What is customer loyalty in retail?


Tue Mar 23 2021

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Tips on how to build and boost it

It’s always nice when a customer comes into your store and buys something, but what’s much better is when they return again and again to make more purchases. That said, getting a customer to frequent your retail business and be a loyal customer isn’t always easy; it requires deliberate planning and effort on your part. 

In this article, we will look at what customer loyalty is, why customer loyalty is so important, the most direct causes of customer loyalty, how you can measure it, how you can boost it, and most importantly, how you can build customer loyalty in your store. 

What is customer loyalty? 

By definition, customer loyalty is a measure of how likely a customer is to do repeat business with a particular store, brand, or product. In other words, it is the measure of how much a customer likes your brand and the odds that you will be able to make more money from that customer in the future. 

There are a few benefits that come with cultivating customer loyalty. Most obviously, you will make more money from them. However, in addition to retaining the customer and generating more revenue from them directly, loyal customers are also likely to promote your brand to family and friends via word of mouth, which can also lead to sales from those other people.

What is the most direct cause for customer loyalty?

To put it simply, the most direct cause for customer loyalty is when a brand consistently meets or exceeds customer expectations. But how do you exceed customer expectations? Well, there are a few proven ways to do that. 

One way is to provide above-average customer service. Most businesses, especially in retail, fail to provide great customer service. You can build customer loyalty by going above and beyond to ensure that your customers are happy with their experience. 

Another way to exceed customer expectations is by using the element of surprise. For example, if a customer perceives a certain item as having a specific value and you are able to offer that product a price that is less than their perceived value for the item, then again, you can foster customer loyalty. 

Finally, by making the customers' experience feel bespoke and personal, you can build loyalty and increase the odds of customer retention. There is a reason why Starbucks asks for your name and writes it on your cup, and it's not because they can't keep track of who ordered what; it's because they understand that by making things personal, they can increase their revenue. By offering each customer a personal in store experience, you too can boost your revenue and generate repeat business. 

Remember, exceeding customer expectations is the number one reason for why customer loyalty will likely rise, and failing to do so is the number one reason why customer loyalty will likely fall. So, ask yourself, "what can I do to exceed my customers' expectations today?" and then do whatever the answer happens to be.

How to measure customer loyalty

Now, you may be wondering how you can possibly keep track of all your customers to measure customer loyalty. In fact, there is a simple, industry-standard calculation you can use to precisely measure customer loyalty and retention. It works as follows:

First, you take the number of customers you had during a given period of time. 

Next, you subtract that number from the number of customers you acquired during that period. 

Finally, you divide by the number of customers you had at the start of that period. 

This may seem a little tricky because the time period could be anything. So, to make it much easier, most companies will only run this calculation once a year, as one year is a nice round figure to use that makes the calculation that much easier, as you have all of the required figures available on your year-end reports. 

Loyalty Cards: a way to boost customer retention

A loyalty card is one of the best ways to boost your customer retention rates. In case you are unfamiliar with the term, a loyalty card is basically a customer identification card. By giving the customer some incentive to use the card in-store, such as a discount, or a freebie after a certain number of purchases, you will encourage them to frequent your store often because they perceive the incentive as having value. This is why so many stores offer 'points' programs and other similar cards. 

Keep in mind also that B2B, or business to business sales, are generally worth more in the long run than B2C, or business to customer sales. This is because businesses typically buy products in much greater quantities than individual customers. As such, it's well worth the time and effort to set up a B2B customer loyalty program as well; doing so is without a doubt one of the best things you can do to increase your overall revenue. 

How to build customer loyalty in-store?

So, to summarize, customer loyalty is tremendously important, especially in retail. The good news is that there are several ways to build customer loyalty in your store. By offering referral codes, coupons, or, best of all, loyalty cards, you can dramatically enhance your customer retention rate. By making a concerted effort to exceed the customers' expectations, you can improve customer loyalty, and finally, by making things personal and offering a custom experience tailored to each individual customer, you can increase the odds of them returning again and promoting your retail business by word of mouth.

With Mirta you can customize your items making them tailored to your customers to maximize loyalty. Check out our site to learn more!