The importance of customer loyalty with LoyaltyLion

Today’s marketplace is competitive. With one-click shopping, speedy delivery and free returns from the likes of ASOS and Amazon, it can feel almost impossible to keep up. With all that in mind, it’s hugely important to look at innovative ways to retain customers and the importance of customer loyalty – harnessing a loyalty program is a great way to do just that.

Each and every customer is pivotal to your business and of importance to customer loyalty, this is why you need to keep them on your side and also keep them spending. A loyalty program is a cost-efficient customer retention strategy, improving both customer lifetime value and average order value.

What’s not to love?

Rather than striving to reach new – and hard to access – audiences, you should value the shoppers you already have.

Data shows that only 9% of digital ads are viewed for more than one second, meaning that the effort made in reaching new customers is costing you time and money that could be invested instead in an already engaged customer base.

With the ecommerce market growing by 13% every year, a loyalty program can help you differentiate your offering. Most importantly, a loyalty program demonstrates to your customers that you value them as a unique individual, not just as a number or an invoice.

To help you understand the importance of customer loyalty, this page will cover the following topics:


What is customer loyalty?

Customer loyalty is when a client consistently returns to shop with a particular brand over an extended period of time.

Loyal customers are those who choose to purchase a particular business’ products exclusively and are unwilling to switch to a competitor brand, regardless of the competition out there.

Loyalty runs hand in hand with emotion. Customer loyalty is the result of a consistently positive experience with the brand and a high level of value. Focusing on how to develop the relationships you have with those customers to continue making them feel valued is pivotal to continued growth.


What is the importance of customer loyalty?

There is a myriad of challenges facing retailers today, causing merchants to realise the importance of customer loyalty.

Not only are digital ads more expensive than ever (up 12% from two years ago) but they’re reaching fewer people. Only 9% of digital ads are viewed for more than one second, suggesting today’s digitally savvy audiences are tuning out advertising as they scroll.

Accessible and easy-to-use ecommerce sites mean barriers to entry in the marketplace are at an all-time low. The ecommerce market grows by 13% every year – and larger players like Amazon are outstripping smaller retailers on their ability to deliver competitive prices alongside quick delivery services.

Plus, discount culture means more and more people are looking for a deal. Boxing Day discounting in 2018 reached a record high with average reductions hitting 43%. If customers expect deals and are willing to seek them it out, it means your bargain prices might draw them in – but will be less likely to keep them coming back once sale season is over.

Why is customer loyalty valuable for your key performance metrics?

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Depending on your industry, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one. Increasing retention by just 2% can have the same impact as reducing costs by 10%. By keeping your existing shoppers happy, you save valuable resources from tracking down new ones. There’s also a 27% likelihood that once a customer has made the first purchase, they’ll return to make another.

Repeat Purchase Rate

Your repeat purchase rate is the percentage of customers who have shopped more than once at your store and is important to customer loyalty. This is an important customer loyalty metric that indicates the degree of customer loyalty to your brand. It is an opportunity for retailers to establish long-term relationships with customers as a high number of repeat purchases indicates a happy and well-retained shopper.

Customer Lifetime Value

Customer lifetime value (CLTV) indicates the total value of a customer to your business during the entirety of their relationship with you – from their very first purchase right up to their most recent sale. The CLTV should be greater than the cost of acquiring that customer, which means increasing the value of existing customers is an important way of driving growth.

By diving deep into the customer experience and measuring feedback across your communications, you can begin to understand the key drivers of CLTV and, in turn, decide where you should be investing your marketing budget.

Repeat Purchase Rate

Average order value (AOV) tracks the average amount spent each time a customer places an order with you. AOV is an important metric as it allows you to measure and understand your customers’ purchasing behaviours. As a key performance indicator, it can help you define your most valuable customers, set goals and strategies and evaluate their performance over time.

Customer Acquisition

Customer acquisition refers to gaining new and loyal customers. Acquiring a new customer can be expensive and involves persuading that shopper as to why they should purchase your products. Retailers consider the cost of customer acquisition an important metric to measure for ascertaining how much value customers bring to the business.
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How to secure customer loyalty

Digital innovation has empowered shoppers like never before – and has secured the importance of customer loyalty.

Never has it been so easy to leave reviews, recommend products and share stories of how great (or terrible) your shopping experience has been. A great customer experience drives loyalty and profit, and driving customer loyalty is so important to your bottom line that building a fantastic reputation online is now the primary focus of 68% of marketers.

To dive deep into customer loyalty you must first understand how a customer experiences your brand and how you can use it to improve your communication with other customers.

Loyalty and the customer experience

A completely satisfied customer contributes 14 times as much revenue as a dissatisfied customer. Taking the opportunity to deliver beyond the customer’s expectations – through a consistently high quality and dependable service – is key to providing satisfaction and repeat custom.

With more choice than ever before, competing on pricing and logistics is no longer enough. In order to differentiate, retailers must offer more.

84% of organisations working to improve customer experience report an increase in revenue and 67% of consumers say they’ll pay more for a great experience. Improving a customer’s experience when shopping with you not only improves their loyalty, but their likelihood of recommending a business to others by up to 77%.

Customer Experience Graph

Loyalty across the customer lifecycle

The opportunity to provide an outstanding customer experience doesn’t end after their first purchase, it’s an ongoing important part of customer loyalty.

Continue to re-engage the customer across their journey with your brand by sending them personalised product recommendations, asking for a review of their previous purchases and sending them your latest news, deals and offers.

Constellation Research found that companies who have improved engagement increased cross-sell by 22%, drive upsell revenue from 13% to 51% and increase order sizes from 5% to 85%. A customer’s lifetime value increases as they go through their journey from initial contact to becoming a regular purchaser and eventually a loyal customer and vocal brand advocate.

Loyalty Lifecycle

How to re-engage with customers across the customer lifecycle

No matter where the customer is on their journey with your brand, here some ways you can  re-engage them using your loyalty program:

From one-time shopper into repeat customer

Your customer has made their first purchase – hooray!

The work doesn’t stop here: now you need to get them to come back and purchase again.

Offer personalised points and rewards in your post-purchase pages and emails to incentivise your shopper to spend again. Customers who join a loyalty program and redeem a reward are 68% more likely to purchase a second time than those who don’t join. It’s easy to see why it’s crucial to get the customer signed up to your loyalty program before they spend. Customers who redeem loyalty rewards spend twice as much as those that don’t as they’re keen to start turning their loyalty points into real-world benefits.

From repeat customer into loyal customer

86% of consumers are more loyal to brands where they participate in rewards programs. And, 69% of consumers say their choice of retailer is influenced by their ability to earn customer loyalty and reward points.

Giving customers good reasons to come back and shop with you regularly through your loyalty program is crucial. You can demonstrate how much you value their custom by adding them to a members-only VIP tier of your loyalty program. This will give them exclusive access to discounts, collections or new release previews, or even birthday gifts or free education resources like tutorials and webinars. Why would they not come back with all of that on the table?

Annemarie Skin Care Tiers

At-risk customers

Life is busy and the ecommerce landscape is noisy.

Send your at-risk customers who haven’t made a purchase in a while a reason to pay attention to your brand. Simply remind these customers that you’re there with a friendly loyalty email offering them points, a gift or a discount that they’re not expecting. These loyalty emails to at-risk customers perform 14 times better than the average marketing email.

Abott Lyon Welcome Email

How customer loyalty benefits relationship management

Part of creating an outstanding customer experience and vital to the importance of customer loyalty is personalising the service you deliver to your customers. Your shoppers want to see content that is relevant to their likes and filters out their dislikes.

According to a recent survey, more than half (52%) of customers would share personal data in exchange for personalised product recommendations. However, over three quarters (78%) of shoppers are dissatisfied with the level of personalisation they are currently receiving. Your customers are clearly asking you to personalise the service by using their data – oblige them!

Here are three steps to utilise a loyalty program to offer personalised experiences:

  1. Use your loyalty program data to segment your customers depending on where they sit in their customer lifecycle. Offer them an experience that’s suited to where they sit on their unique journey. For example, segment customers who have purchased from you several times into a VIP tier that gives them access to more benefits than those who only purchase infrequently. This will make these shoppers feel valued and they will continue to engage at a higher level.
  2. Use your data to tailor your brand’s communications to their needs and wants. For instance, send a one-purchase shopper an email that summarises the points they have already acquired from their first purchase and how to redeem those points. You could also use data to send emails with product suggestions that match their previous buying patterns.
  3. Give your customers a unique gift on their birthday or on the anniversary of their first purchase as a way of rewarding their loyalty. This will make them more likely to continue shopping with you as they feel their custom is appreciated.

How loyalty programs work

A loyalty program is a long-term marketing tool used by ecommerce merchants to encourage repeat purchase and increase customer retention by offering rewards to shoppers who demonstrate loyal purchasing behaviours. In retail loyalty programs, rewards can take the form of discounts, special offers, deals and freebies.

Benefits of a loyalty program include increasing the lifetime value of a customer through driving up their average order value and increasing purchase frequency. Loyalty points can be given to your most loyal customers with points for social media likes, completing a profile page, referring a friend, birthdays and more. Customers collect points to redeem for real-world rewards.

Beyond simply rewarding customers with points, a loyalty program can increase customer loyalty and engagement, transforming casual shoppers into brand advocates.

Tiering your loyalty program will encourage shoppers to climb up the loyalty ladder, adding more points and unlocking more redeemables.

Rewarding points for reviews and referrals will also encourage customers to act on your behalf as brand advocates.

Once you’ve got the basics of a loyalty program, you need to tell your customers all about it so they start signing up. Here are five simple steps to get the sign-ups rolling in:

  1. Send an email campaign to existing customers when you launch your loyalty program. These customers are likely to tell people in their network
  2. Display your loyalty program on your website homepage with the call to action “Join Now” to encourage sign-ups. You can also entice customers to join by offering points for sign-ups
  3. Use your social media accounts to reach and amplify the message to your audience. Include a link to the sign-up page in your post
  4. Ensure that the benefits of your loyalty program are communicated clearly with information about how points can be earned and redeemed
  5. Consider how to incorporate your loyalty program into your long-term marketing plan. Use email newsletters, social media channels and your website to continue its promotion

Today’s ecommerce marketplace is rife with competition. Giant corporations cast a gloomy cloud over smaller businesses with their ability to deliver with ruthless efficiency. The barrier to entry for ecommerce merchants is at an all-time low with easy-to-use sites resulting in a flood of competing brands with goods to sell.

That is why customer loyalty is crucial. When a totally satisfied customer contributes 2.6 times as much revenue as a satisfied customer and 14 times as much revenue as a dissatisfied customer, the path forward is obvious.

Use your loyalty program to deliver beyond the customer’s expectations – through a consistently high quality and dependable service – and watch as repeat custom rolls in. 
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