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What is Customer Loyalty?

By Sherry Holetzky
Updated May 16, 2024
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The term customer loyalty is used to describe the behavior of repeat customers, as well as those who offer good ratings, reviews, or testimonials. Some customers do a particular company a great service by offering favorable word of mouth publicity regarding a product, telling friends and family, and adding them to the number of loyal customers. Customer loyalty includes much more, however; it is a process, a program, or a group of programs geared toward keeping a client happy so he or she will provide more business.

A company can help build loyalty in some cases by offering a quality product with a firm guarantee. Others provide free offers, coupons, low interest rates on financing, high value trade-ins, extended warranties, rebates, and other rewards and incentive programs. The ultimate goal is happy customers who will return to purchase again and persuade others to use that company's products or services. This equals profitability and happy stakeholders.

Customer loyalty may involve a one-time program or incentive, or an ongoing group of programs to entice consumers. Buy-one-get-one-free programs are very popular, as are purchases that come with rebates or free gifts. Another good incentive is offering a risk free trial period for a product or service. Also known as brand name loyalty, these types of incentives are meant to ensure that customers will return, not only to buy the same product again and again, but also to try other products or services offered by the company.

Excellent customer service is also key. If a client has a problem, the company should do whatever it takes to make things right. If a product is faulty, it should be replaced or the customer's money should be refunded. This should be standard procedure for any reputable business, but those who wish to develop customer loyalty on a large-scale basis may also go above and beyond the standard. They may offer even more by way of free gifts or discounts to appease the customer.

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Discussion Comments

By anon325819 — On Mar 18, 2013

I think everyone here is point on. Yes, consumers expect top-notch customer service. They also expect great products and service. Without that, nothing you do is going to matter. However, if you have all your ducks in line regarding desirable products and/or services and good customer service, you will still fall short.

You really do need a high-end loyalty software program for several reasons. Customers expect it. It's the only way to interact on a personal level with your customers, which they expect as well. Your competitors likely have one, so if you don't, you're behind the curve. It's the only way you will have visibility into which customers are good, which are average and which ones are about to leave or have left.

It's not just about points, rewards and discounts. It's about collecting enough data so you know your customers, who they are, what they spend, what they like and how often they visit.

By anon281970 — On Jul 26, 2012

There is also an option called Perka which is a cell phone based app that rewards customers for purchases - the more purchases, the better the rewards.

By anon274387 — On Jun 11, 2012

I have studied the concept of true loyalty. Guess what? Loyalty can't be bought; it needs to be earned. It is based in trust and respect. In my white paper I have made the comparison between love and loyalty. There are a lot of some similarities. If you define loyalty in teams of friendship, you will succeed.

By anon254104 — On Mar 12, 2012

There is a very unique customer loyalty program concept that has a free trial and setup called Cinco Squared. It's worth checking out.

By Emm Cin — On Nov 20, 2010

yes it's right. good customer service doesn't ensure customer loyalty, if we expect loyalty from the customer, then we have also to give something extra to them just like incentives, rewards, bonus, gifts and many other things that are available.

By AshishK — On Apr 15, 2010

Hyperbolize sales (cross or up) to the present customers or consumer is fundamental to retention strategy of any business.

Higher customer retention is the key to customer loyalty. Customer loyalty yields higher profit margins. Internet is the key to higher retention, loyalty and profit margins. In a nutshell, higher sales.

The internet is instrumental in the way customers (not the prospects) are driven through the retention funnel.

It's a proven fact that retention acts as synergist to profit margin. Success has never been a matter of chance. Personalization, behavioral profiling and targeting, psychographic profiling, transactional messaging, co-branding, affinity modelling, customer convenience circle, value added promotions, CRM, Social, ethical, relationship models, circle of customer influence, etc. are identifiers of retention value pitch.

Is it just the first time experience that makes a customer becomes consumer of your products or services? What are the loyalty traits of the customer centric or customer driven organization? What are the tactics and tools which makes organization not only acquisition leader but customer driven as well? What does it take to become not only a retention leader, but also a loyalty leader in this digital age?

My 2 cents and food for thought!

By anon66018 — On Feb 17, 2010

I think only good customer service is not enough to gain the customer loyalty, but also that incentive programs are required, for example using bonus cards, will help to increase the customer loyalty.

By anon64258 — On Feb 06, 2010

I think customer loyalty is achieved through excellent customer service. However, it is also important to ensure good product quality which can win more customers for the organization even when the organization is not physically present to showcase their quality of service.

By anon57031 — On Dec 19, 2009

First of all i thank all of you for creating such a nice website.

Actually, when we are talking about customer loyalty, which is closely related to many things like satisfaction, customer value, expectation, trust and so on, the main element which can create more loyalty is dealing with people in person. Organizations need to hire and train polite employees, because human interaction is very important for a good impression

thank you. Dr. S. Akbar

By anon31689 — On May 10, 2009

Customer loyalty is the behavior of repeat customers, offering favorable word of mouth to friends and family about a certain product and/or organization, but it doesn’t always mean these friends and family will become loyal customers. They may already be loyal to another product/organization, or may have had a bad experience with the organization being spoken about, although it may well add a ‘seed’ of loyalty that could grow into ‘blooming’ loyalty over time.

By Aiman — On Mar 11, 2009

It's true, but how can we develop a loyalty program with spending less money?

By anon26938 — On Feb 21, 2009

One way I've done well increasing my customer loyalty is by using a loyalty/gift card tracking program called stickystreet. It's for small businesses-so cheap and works great! Can't tell you how much it has helped. Just a tip...

By anon16473 — On Aug 07, 2008

I agree with sikkim, excellent customer service is the ONLY way to differentiate your company from the competitors. Customer will always come back to a company that the service providers know them and connect with them on the human level.

By anon16356 — On Aug 04, 2008

Well on one part you're right, but now a days, people expect/want more than just customer service. Incentive programs are a great tool to achieve some kind of loyalty.

By sikkim — On Mar 13, 2008

I think that good customer service is the single best way for a business to ensure high levels of customer loyalty.

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