick and order teas based on their desired outcome in terms of mood or health benefit. In addition to adding more personality to the shopping experience, this had the added bonus of educating shoppers regarding teas’ properties. A customisable subscription program completes the picture, automating repeat purchases and doubling down on retention.

Subscriptions Tea Pigs

The future of retention and loyalty

As the online space becomes increasingly competitive, getting customers to make that first purchase, to unlock that instant value level up, becomes ever more important. Retention is just part of the picture, with loyalty locking in the benefits that retained customers bring to a brand. It will be more and more important for brand value to shine, and as online stores move into the offline space (and vice versa) the overlapping multichannel experience of customers – ensuring that same sense of familiarity and trust is felt wherever the brand is represented – will become vital.

We’re all used to marketing pop-ups appealing to first time buyers with an introductory discount, but it’ll be interesting to see if there’s a promotional swing in favour of the loyal, retained customer in the years to come. Offering a 10% discount in exchange for inclusion on a mailing list is one thing, but transactional emails get a 8.8% open rate, much better than the standard 3.3% of promotional messages. Perhaps the smarter money is on mobilising these post-purchase communications to reward and encourage future buying…

Ultimately, confidence within your niche, truly customer-centric ecommerce experiences and attention to the fine detail of your user journey after purchase and across all touchpoints, will prove key to loyalty and the resultant retention of the customer bases of tomorrow.

At blubolt we’re delighted to be working alongside LoyaltyLion to ensure our clients get the very most of these opportunities, and that their happy customers are recognised as the star players that they are.

About blubolt
blubolt are a personal and proactive eCommerce agency with over a decade of frontline experience. We build on Shopify Plus and bluCommerce, enabling brands such as Seasalt, TeaPigs, Frugi and many more household names to exceed all online expectations through truly beautiful and high converting online solutions.

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