Loyalty and Retention Are Not Synonyms

February 4, 2021

Loyalty and retention are not the same, but they are definitely related. Loyalty is personal and emotional, while retention is a financial measure, is what Ryan Tamminga, VP of Customer Success at Alchemer, and Vanessa Bagnato, Director of Enterprise Solutions at Alchemer, explained recently in a webinar.

If loyalty and retention are not the same, how they are inextricably connected? Customer loyalty is about the emotional relationship a customer has with a brand. That connection between a customer and a brand is what drives repeat purchases, and is a primary reason why a customer would stay with a company rather than switch to a competitor.

Profit and growth are therefore stimulated by loyalty which is a direct result of customer satisfaction. Retention is the percentage of customers who stay with you at renewal or purchase time. Retention is an important metric to track, but is a narrower financial focus that leaves behind the human factor.

What do the top brands focus on? For an organization that truly wants to become customer-centric, then they need a strategy for building customer loyalty. And building a loyal customer base should be one of their goals when launching a VoC program.

Striving for a superior customer experience should go hand-in-hand with your VoC program. Deliver upon your brand promise and bring value to your customers. Ensure you are acting upon the feedback your customers share.

Loyalty programs are one method for bringing value to your customers, and to be successful need to deliver upon brand promise and build positive customer experiences. When executed correctly, loyalty programs can often cover potential losses during tougher times because loyal customers will remain customers. Shifting your loyalty program’s focus allows you to stop running promotions and specials and focus instead on creating a customer experience that drives the loyalty you want, and by default, the retention you need.

For example, it’s very common for business travelers to be loyal to one brand of hotels or airlines. Likely they become loyal to that brand over time. They probably tried different hotels and airlines, and the brands that rose to the top had the best customer experience and service. Which is how the emotional connection was made.

If retention is measured by renewal and purchase levels, how do you measure loyalty? Loyalty metrics depend upon the business, their product, and their customer base. And it’s not a single metric. Brands need to decide as a business how they will benchmark and track against a metric or metrics to assess loyalty.

  • Net Promoter Score is among one of the most used metrics for customer loyalty.
  • Brand Engagement is another score, such as website visitors, organic reviews (not paid), and social media engagement (again, organic, not paid).
  • Product Usage metrics are also a way to measure loyalty. If your product is used daily, people are engaged and probably not willing to change.
  • Renewal rate (or retention) is a metric of loyalty. If you have loyal customers, they are more likely to renew over and over again.

Are happy customers really loyal customers? A Deloitte report shared that customers who enjoy positive experiences are likely to remain customers for five years longer than customers who had negative experiences.

To get your business on the path to building loyalty, set a business goal of building a loyal customer base and focus on:

  • Offering quality products or services
  • Empowering customer-facing employees so they can provide superior customer experiences and build a personal connection between your brand and your customers
  • Keeping in mind that happy and engaged employees are also more motivated to provide a better customer experience

Build loyalty in small steps, even though it takes time. Look for ways to better listen for signals from your customers on how you can improve their experience. Then use those signals to identify the steps to take to move towards building loyal customers.

What do the best do differently? High-performing companies go the extra mile to build loyal customers and build an emotional relationship to foster the best types of customers. Remember that convenience is a loyalty driver just like a world-class experience, as it gives customers more opportunities to experience your brand.

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