Customer Loyalty vs. Customer Retention: They’re Not the Same
by Veronica Stone on December 21st, 2007
"If you do build a great experience, customers tell each other about that. Word of mouth is very powerful." This was said by none other than Amazon.com founder Jeff Bezos. It provides an appropriate introduction to customer loyalty and customer retention; two well-known, but poorly understood concepts in today’s business world.
So, just what is customer loyalty? How does it compare to customer retention? Many professionals use the two terms interchangeably. And why shouldn’t they? They look similar. They sound similar. So, what’s the big deal?
The answer lies, not necessarily in their meaning, but in how they affect your business and potential profits. Let’s take a look at customer retention first.
CUSTOMER RETENTION 101:
You hear so many clich�s that play on the phrase "customer retention." "Retention is the key." "It’s twice as hard (and expensive) to find a new customer as it is to keep an existing one." These are just some examples, but you hear them everyday in the professional world. And rightly so. It makes perfect sense to want to keep the customers you have.
Most companies have some sort of customer retention program. This usually involves direct mailings or telephone services that keep the company in the front of your mind and offer you the newest product or service they have to offer.
The second part of customer retention is servicing customers as they have issues or problems that come up. This is usually handled with a customer service desk, phone number, or website that consumers or intermediaries can go through to initiate the resolution. Many times, these avenues can create additional stress for the consumer due to waiting periods, unknowledgeable associates, or rules and regulations.
As you can see customer retention focuses on impersonal contact and is handled as a numbers game. The more customers a company contacts with retention propaganda, the better chance of keeping those people as customers. Problems are dealt with in a reactive manner.
Now, let’s examine customer loyalty.
CUSTOMER LOYALTY 101:
Many companies are uneducated on this aspect of the customer chain. Customer retention programs and an influx of innumerable new competitors have shadowed true customer loyalty to the point of nonexistence. But, there is hope. Recent studies have shown that brand loyalty, as well as customer loyalty, is making a comeback due to the management of some savvy new marketing and loyalty campaigns.
Customer loyalty is so much more than customer retention. The word loyalty itself implies a deeper connection between business and consumer. When a customer has that kind of connection with a product or service, they will fight for your company even if you wrong them.
Simple, right? Well, it’s not as easy as it sounds. Customer loyalty doesn’t happen overnight. It also doesn’t happen with a single phone call, a simple piece of direct mail, or a groovy website. Customer loyalty begins with trust.
Successful companies that are practicing customer loyalty right now have gained the trust of their customer base. This is achieved by a more personal marketing campaign to the consumer. People want to genuinely feel like the company has an interest in them, not just their money. This starts with telemarketing that does not rely on a script and a time limit. Real professionals need to be on the line, not an $8/hour college student.
The second part of customer loyalty is giving the customer a sense of belonging. Everyone wants to be a part of something great. Invite the customer along on your journey, let them know you will be there to help with every aspect along the way, and you could gain customers for life.
As you can see, customer loyalty and customer retention have some very important differences. Retention has a reactive nature, while loyalty has proactive one. If a company is adept enough to focus more on loyalty than retention, only the sky is the limit.
