Feedback Management

How to Build Customer Loyalty for Improving Business Revenue

How to Build Customer Loyalty for Improving Business Revenue

Running a business without defining customer goals is like shooting arrows without having any idea where the target is. Having solid customer goals helps you to strategize and deliver your customers exactly what they want.

When you serve your customers with an exceptional product or service along with a good customer experience, a stage comes when your customers continue to buy your product or service even at a high price. They are said to be your loyal customers.

If you want to attain maximum customer loyalty then you need to ace yourself in consistently meeting and exceeding customer expectations. To a large extent, customer loyalty is correlated to your business growth.

What is Customer Loyalty?

Customer Loyalty refers to the positive emotional experience or, in other words, the satisfaction level achieved on the perceived value of customer experience. When customers choose one company’s products and services consistently over other competitors, they are said to be loyal.

For example, think of yourself as a customer who needs to buy a laptop and you’re a Lenovo user, there’s a good chance you’ll consider Lenovo again. Why? There could be many reasons for choosing Lenovo like user-friendliness, great customer service, or you might have had a good experience with them in the past.

So, you’ll choose Lenovo even if they are slightly more expensive than the competition. So, you are a loyal customer of Lenovo. The same is true for iPhone users - a lot of features are the same in similar Android phones, but Apple loyalists will choose an iPhone despite it being priced higher than its competitors.

Why Customer Loyalty is important for your business?

Customer Loyalty is key to your business growth. If your customers are happy and satisfied they consistently buy your products or services and bring more business.

According to Chris Luo, VP of Marketing of a loyalty technology company,

“Loyalty programs are proven to increase customer lifetime value by up to 30% or more by increasing visit frequency, increasing spend per visit, and winning back lost customers."

Keeping your customers loyal to your brand and business is critical to business success. Customer Loyalty will help you to not only augment your business growth but also reduce customer churn and keep profits high. Apart from these, there are other benefits associated with customer loyalty.

So in a nutshell, here's why Customer Loyalty is important for every business:

1. Customer Loyalty boost Customer Retention Rate

Customer Retention is a measure of how many of your customers are loyal to your brand and return to make further purchases. Usually, businesses commit a mistake by focusing on acquiring new customers to improve their customer loyalty rate. But the fact is that customers who come back are willing to spend more money.

According to the study by Forbes, it costs a business about 5-25X more to acquire a new customer than it does to sell to an existing one. Not only that, but existing customers spend 67% more than new customers.

Sometimes it happens that business starts losing valuable customers. Check what makes these top customers become disloyal and provide them with what they want and retain them before they churn. Thus, retaining valuable customers will help you to improve the overall growth of your business including profits.

Combined research by Bain & Company and Harvard Business School has shown that even a 5% increase in customer retention increases business profits by 25%-95%.

2. Loyal Customers Act as Brand Ambassadors

When you provide quality-grade products & services along with world-class customer service support to your loyal customers, they'll likely share their positive experiences with others.

These happy and satisfied customers can work as brand ambassadors for your business and reinforce your USP (Unique Selling Proposition) to other new customers.

3. Customer Loyalty offers Constructive Feedback

If you want to grow your brand and make it more customer-centric, customer feedback is one of the best ways that can help you to improve and add more value to the product and services.

Your loyal customers will always provide you with genuine and constructive feedback, as they know your brand inside and out and can tell you the areas of your business that need improvement.

4. Customer Loyalty means Higher Profit

If you want to skyrocket the profits of your business, then your revenue must be greater than your Customer Acquisition Cost (CAC). Say, if it takes $500 to convert a customer to a buyer, then make your products and services exceptionally amazing that they readily spend at least that much with your business for you to break even.

Leading American management consultancy, Bain & Company highlighted the significance of investing in customer loyalty. According to them, a business should retain customers for at least 12 to 18 months to break even on the cost of acquisition. Thus, focusing on customer loyalty leads to higher profits and helps you to keep your business afloat.


According to the book Marketing Metrics, the success rate of selling to an existing customer is 60-70%, while the success rate of selling to a new customer is only 5-20%.

How to build Customer Loyalty?

Customer Loyalty can be built in 6 stages and each stage increases in the amount of loyalty the customers express.

Customer Loyalty-2How do you Measure Customer Loyalty?

It is being said that loyal customers stay for a longer time, make more purchases, and of course, work as brand ambassadors who will recommend your business to their friends and family.

So, there are multiple ways to check whether your customers are loyal or disloyal.

1. Net Promoter Score (NPS)

When it comes to measuring customer loyalty, then the Net Promoter Score is the best feedback metrics to use. The Net Promoter Score (NPS) is an industry-recognized metric that was incorporated by the leading management-consulting firm Bain & Company. It determines the customers’ loyalty by tracking the willingness of customers to recommend your product and service or your brand.

The Net Promoter Score comes from the simple question “How likely would you be to recommend our products and services to a friend?”. NPS ranges from -100 to 100 and customers range their willingness of recommendation on the scale of 0-10.

Based on their responses, customers will be segregated into three categories

  • Promoters: 9-10 Score - They are likely to recommend your brand to their friends and family.
  • Detractors: 0-6 Score - They are unlikely to recommend your brand to their friends and family.
  • Passives: 7-8 Score - They may or may not recommend your brand to their friends and family.

Net Promoter Score can be calculated using a simple NPS formula:

Net Promoter Score = %Promoters - %Detractors.

2. Churn Rate

To achieve the overall growth of the business, it is important to examine both the customers who stay and customers who go. With churn, growing business is next to impossible. Churn rate refers to the number of customers that don't return to your company after purchasing due to bad customer experience.

But your churned customers or disloyal customers are a great source of learning and product or service improvement to spare you from potential blunders. Thus, churn rate is a great indicator to check the performance of your business in the market.

To calculate Churn Rate use simple churn rate formula:

Churn Rate % = Number of Churn Customers ÷ Total Number of Customers ✕ 100

Total Number of Customers = Number of existing customers + Number of acquired new customers - Number of churned customers

For example, if a company wants to calculate the Churn Rate for a period of 30 days.

Day 1 - you have 300 customers

During the next 30 days, you acquire 100 new customers.

During the same 30 days, 5 of your existing 300 customers do not convert or cancel for whatever reason (assumed lost).

Total customers = Number of existing customers + Number of acquired new customers - Number of churned customers

Total Customers = 300 +100 -5 = 395

Churn rate % = Number of Churn Customers ÷ Total Number of Customers ✕ 100 = 5 ÷ 395 ✕ 100 = 1.26%

So, Churn Rate % = 1.26%

3. Referral Program

Having loyal customers is not enough, you need to appreciate their efforts for sharing positive reviews and recommending your product or services to their friends and family.

Some customer loyalty programs like the Referral Program can help you to identify new customers who come to you based on the recommendations.

For example: According to Inside Viral Loops, Dropbox employs Referral Program to boost the number of loyal customers. As part of their referral program, they offer free storage to users that refer to new customers. Apart from free storage, when a new customer signs up via referral link, Dropbox has credited their future payments to referrals.

How to Improve Customer Loyalty?

Not all happy and satisfied customers need to be loyal to your brand. A good customer experience goes a long way in building Customer Loyalty for a brand. Delivering exceptional customer experience to their customers has helped many leading brands like Apple, Amazon, Starbucks, and Harley Davidson to acquire maximum customer loyalty.

According to Braun Research, 57% of small business owners say that having a relationship with their customers is what drives loyalty. Further, this relationship entices customers to make a purchase.

We don’t have any defined formula or strategy to improve customer loyalty, but here we are compiling 4 best guidelines to improve customer loyalty.

1. Strengthen your Customer Relationship

Having transparency in communication with customers is the key to your business success. Connecting with your customers on the business ground is not enough to make them loyal. You need to make the relationship more than just business-like.

Talk to them regularly to understand their likes and dislikes, preferences, buying behavior, and much more. This personal level of engagement will not only help you to build or improve customer loyalty but also make other things better.

2. Appreciate their involvement in your brand

Ultimately your customers help you to improve your product and service and grow your brand. So, these customers need to be treated with extra care and recognition. You can make them feel special by appreciating for associating with your brand, sharing positive reviews and recommending your product or services to their friends and family.

There are various loyalty programs to encourage your loyal customers. One of them is the Referral program.

3. Take Regular Feedback

If you want to retain your customers and acquire new customers, then you need to put yourself into their shoes. Check regularly what they feel about your product & services, and brand.

Customer Feedback is one of the best ways to identify any flaws in the products and services and address the issues to make unhappy customers happy. A simplified way to get customer feedback is adding QR codes created using a QR Code Generator on your product packages which when scanned will direct your customers to a feedback form.

Through customer feedback, you can check what makes your customers disloyal and provide them with what they want and retain them before they churn. Thus, customer feedback helps you to retain customers and boost the overall growth of your business.

4. Personalize your Thank You message

According to a Rockefeller Corporation Study, 68% of customers turn their backs on companies because they feel unappreciated. You need to appreciate your customers for investing their time in giving reviews & feedback.

Always connect with the emotions of customers because positive emotions always ensure long-term customer relationships. Always send Personalized Post-Survey message/mail or express thanks to your respondents. This expression of appreciation helps you to connect your customers with your brand and improve customer satisfaction.

Learn more about the Customer Loyalty

Published on Feb 13, 2020. Updated on Jul 22, 2022.


Written by Archit

Feb 13, 2020

Experienced Content Writer and Strategist, been in the IT industry for the last 7 years. Associated with the Zonka Feedback. Passionate about writing customer experience, customer satisfaction, customer feedback, and Net Promoter Score.

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