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Customer Loyalty vs Retention: 4 Ways To Improve Customer Experience

by Simon Spyer on Dec 21, 2016 11:45:43 AM

Reduce Customer Effort To Increase Customer Loyalty

Customer Loyalty vs Retention: 4 Ways To Improve Customer Experience

'Loyalty' and 'retention' are often used interchangably but they're not the same thing.

One is about customers wanting to stay with your brand and the other is about customers having to stay with your brand. The marketing objectives are therefore very different.

We have identified 4 platforms for increasing customer loyalty and delivering great customer experience. And these platforms are rooted in the understanding of why loyalty is so different to retention. 

Customer loyalty

Customer loyalty is the function of 3 specific customer behaviours:

  • Repurchase. Customers continue to buy from your company.
  • Share of Wallet. Customers buy more from you rather than your competitors over time.
  • Advocacy. Customers promote your company to the network (this could be colleagues, friends, family or even wider).

Viewed in this context, loyalty is driven by the customer and clearly customer experience is key - the customer has to want to stay with your company.

Do it well and customer spend and advocacy will increase.

Customer retention

Customer retention is a business process used to retain or 'lock in' customers so that they repurchase and/or don't purchase from your competitors.

In other words the customer has to stay with your company.

4 Platforms For Growing Loyalty & Maximising CX

There are 4 platforms for building loyalty:

  • Product delivery. Your product or service needs to do what it promised the customer when they made their purchase. This is the basic value proposition and will be a combination of your brand, the price paid, perceived quality and execution. Get this wrong of miss expectation and you don't have a platform for building customer loyalty.
  • Customer effort. Understanding of this platform is growing and it encompasses how easy it is to interact with your business - so effort required to purchase from youl the ability to switch between channels and have the same experience and understanding; the ease of contacting your business with questions or when things go wrong; not having to repeat information.
  • Interactions. The customer's interactions with your staff (shop floor, call centre) and your digital channels (website, mobile apps). These interactions need to demonstrate an understanding of the customer, personalisation and the setting of expectations (that are achievable).
  • Surprise and Delight. Often brand-led, unpromised services, rewards or communications that show that your business goes 'above and beyond' for its customers.

Product delivery and customer effort are the critical platforms to get right. Consistently meeting expectations can have a significant, positive influence on loyalty.

Delivering an effortless customer experience is the key differentiator and will increase loyalty.

There is growing evidence that customers don't want to interact with humans - they would prefer to self-service through a website. Chatbots and emerging AI will only accelerate this trend.

And surprise and delight activities are by definition only applicable to certain customers. They tend to be used to recover the situation following major service failures and the reality is that, again, research suggests that they don't move the dial in loyalty; customers will punish bad service but they won't reward over-the-top service.

Exceeding expectations, or delighting customers, may create “feel-good” moments, but doing so has no impact on loyalty or repeat business.

So What Should You Do?

Think loyalty not retention. It obviously pays to be customer-centric and think in terms of customer needs and behaviours rather than business processes.

Measure customer effort. Many businesses are measuring Net Promoter Score but this should be supplemented with (or even subsituted by) a Customer Effort Score.

Get the basics right. Without exception, obsess on the basic delivery of your product or service. This is what customers will credit you with rather than bells and whistles.

Eliminate pain points. Understanding customer effort will help you to define the pain points in the customer journey and what you can do to eliminate or at least reduce them.

Invest is self-service touchpoints. Customers want to self-serve (over 50% of those under 51) so ensure that you are using the right channels (remember you don't need too much choice) and that the right content and functionality is readily available.

10 Ways To Maximise Customer Loyalty

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This post was written by Simon Spyer

Co-founder & Insight Partner at Conduit, professional insight-monger, dad, lover of all sport and Spurs.

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