187. The 3 Ways To Build Customer Loyalty, Part 2
There are three types of customer loyalty that you need to understand
This article is sponsored by Shopify development experts
You and I recently had a conversation about repeat customers and loyal customers. Do you remember that chat?
It’s ok, I took notes.
I’ve been thinking about our talk and want to clarify something that’s been bugging me.
I’m not sure I made this clear before, but repeat customers are good. There’s nothing wrong with a repeat customer. We like repeat customers.
However, loyal customers are better. We love loyal customers.
But not everybody will be a loyal customer, though it’s possible to come close (more on that in a minute)
As a reminder:
A REPEAT customer is someone who buys from you multiple times.
A LOYAL customer is someone who will turn down a better product or better price to remain with you.
The 4 Stages of Customer Engagement
You know what, let’s take a step back for a quick sec and talk about the four stages of customer engagement. Since I’m more of a visual fella, I whipped up a little infographic thingy for you.
The goal is to move customers through these four stages and get as many people to the loyal level as possible.
Your loyal customers are your most important customers and they should be treated that way.
Loyal customers will have a higher lifetime value (LTV).
Loyal customers will pay more for your service.
Loyal customers will drive more new customers to you.
Loyal customers will forgive you faster when shit goes wrong (and at some point, it will)
Strong and long-lasting businesses are focused on building and revering their loyal following. Just ask Apple and their awe-inspiring 87% brand loyalty.
The more loyal customers you can get, the bigger your company will be. Loyalty is compounding. The revenue from every loyal customer you get this year will just be adding to the revenue you got from the loyal customers you secured last year.
This of course leads to the obvious question: “How the heck do I get more loyal customers?!”
I am so glad you finally asked - I’ve been waiting two weeks for you to ask. It’s about damn time.
The 3 Ways to Build Customer Loyalty
There are three strategies to create customer loyalty. They are:
Let’s talk briefly about each of them, shall we?
(Correct answer: yes we shall)
Manufactured loyalty is the most tenuous of all loyal customers. Why? Because it’s manufactured. It’s right there in the name.
Manufactured loyalty is based primarily on the product, not necessarily the brand. This is why manufactured loyalty can end faster than the other types of loyalty.
There are a few ways to manufacture loyalty, but they all can be summed up as “the loyalty points”.
Back in its early days, Subway did a very good job with its loyalty cards. Every time you bought a foot-long or 6’ sandwich you got a sticker on your card. After 6 stickers you got a free sandwich. Buy 6, get 1 free.
Airlines did a good job with it early on as well (and, arguably, they still do). For every mile you fly, you get a point. The more points you have, the better they’ll treat you.
With the onset of technology, the loyalty points game has morphed into loyalty payments. Starbucks provides one of the better examples of this.
You can load money onto your Starbucks app and pay for your drink and food with that app. Every time you use the app to pay, you accumulate points. Those points can be redeemed for free drinks, food, and merchandise.
The payment system is critical to manufacturing this loyalty. The only way to accumulate points is to use their payment system. Once you have money in your Starbucks app, you are firmly in their ecosystem. The only way to use that money is to buy something from Starbucks. Once you have points, the only way to redeem those points is to buy something from Starbucks.
Once you enter their loyalty eco-system, it’s hard to get out without giving up either money or rewards.
The next level of loyalty is inspirational. This type of loyalty is less about the product and more about the brand positioning. (Hint: this is much more long-lasting.)
When a company inspires you, it makes you feel good. When you feel good, you want to come back for more.
By being inspired, people can be passionately loyal to a brand even though the product itself may or may not be superior in the market.
Inspiration breeds loyalty.
Nike is one of the best examples.
Let’s be honest with each other, for a long time, Nike’s running shoes kinda sucked. Truthfully,’ I’m not sure their clothing was all that either.
Oh, and then there was that entire thing about forced child labor. Yeah, that wasn’t good.
Yet the company continued to grow. A lot.
They continue to grow because of their brand message, because of what the the swoosh represents. Their ads, their tag lines, their sponsorships, it’s all focused on inspiring and empowering people to move. Wearing Nike means being the best you can be.
Nike is the master of building massive brand loyalty, and continuing to attract consumers regardless of the products’ position in the marketplace and despite poor corporate decision-making. Love ‘em or hate ‘em, it’s pretty darn impressive.
Apple has done the same. So has lululemon. Hubspot has too. As have many many other brands big and small.
Aspirational loyalty is the next - and potentially the most challenging - level of consumer connectivity.
Aspirational loyalty is about making people feel special about their rank within a societal group. It’s about exclusivity and uniqueness.
The challenge with aspirational loyalty is that, in order to maintain the aspirational feel, the company has to be selective in who they let purchase. By definition, an aspirational brand needs to be out of reach to most people.
I can’t think of a company that does this better than American Express.
American Express started with their green card. Out of the gate, it was an exclusive offer only available to people who could afford to pay their credit card statement in full every month. It quickly became a status symbol.
It is extremely hard to expand an aspirational brand beyond that. But American Express can do hard things.
They opened the green card up to the masses who don’t pay off their credit every month, then they created a gold card, then a platinum card, and then a black card, each one an aspirational goal above the other.
American Express cards are more expensive than others, they aren’t accepted in as many places as others and their finance charges are at the high end of the spectrum. However, they continue to grow and attract a highly loyal, aspirational crowd.
With aspirational loyalty, it is less about the product and more about the special, exclusive feeling people get from being associated with the brand.
The Frailty of Loyalty
As I said up top, repeat customers are really good to have. But their dedication to you balances on shaky ground.
Loyal customers are better.
Your job as a marketer, business owner or whatever the heck you are, is to move people through the pipeline from prospect to loyal customer.
So tell me, how are you measuring loyalty now?
How do you separate the repeats from the loyals?
Who are your heroes for creating loyalty with its consumers?
Drop your thoughts in the comments or email me. I’d love to know.
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A Somewhat Relevant Quote
“Satisfaction is a rating. Loyalty is a brand."