Customer loyalty is a multi-faceted metric to be sure, with more than one lever involved in a retailer’s success — or struggle — to retain existing customers. Common strategies include a mix of email marketing and retargeting ads, coupons and discounts, rewards and referral programs and customer appreciation events. Customer service and brand trust, too, have become more important than ever to differentiate and drive loyalty.
Yet, something is missing. Or rather, companies could maximize impact with all of the above strategies and still lose out on a large percentage of potentially loyal customers. Before we dive into what is missing, let’s first look at why loyalty and retention are so important — and that means debunking a long-held belief about customer retention versus acquisition.
The “5X Rule” is Outdated
No doubt you’ve heard of the 5x statistic that claims it costs five times more to acquire a new customer than it does to retain one. But did you know that the source of this data is over a decade old — possibly two — and doesn’t fully account for newer channels like social media and influencer marketing.
A more accurate consideration for the cost comparison between acquiring and retaining customers is that it will vary by industry. The truth is that both are necessary in any long-term business strategy. You can’t improve loyalty without bringing in new customers. But it is often the testimony of loyal customers that attracts new audiences.
3 Reasons Why Customer Loyalty is Crucial
Either way you look at it, keeping existing customers happy is a win-win situation, and here’s why.
- Existing customers already know your brand. You can spend less time — and ad dollars — overcoming the awareness and trust barriers and more time meeting their actual needs.
- Existing customers can generate free advertising. Whether they leave a review online, tell a friend about your service or tag you on social media, happy customers who advocate for you can supplement your marketing strategy — and your marketing budget.
- Existing customers increase your bottom line. Those repeat customers tend to spend more per purchase, according to Bluecore’s 2024 Customer Growth Benchmarks Report. In fact, in the home goods category, sales for returning customers are 13.2 percent higher than new customer sales.
One Surprising Thing That is Hurting Customer Loyalty
Customer loyalty has declined significantly over the past few years. In 2022, 79 percent of U.S. consumers claimed loyalty to certain brands and retailers. In 2023, that number dropped to 14 percent and is currently sitting at 13 percent in 2024. According to Emarsys — the omnichannel customer engagement platform that reported these statistics — the drop is directly impacted by an “ever more empowered customer” who expects the customer experience to go beyond customer service.
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Today’s customers want a seamless transition across multiple channels, regardless of where their shopping journey begins. They want the flexibility to shop where they want to, when they want to and how they want to, with the online experience matching the in-store experience and vice versa. Brands that can provide this level of fluidity are being rewarded with repeat sales. And those that can’t are losing out on loyalty. Even big box retailers are seeing this shift. On an earnings call to investors, Best Buy CEO Corrie Barry commented that shoppers are “less brand loyal than they’ve really ever been historically.”
For Independent retailers, this shift equals opportunity. Loyalty is not a given for mass retail stores and national brands. And what’s more, these larger companies often struggle to pivot quickly with too many layers from the store level to the corporate office. Smaller, more nimble businesses that are willing and able to embrace new technologies can better position themselves to create loyal fans.
Practical Ways to Improve Customers’ Omnichannel Experience
You may be wondering how to create a better omnichannel experience that meets your customers where, when and how they want to shop. Here are a few ideas to get you started.
- Use clear and consistent messaging across all channels, including your website, social media accounts, email campaigns, ad content and your physical retail space(s).
- Provide clear and specific information for online shoppers who may want to visit your store in person. Not only should your address be easily accessible but online browsers should be able to determine if a specific product they see on your website — or even in your social media feed — is available in-store. An unsure consumer is less likely to move forward and those who do decide to venture to your store may be disappointed if they don’t find what they’re looking for.
- Provide easily accessible online resources in-store. Examples of this include a kiosk for customers to browse your full inventory beyond the showroom floor or QR codes on signs and item tags that direct shoppers to access additional product information on their mobile devices.
- Offer flexible purchase and delivery options. “Buy online, pick up in store” has become increasingly popular for consumers who want the convenience of online shopping without shipping fees. Other delivery options might include same-day or next-day, smaller delivery windows or optional installation services.
An intentional loyalty plan increases the odds that customers will intentionally choose your business — over and over again.
