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What's the difference between Customer Loyalty and Customer Retention?

Customer Loyalty and Customer Retention are related but refer to different things.

What is Customer Loyalty?

Customer Loyalty is the result of a customer's positive attitude towards a brand. This includes factors like customer satisfaction, perceived value, and brand trustworthiness.
A loyal customer is one who keeps coming back to the same company, despite being offered cheaper or better alternatives elsewhere.

Customer Loyalty is built on trust, and trust is when a customer believes that a company will act in their best interest. A customer who trusts a company is more likely to continue doing business with it.

To earn and maintain trust, companies should focus on:

  • Competence, that is delivering the products and services as the customers expect;
  • Consistency, that is following through on promises and if something goes wrong, don't cover it up but be honest and fix it as soon as possible;
  • Communication, be clear, honest and share information;
  • Creating a personalized customer experience from the first contact to the post-sale, working on products/services, customer services, engaging contents and activities, using state-of-the-art technology.

    Transactional and Emotional Customer Loyalty

    There are two main types of Customer Loyalty: transactional and emotional.

    • Transactional loyalty is based on the customer's perceived value for money. In other words, they continue to buy from a company because they feel they are getting a good deal.

    • Emotional loyalty is when the customer has an emotional attachment to the brand. They feel positively towards the company and are less likely to switch to a competitor, even if it is cheaper.

      What is Customer Retention?

      Customer Retention is the consequence of Customer Loyalty. In fact, it is the percentage of customers who continue to do business with a company over a period of time. It's a measure of how well a company keeps its customers. A high Customer Retention rate means that most of the company's customers are happy and stick around for the long run. On the contrary, a high churn rate indicates that a company is losing customers.

      In other words, Customer Retention refers to a company's ability to keep its customers over time. 

      As you can imagine, to improve Customer Retention a company should work on the same elements that define Customer Loyalty, such as high-quality products/services, great customer service, and an engaging customer experience. 

      Differences between Customer Loyalty and Customer Retention

      Customer Retention and Customer Retention may sound very similar concepts. So, let's try to outline the differences between them:

      • Customer Loyalty leads to repeat purchases and word-of-mouth marketing, while Customer Retention ensures that a company keeps its customers for the long run.
      • Customer Loyalty is the result of a positive attitude towards a brand, while Customer Retention is the process of keeping customers coming back to a business.
      • Loyal customers are those who keep coming back to make purchases from the same company, despite being offered cheaper or better alternatives elsewhere. On the other hand, customers who are retained by a company are those who continue doing business with it over time, but they can be prone to change company.
      • Customer Loyalty is often measured by customer satisfaction and brand trustworthiness, while Customer Retention is usually measured by metrics like the churn rate.
      What's the difference between Customer Loyalty and Customer Retention?

      Tips to improve your Customer Retention

      The best way to improve Customer Retention is by creating lifelong loyalty. To do so, you have to build long term relationships with your customers which are strong and satisfying.

      So how do you achieve this? Here are some tips:

      • Go above and beyond to meet your customer needs and exceed expectations;
      • Keep prices competitive. Customers are more likely to be loyal to a company that offers fair prices;
      • Keep them updated on new products, services, free trials, and deals, but also on the company's news, and don't forget to share entertainment content;
      • Monitor reputation by checking customer reviews online or asking for customer feedback through social media or surveys;
      • Give customers a phygital experience using technology to connect their physical world (that of shops, live events, and physical products) to their digital world (that of the Internet and the Metaverse);
      • Implement a digital loyalty program to engage them, reward their loyalty, make them feel appreciated, and encourage new purchases or specific actions.
      • Give them tools to verify your transparency and your products authenticity.
      12 Sep 2022

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