What is customer loyalty? Introducing the meaning, benefits, and specific measures for improvement

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What is customer loyalty?

“Loyalty” is a word that expresses “loyalty.” Using this term, customer loyalty has come to be used as an indicator of whether customers have positive feelings about a company or brand image, and how much trust they have in products and services.

Around the 1980s in Japan, the mainstream idea was that the connection with a customer began after the customer purchased a product.

It was believed that if customers were satisfied with a product, they would continue to buy the same product in the future.

The term “customer satisfaction” also began to become popular around this time. As a result, there has been a movement to measure not only sales, but also the emotions of customers to determine how satisfied they are.

Companies conducted surveys of their customers to find out their level of product satisfaction and subsequent purchasing trends.

Initially, it was thought that there was a relationship between satisfaction and purchasing trends. However, as a result of our research, we found that even if customers are highly satisfied with a product or service, they do not necessarily continue to purchase products or services from the same company.

Even if their satisfaction level was high, if the purchasing process was troublesome or they were dissatisfied with the support system, the percentage of customers who continued purchasing decreased.

Against this background, the concept of “customer loyalty” has emerged as a word that indicates the “state” of long-term trust and attachment to a company or brand, in addition to “customer satisfaction.” It was born.

In recent years, the Internet environment has improved, and it has become easy to write opinions on review sites. Every day, we encounter situations where it is no exaggeration to say that the evaluations that are written can make or break a company’s future.

Therefore, it can be said that increasing customer loyalty holds the key to future business expansion.

Why is it important?

Customer loyalty has a significant impact on customer purchase frequency, purchase price, and number of reviews.

When we looked at the number of times a certain e-commerce site was used in a year by dividing the target audience based on high or low customer loyalty, the former used it nearly 17 times, while those with low customer loyalty only used it around 9 times. There are survey results that show that.

Similarly, a study of apparel brand spending per transaction revealed that loyal customers spend 1.3 times more than non-loyal customers. From these findings, we found that highly loyal customers tend to favorably choose a company’s products and services, and also spend more on each purchase.

In addition, a survey of sports manufacturers revealed that 85% of those with high customer loyalty would recommend the product to friends and family. Word of mouth has a significant impact on a company’s image and sales.

Some dissatisfied customers may post negative reviews, but on the other hand, customers who have a positive image of a company are more likely to share good reviews. With such a high reputation, you can expect to acquire new customers.

In this way, if you want to stabilize your company’s management, it is important to first increase customer loyalty.

How to measure

A metric called “NPS” is used to measure customer loyalty. NPS is an abbreviation for “Net Promoter Score,” and since it was announced by Fredrik F. Reichheld in 2003, it has been introduced by various companies including Google and Apple .

NPS asks customers to rate their willingness to recommend your product or service on a scale of 0 to 10. Among respondents, those who gave a score of 6 or less were classified as “detractors,” those who gave a score of 7 or 8 were classified as “neutral,” and those who gave a score of 9 or 10 were classified as “promoters.” , NPS is calculated by subtracting the percentage of detractors from the percentage of promoters.

For example, if the percentage of “promoters” for a certain product is 70% and the percentage of “detractors” is 20%, the NPS will be 50% (70% – 20%). The number increases as more people give high scores or fewer people give low scores.

The advantages of introducing NPS are that the measurement method is simple and the results are highly reliable. In addition, many companies have introduced NPS, so it can be said that it is an advantage that it is easy to compare with other companies.

On the other hand, the disadvantage is that high numbers do not necessarily translate directly to profits.

Types of loyalty

There are two types of customer loyalty. By distinguishing between these two, you will be able to utilize them for better corporate management. From here, we will explain the characteristics of each.

psychological loyalty

Psychological loyalty refers to the positive emotions that customers have, such as love and trust towards a company or the products and services it provides. Psychological aspects also affect customers’ actual behavior, such as their willingness to purchase, so we must be careful not to arouse negative emotions as much as possible.

Also, if you notice that you are experiencing negative emotions, it is important to try to convert them into positive emotions. Let’s come up with appropriate improvement measures while keeping in mind the fundamental solution.

behavioral loyalty

Behavioral loyalty refers to actual customer behavior. This includes the behavior of repeatedly purchasing products and services, and the behavior of recommending them to acquaintances.

When behavioral loyalty increases, not only will customers continue to purchase your products and services, but you can also expect them to spread word of mouth. To achieve this, it is essential to increase psychological loyalty.

What can be seen from the two royalties

Consumer types can be divided into four types based on the combination of the two loyalty types.

Both types of loyal customers are very important to a company, as they are likely to continue purchasing products in the future.

Consumers who have a high psychological level but a low behavioral level refer to consumers who have a positive image of a company, but are unable to actually purchase it for financial or other reasons.

In addition, customers who are high on behavioral aspects and low on psychological aspects do not necessarily prefer the products and services of a particular company, but simply because the store is close to their home or they can buy at a low price. Many customers will be purchasing.

Customers with low scores in both may be attached to other companies or may not yet be aware of your company.

Determining the properties of these four matrices is a very important process. Taking appropriate measures and approaches to improve customer loyalty for each group will also lead to improving a company’s management efficiency.

Specific measures to increase customer loyalty

Here are some concrete strategies to increase customer loyalty. Let’s focus on three areas: customer list, customer service, and social media.

Utilization of customer list

Once you have taken the trouble to measure the degree of customer trust and attachment to your company using NPS etc., it is a good idea to create a categorized customer list based on the results. By doing so, you will be able to understand what your customers are looking for and provide appropriate services.

Customers can be categorized into promoters, neutrals, and detractors, so it’s a good idea to change your promotion methods depending on their rank. If you do not properly promote your products, especially with customers who have critical feelings, you may not only turn them away from your products, but you may also end up spreading negative reviews. By conducting surveys and carefully checking the voices of customers received at the customer center, you can check in what aspects they are dissatisfied.

In the unlikely event that you receive a complaint, it is important to check whether there was a problem with the product itself, or whether there was a problem with the response from the support center. If you respond appropriately, a person who was in a critical position may turn around and become more favorable toward you.

On the other hand, you will need to find ways to avoid giving negative impressions so that promoters will feel more attached to your company and neutrals will give you a higher evaluation. In particular, customers who have already given good reviews will not only continue to support the company’s profits, but may also recommend the product or service to people who have not yet used it.

Quality and speed of customer service

Customer service does not only take place in stores. Customer service is required in a variety of ways, including on the phone, on the website, and via email. In these services, it is important to work with a sense of speed while maintaining high quality.

When shopping online, you don’t have the opportunity to actually meet and talk with customers face-to-face. Therefore, how quickly you can respond to customer inquiries is a way to improve trust. Similarly, it is important to respond quickly to complaints.

Connect with customers on SNS

We also recommend promoting your products and services to more customers through SNS such as Facebook and Twitter. By conducting surveys on SNS, you can listen to customers’ impressions of your products and services in a natural way. Not only that, it will also help you understand the detailed needs of your customers. By utilizing the information obtained in development with an eye toward improvement, you can not only increase customer loyalty but also increase the number of customers.

Not only are SNS easy to use, but they are also used by people of a wide range of age groups, so they have the advantage of gathering a wide variety of opinions that cannot be captured by monitoring surveys alone.

summary

Increasing customer loyalty is important in pursuing corporate profits. Even people with low customer loyalty can be changed for the better by implementing effective measures. Start by measuring your current customer loyalty and learn the correct measures to take.