Loyal customers reduce marketing costs and improve your reputation. Increasing customer retention by just 5% can increase profits by 25%.
*Originally posted on February 11th, 2019, and updated on October 14th, 2024.
Customers are the backbone of every business, and it’s easy to focus solely on attracting new ones. While gaining new customers will always be important, we can’t forget the value of loyal customers.
We’ve put together 10 reasons customer loyalty is vital to your business.
Repeat business is cheaper than new business. Acquiring a new customer is as much as 25 times more expensive than keeping an existing one. Longtime customers don’t require the extensive marketing efforts that potential customers do. Yes, an advertised deal or coupon might bring a loyal customer into the store, but they were already on the way there to begin with. You can depend on loyal customers to choose your business over others, so carefully craft campaigns to acknowledge their commitment—and ensure that they feel supported when they choose to work with you—don’t oversell the loyal base.
Loyal customers provide invaluable insights into your business. Their repeated experiences allow them to discern what works, what doesn’t, and what truly fosters loyalty. By analyzing feedback from these customers, you can proactively pinpoint both your strengths and areas for improvement within your customer service processes. When challenges arise, who better to consult than those who have witnessed your business at its best? By leveraging loyal customer feedback, you position your business for continuous improvement and sustainable growth.
Consistently satisfied customers will leave positive reviews, especially when you ask them to, and more reviews lead to a more positive online presence. When prospects see enthusiastic feedback from long-term patrons, they’re more inclined to believe in the quality of your products and services, increasing the likelihood they’ll choose your business over others. Moreover, positive reviews and high ratings improve your visibility on search engines. This higher visibility makes it easier for new customers to discover your business, driving even more traffic and sales your way.
Businesses can depend on their loyal customers to represent their brand. Loyal customers are knowledgeable about your product, experienced with the service you provide, and can be eager to talk about it. They serve as an unbiased source of information—no strings attached, which is even more convincing to potential customers than your company’s marketing efforts. Brand advocates will bring you business, at no cost, simply through their recommendations. These leads aren’t just free, they are valuable: leads gained from advocates are 7 times more likely to convert than other leads.
Customer churn, or the rate at which clients discontinue their relationship with your business, is a critical metric for growth. While it's impossible to retain every customer, a high churn rate is bad news for any business. That’s why customer loyalty is so important. Loyal customers are much less likely to switch to your competitors, making them key to your overall success.
Nothing is more meaningful than an online review containing the phrase, “I’ve been a customer for over a decade.” This speaks volumes about the kind of service your business has been providing consistently year after year. It demonstrates that your business values its customers and delivers a product worth going back to. This type of testimonial is the kind that wins over the 86% of consumers who read reviews. An easy way to double down on this value and further demonstrate how much you invest in your customers is by responding to these reviews in a meaningful way.
Research by Glassdoor reveals a connection between employee satisfaction and customer satisfaction. For every one-star improvement in an employer's Glassdoor rating, customer satisfaction increased by 1.3 points out of 100. This relationship underscores a vital truth: a happy team leads to happy customers. Your employees are the heart of your company culture, and when they feel valued and engaged, it reflects in their interactions with customers. Ultimately, fostering loyalty among customers not only enhances the customer experience but also uplifts team morale, creating a thriving work environment.
Loyal customers come to your store regularly and fully trust the service you provide. With this trust already earned, it makes sense that they would try your other products. For example, customers who have had consistently great experiences with your sales team are more likely to give your service or parts department a chance. The proof is in the profit: existing customers spend an average of 67% more than first-time customers, trusting the quality of your products based on their first-hand experiences. In fact, repeat customers make up only 8% of all customers but account for 40% of a company’s revenue. Loyal customers spend more money per visit than new customers.
The ultimate reason why loyal customers are vital to small businesses: they lead to more profits. Spending more money per visit to your store adds up over time, so much so that increasing customer retention by just 5% will increase profit by 25%. The effort it takes to create loyal customers has a great return value, and this value means sustainability. Repeat customers provide the sturdy foundation your business needs to not only survive but flourish.
A strong customer base will give your business a significant edge over competitors. Loyal customers are less swayed by factors like price or availability because they have already identified your business as the right fit for them. Loyal customers are also more likely to engage with your marketing efforts and promotions, which will in turn work to bring in new clients.
Customer loyalty is essential for building a resilient and profitable business model. Here are some tools to improve retention fast:
Assess your business plan and make sure you aren’t getting distracted by the allure of new customers. Remember to allocate enough time and money to building and retaining loyal customers. With the right balance, you can maintain a base of lifetime customers, save money, and grow your business.
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*Originally posted on February 11th, 2019, and updated on October 14th, 2024.
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