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customer loyalty vs customer retention

Customer Loyalty vs. Customer Retention: Getting the most out of both

Rhys Williams
By Rhys Williams — March 7, 2024 -

Loyalty and retention are different, but connected, things. 

Customer retention, as it’s traditionally thought of, is narrowly focused on buying decisions. Loyalty is a more expansive concept. It is a measure of the feelings a customer has toward your brand. 

If an interaction with your brand leaves a customer feeling happy, satisfied, and valued, and they spend more money as a result, they’re actively choosing to stay loyal to your brand. Retaining a customer could be the result of inertia, forgetting to cancel a subscription for example, while loyalty means that a customer actively wants to spend money with you. 

Once you know that your customer wants to stick around and feels good about that desire, you can measure it. 

How great do they feel? Enough to write you a glowing review? Enough to tell all their friends and family how amazing you are?

The answers to these questions allows you to quantify all that great sentiment, telling you how valuable these customers are going to be to your brand. 

 

What customer retention really means

The way most people think of customer retention is flawed: RFM models only measure spending within a given period. That’s understandable, we need clear metrics on how much customers spend. But to truly understand retention, we have to broaden our definition. 

Rather than simply measuring spending, which tells you very little about what’s going on with the customer overall, judge retention by whether they’re engaging with, and taking actions to promote, your brand.

If they’re referring you to friends, sharing your brand on social media, or leaving positive reviews, they’re still around, still engaging and still driving revenue to your business, even if indirectly through customer advocacy. 

Once you start to measure these advocacy actions and gain insights into how loyal and enthusiastic your customers are, you can develop ways to drive more actions. 

 

Why you need retention and loyalty

While these terms describe different concepts, there is no absolute boundary separating customer retention from loyalty. This is especially true of ecommerce and retail, where retention usually means customers taking an active decision spend more money. Rather than relying on the inertia of failing to cancel a subscription, ecommerce brands need their customers to choose to spend again.  

 

Foster loyalty to improve retention

What you do to encourage your customers to stick with your band has a big impact on how healthy your customer base is. You could rely on discounting and paid marketing campaigns to entice customers to spend again, or you could decide the best way to keep customers coming back is to win their loyalty and trust with an outstanding customer experience. 

If you create consistent, personalised experiences that demonstrate your appreciation for your customers, your retention rates will take care of themselves. 

If you want to know more about customer retention in general, check out our comprehensive guide here.

But for now, let's look at the ways customer loyalty can feed into customer retention. 

  • Make your loyalty programme count: A welcoming, easy-to-use scheme that rewards repeat customers is a great place to start. Reward customers with loyalty points for sticking with your brand.
  • Create a community: Offer loyalty points when customers refer friends and build a community around your brand. You can monitor how much of an impact this initiative has by monitoring loyalty point uptake, giving you insights into who your most loyal customers really are. 
  • Surprise and delight: Surprise your customers with something unexpected, like a small gift, a personal note, or a special offer. Create a customer-first culture that drops moments of delight into your CX.
  • Deliver a consistent all-round experience: From the speed of your site to your post-sales customer service, every part of your business that touches the customer can build, or detract from, loyalty. Getting this right is a long-term endeavour, so get started by looking for small changes you can make. 
  • Engage with customers at the right time and with the right message: Regularly engage with customers through social media, email newsletters, or events. It takes a mature tech stack to fully understand which messages to push at any given time and to be able to do this automatically. But whatever stage of maturity you’re at, connecting the dots between software packages will give you a better understanding of when and how to speak to your customers.

 

How to build genuine loyalty

Genuine loyalty is so much more than a simple reward scheme: it's about fostering a deep-seated connection with your customers. 

As important as loyalty programmes are, genuine customer loyalty is about the whole customer experience, where heartfelt interactions mean customers make an active decision to spend money with you again and again. 

It’s a process of forging genuine connections and trust, the emotional impact of which often outweighs the transactional benefits of a purchase. 

Unlock the full potential of customer loyalty and retention with Mention Me.  Ready to transform casual buyers into lifelong advocates that spend more, come back often and bring their friends? Discover how with Mention Me. Request a demo.

 

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