Here’s how to turn retained customers into loyal customers

There are plenty of brands in my life for which I would consider myself a “retained” customer. Starbucks, Rituals Cosmetics, The Protein Works, and many more. I regularly return to these brands for their products and services, but I wouldn’t consider myself loyal to them.

I don’t have strong emotions about them. I don’t believe they offer me the best product/service or value for money. Neither would I be upset if I had to spend my money with a competitor.

But there are a few brands that I feel strongly about. Some of those include IKEA, Füm, Waken, and a few more.

There are a few reasons I feel loyal to these brands. A commitment to sustainability practices (IKEA and Waken), and for helping me and others quit vaping naturally (Füm) among them. I often talk about these brands to friends and family, and if they were to disappear, I would be upset.

As an ecommerce store owner, your goal should be to inspire customer loyalty, not just keep your customers. In this guide, we’re going to show you why and how this level of loyalty is important.

Loyalty vs retention

Let’s get more specific: what are the differences between loyalty and retention?

Customer retention is when customers keep returning and buying from you. This could be for reasons like being the cheapest or most convenient option, rather than a genuine feeling of loyalty.

Customer loyalty is when customers feel a positive emotional connection to your brand. They talk about “loving” your brand and will recommend it to friends and family, or make user-generated content about it online.

Here are a couple of examples of people expressing customer loyalty:

In this example, we see user \@lornabladen showing off the Trip brand alongside another brand shout-out. A couple of commenters also mentioned their love for the Trip brand.

In this example, we see the user \@livewell_withem talking about how much she loves the Vivolife brand. She also mentions she’s not affiliated with them.

The value of retention

We’re not saying that customer retention is a bad thing, far from it. There is a ton of value you can get from using a retention-focused approach (as opposed to focusing on customer acquisition).

Some of those benefits include:

• Increasing the time a customer spends with you (customer lifetime) to help offset the cost of customer acquisition.
• Consistent revenue from customers regularly returning to shop with you.
• Better customer data the longer a customer shops with you helps you generate more accurate customer segments.

These benefits are valuable — it’s just that loyalty can do it better.

The value of loyalty

You can think of customer loyalty as the next level up from customer retention. Why? Loyalty brings you the above benefits and more, including:

• Higher Average Order Value (AOV). This comes from customers using loyalty rewards that increase the shopping cart value.
• Higher Customer Lifetime Value (CLV). Higher CLVs come from loyal customers who spend more over the course of their lifetime.
• Improved social proof thanks to public reviews and testimonials.
• User-generated content and other social media engagement.
• Low-cost customer acquisition through customer referrals.

With better benefits, aiming to increase customer loyalty becomes a no-brainer for any ecommerce store owner.

Honorable mention: CSAT vs retention vs loyalty

Before we move on, it’s worth mentioning Customer Satisfaction (CSAT). Some folks may confuse having a good CSAT score with higher customer retention or loyalty, but that’s not always the case.

A customer may leave a high CSAT score in your feedback survey but never shop with you again. This scenario can mean that the customer was happy with the product or service, they just didn’t feel the need to get more.

Additionally, CSAT is more of a measurement tool or key performance indicator (KPI) than a strategy. “Retention” or “loyalty” alone aren’t terms of measurement.

How to build customer retention

Building customer loyalty starts with having retained customers in the first place. It’s a good idea to cover some of the strategies you’ll need to retain them.

A few of these paths include email marketing, data segmentation, customer service, and creating a loyalty program.

Use email marketing and data segmentation

We’ll talk about these two together because they’re complementary to each other. Email marketing is a crucial strategy for ecommerce store owners. It helps you communicate more effectively by personalizing messages for individual customers.

To do that, you’ll need some customer data and segmentation practices.

At the most basic level, addressing your customers by their names is a great start. However, the magic happens when you create email campaigns for specific customers who are interested in specific types of products.

This isn’t just a hypothetical idea. Data from McKinsey & Company shows 71% of consumers expect personalization, and 76% get frustrated when they don’t get it.

Deliver great customer service

Good customer service is also a crucial factor in retaining customers.

Data from the UK Customer Satisfaction Index says 41% of the least satisfied customers will seek to avoid dealing with the organization in the future.

On the flip side, over a quarter (27.6%) of customers who rated a brand highly said they would look to buy more products and services, with over a fifth saying they’d also spend more.

So, how do you offer great support?

You can use Shopify tools like Gorgias to build solutions like chatbots, which handle simple, self-help options and direct complex issues to human agents, reducing response times while easing staff workloads.

You can also create procedures that turn negative experiences into positive ones, such as compensating for late deliveries with loyalty points — which helps rebuild trust.

Create a loyalty program

A loyalty program encourages repeat purchases by offering added value for continued engagement.

An example of this approach in action is The Organic Butchery, which created a program that offers customers 5 points for each £1 spent. Customers can then redeem discount vouchers with the points they’ve accumulated.

Using this method, The Organic Butchery saw a 70% increase in spending from program members. Plus, the program now generates 53% of their revenue.

Loyalty programs like this not only retain customers but also lay the groundwork for long-term loyalty.

How to measure customer retention

Another key factor for building customer retention is knowing how to measure it. If you don’t know how to measure customer retention, you will not know if the strategies you’ve implemented are working.

So, how do you measure it? Here are a few key metrics to set up and track:

• Purchase frequency. Quite simple. Purchase frequency refers to how often customers return to make a purchase. Use this formula: Purchase Frequency = Total number of orders / Total number of unique customers (in a specified time period).
• Customer lifespan. This one is trickier, especially if you don’t have a subscription model for your products. We detail calculating average customer lifespans in our guide on ecommerce CLV.
• Churn rates. Again, this one is a little tricky for ecommerce stores, but a good rule of thumb for ecommerce churn is that you can consider customers whose time since their last purchase was 3x the average purchase interval as churned.

Tracking the performance of your customer retention with these metrics will help you level up your understanding as you move toward customer loyalty.

How to build customer loyalty

There are a few different types of customer loyalty. But the types most businesses want to foster include engagement, behavioral, emotional, and advocacy. In most cases, having a solid loyalty program can help build loyalty in all of these areas.

Build engagement loyalty

Engagement loyalty refers to engagement behavior beyond purchasing products.

Your brand needs to find ways to keep customers engaging in between transactions. A loyalty program can be a valuable vehicle for this, as can an email marketing sequence, social media activity, or other online content.

Whichever approach you choose, you need a detailed Ideal Customer Profile (ICP), opportunities for personalized engagement, and channels for community building (like a Facebook group).

Build transactional loyalty

Transactional loyalty refers to customers who demonstrate loyalty through purchasing behavior rather than through public or direct engagement. You’ll find higher repeat purchases or higher average order values with this type of loyalty.

The best way to build this type of loyalty is to have a loyalty program that rewards purchases, like how esmi Skin Minerals tripled average customer spending with their loyalty-led solution.

Build behavioral loyalty

Emotional loyalty refers to customers who have developed stronger feelings related to your brand and would likely be upset if your brand disappeared. These customers are more likely to engage with your brand in between purchases and engage with your content and social media channels.

One strategy for building behavioral or emotional loyalty is using a value-based loyalty program that appeals to your customer’s deep, personal values, like how Edgard & Cooper give their loyal customers the option to donate their points to give meals to shelter dogs or plant a tree.

Build customer advocacy

Customer advocacy is the most valuable level of loyalty you’ll find. Customer advocates not only have a strong bond with your brand, but they’ll also go out of their way to recommend you to others.

Developing advocacy isn’t easy, but you can try speeding up the process by rewarding advocate behavior. To do that, you’ll want to create a high-value referral program and offer great rewards for user-generated content (UGC) like reviews and testimonials.

With this approach, The Pulse Boutique saw a 39% uplift in returning customers and generated over $200,000 in earned rewards purchases.

How to measure customer loyalty

As we said about retention — you don’t know if your loyalty marketing efforts are working if you don’t know how to measure them. The concept of customer loyalty might seem abstract at first, but there are metrics you can use to measure it.

• Customer Lifetime Value (CLV). While customer lifespan is an indicator of retention, lifetime value tells you if a customer is building a deeper relationship over time by spending more and with greater frequency. The ecommerce CLV guide we published has the calculation breakdown.
• Average Order Value (AOV) is a simple but useful metric. If your customers’ AOV is high or increasing over time, this suggests more customer loyalty. Use this formula: AOV = Total Revenue / Total Number of Orders.
• Referral Rate. This metric tells you the percentage of new customers gained through referrals compared to total new customers. In other words, how effective your referral program is. Use this formula: Referral Rate = Number of Referral Customers / Total Number of New Customers.
• NPS/Sentiment Analysis. It is crucial to get a baseline understanding of how your customers feel about your brand before improving things. Use an NPS-style survey or sentiment analysis of reviews or social media engagement to establish a benchmark, then repeat the process regularly to see how your customers feel.

With these metrics in place, you’ll be able to see what loyalty strategies work best for your customers.

The role of loyalty programs

As you may have noticed, building a loyalty program is one of the best ways to move from simple customer retention to genuine customer loyalty. However, as we’ve hinted, loyalty programs come in a variety of styles to address different loyalty needs.

The simplest points-based system for discounts we’ve described above, known as an earn-and-burn loyalty strategy, is a good method for building retention.

But there are other types of programs that can help build the deeper, loyalty behavior you want by moving beyond transactional interactions. These other types of loyalty programs include value-based, tiered, and subscription programs.

Value-based loyalty programs

We already mentioned one value-based loyalty program in this guide, which was Edgard & Cooper’s program. This program is particularly effective because the main cause (feeding shelter dogs) is perfectly aimed at the brand’s target audience—pet lovers.

Astrid & Miyu also revamped their loyalty program, which includes a 1,000-point reward (the highest value reward) for recycling gold and silver jewelry. The jewelry also doesn’t need to be from the Astrid & Miyu brand.

This approach showcases the brand’s values toward sustainable fashion—and it works. The program as a whole saw over 50k signups in 9 months and a 40% increase in total revenue. Additionally, members purchase 220% more than non-members throughout the year.

Tiered loyalty programs

A tiered loyalty program offers your customers more and better rewards the more they engage with your brand and demonstrate loyal behaviors. The lowest tier represents newly joined customers, while the highest tier represents your VIPs.

Astrid & Miyu, the brand we mentioned above, also uses this strategy. The program is split into five tiers; Club A&M, Silver, Pearl, Gold, and Diamond. For customers to reach the next tier, they need to meet the annual spending threshold.

These programs are great for building loyalty for a few reasons:

• They introduce a “gamification” element, motivating customers to earn higher tiers.
• The higher tiers create a sense of exclusivity for high-value customers, which generates loyal VIPs.
• They also help you segment your customers and create more tailored marketing campaigns based on their tier status.

A tiered program is a good approach for brands struggling with low purchase frequency.

Subscription programs

If you have a product you can package into a recurring subscription, a subscription-based loyalty program is an ideal choice. It can help reduce subscription churn and maintain long-term brand engagement.

A quick example of a brand using the subscription model is Waterdrop, which offers healthy flavor drops for people who don’t like plain water.

Using the LoyaltyLion ReCharge integration, they created a subscription loyalty program that offers exclusive benefits the longer a customer stays on the subscription. This program helped generate a 70% increase in repeat purchase rates and a 90% increase in spending from loyalty members.

These loyalty programs play a crucial role in building customer loyalty for the brands we’ve highlighted, and many more.

Build customer loyalty with LoyaltyLion

By now, you should have a good understanding of why “customer retention” alone shouldn’t be your only goal. Any ecommerce brand should strive for customer loyalty as it takes the benefits of retention a step further:

• You see increases across key metrics like CLV, AOV, and repeat purchase rates.
• You get more brand awareness thanks to UGC.
• You see a reduction in acquisition costs thanks to loyal customer referrals.

At this point, you might be wondering how to build a loyalty program for your brand. The process is pretty straightforward:

• Decide what kind of loyalty program you want to build.
• Plan your reward structure.
• Choose your loyalty program software based on features, scalability, ease of use, integrations, support, and cost.
• Sign up and build your program.
• Launch the program for your customers.

If you’re ready to look at loyalty program software options, take a three-minute product tour of LoyaltyLion to discover a loyalty platform built for your success.