Optimize beyond the initial purchase conversion, increase repeat purchases, and gain more referrals.
For example, if you sell a meditation app that costs $5 per month, then the cost of switching is incredibly low, the competition is plenty, and you should definitely be optimizing for customer loyalty. On the other hand, if you operate a required service with zero or limited competition, like the DMV, then customer loyalty is not very relevant. The ROI of your customer loyalty investment depends on your ability to influence it in the first place and the potential effects of a hypothetical increase. For example, you gain a lifetime customer if you create a loyal customer for your detergent brand, whereas you gain a lifetime customer and the high probability of word-of-mouth referrals if you create a loyal customer for your social media management tool or brand of shoes. Nevertheless, you still risk very little if you optimize for relevancy in a market with a high switching cost and could just improve your user experience, which tends to have many positive effects.
A Harvard Business School study found that reducing the effort customers have to exert is the number one factor in creating customer loyalty. People are more likely to use something or understand the message being conveyed if it’s simple. Adhere to the simplicity principle and make it easy for your customers to try, buy, and use your products. For example, both Google and Amazon have millions of loyal users because they’re so easy to use.
Retention begets retention. The more times someone uses your product, the more likely they are to continue using it and the more likely they are to remain loyal. Designing for habit is a deep, complex, and nuanced topic. There’s no easy answer or step-by-step guide, but there are many methodologies available. The methodology you choose should ultimately be based on your product and business goals, but one popular way to model habit is by following Nir Eyal’s Hook framework shown below.
How you structure your loyalty or rewards programs depends on your business. For example, Duolingo uses points (gems), achievements (streaks), and competition (scoreboards) to add gamification to keep users coming back. Loyalty programs and gamification won’t solve retention issues, however, and you also need to ensure you have a solid product.
Customers are much more likely to stay loyal to a brand that cares about them. Take a customer-centric approach and do what you can to show your customers you care. Here’s some tactical advice on creating a better customer experience through customer support:
- Listen to complaints and resolve problems in your business.
- Work tirelessly to fix the problems of your most passionate and angry customers.
- Fix problems as quickly as you can.
- Wow your customers and go overboard
- When all else fails, respond from the top.
Customers aren’t loyal to companies, they’re loyal to what the companies stand for. Showing your audience that you stand for the same things they believe in can create powerful connections that keep customers loyal to your brand. For example, one of the main reasons Harley-Davidson is so successful is the fact that its customers feel a shared sense of values with the brand, which is reflected perfectly in their famous commercial.
Position your brand against the competition to establish an in-group vs out-group mentality among customers.
Humans want to feel like they’re part of a group. For example, Chubbies is known for their consistent antagonism towards cargo shorts, pants, and the office. By positioning themselves against these ideals, they form their own group cohesion and identity — people that wear Chubbies love fun, the weekend, and funny shorts.