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Customer Loyalty vs. Customer Retention: What’s the Difference?

Posted by Joe Moriarty on April 8, 2021

In Customer Retention

Both customer loyalty and customer retention are key parts of a business’ strategy. Being able to measure and affect both of them is a crucial part of succeeding in any market. Although they’re sometimes used interchangeably, it's important to understand how they’re distinctly different.

Today we’re going to cover the differences between customer loyalty and customer retention 

– delving a little deeper into how to measure both and how they play a key role in a tech company’s growth. Let’s jump in.

Spot the Difference

Before we go any further let’s quickly cover the definition of both customer retention and customer loyalty. 

  • Customer retention is a way of measuring whether an existing client continues to use your products or services. 
  • Customer loyalty is a way of measuring a customer’s propensity to engaging with your business’ products or services.

A quick glance at these definitions shows us that retention is a binary concept. Conversely, loyalty is scalable – meaning customers can be more or less loyal than one another. Also, a customer you've retained isn’t necessarily a loyal customer per se.

Customer Retention

Any business action designed to generate repeat business can be considered part of a customer retention strategy. 

High levels of customer retention give your business more opportunity to grow and do so stably. This is because there’s essentially a pool of potential revenue that you can tap into – repeatedly. Higher customer retention means that you’re increasing your customers’ lifetime value (LTV), and increasing your income from them by doing so.

Customer retention has a large number of potential metrics – but some of the most popular include customer and revenue churn; as well as the time between a client’s purchases. Churn, be it customer or revenue, simply put, is a measure of a unit's movement from one category to another. In this context, a business might look to see how many customers are cancelling monthly billing plans to help them measure churn.

If customer retention is your goal, then there are a few steps to follow before engaging in any dedicated action toward it. You need to ensure that you have the means to identify your chosen retention metrics. This could be something as simple as capturing enough data in your CRM system. 

Next, you need to make sure that you’re taking client feedback on board wherever possible. This will help you uncover how different aspects of your business, product, or service can be improved. It also serves as a way of finding out from the customer if your attempts to retain them are effective and if so, why.

In the technology sector, customer retention has become a leading growth strategy for many businesses – which has led to the market becoming dominated by SaaS and modular platforms. The idea of billing a client only for what they use, and in small but regular increments, improves the chances of retaining their business for a couple of key reasons. 

Firstly, the client can be confident they aren’t laying out high capital expenditure as the payments are spread out. Secondly, the client knows they are only being billed for exactly what they’re using, rather than for an entire software package. 

Customer Loyalty

Now that we’ve covered retention let’s move on to our second metric: customer loyalty. Think of the difference between someone who buys a new phone from the same brand every few years compared with the person who queues at midnight for the latest model each year. The brand has effectively retained both customer – but one is far more loyal than the other.

Loyal customers do more than just provide you with repeat business. While retention measures a customer’s state, loyalty looks more closely at an individual’s actions during your relationship. Key metrics for customer loyalty include a customer’s resistance to competition as well as their willingness to recommend you to their peers.

Just like retention, customer loyalty offers a great way for businesses to achieve sustainable growth. If your customers reject the advances of your competitors. while also telling their peers about how great you are, you can keep them close – while onboarding prospects through personal recommendations. 

Because brand loyalty is a representation of a customer’s sentiment toward you, improving it can be achieved in a similar way to retention. But you need to ensure that you’re capturing the right customer data and that you continually seek feedback on how effective your efforts are.

Unlike retention, where loyalty’s concerned you must focus on things like user experience and customer service as well as the product or service offering itself. This is because much of the loyalty a customer will feel is based around their interactions outside of the product use. When they speak with your sales team is there an immediate rapport? If they have a problem, is solving it a straightforward process that is taken seriously by your business?

These things must be done well consistently if you want to build up brand loyalty. Being able to understand a customer’s particular needs and alter your approach to accommodate them is also key, and something smaller more agile businesses often find easier than larger companies with more rigid structures.

But just because a large company might not be able to personalize its experience as much as a smaller firm doesn’t mean it can’t build brand loyalty. Think back to the phone example we used earlier, few companies have built brand loyalty quite like Apple. 

Where Does Training Come In?

If you want to find a great way to boost retention and loyalty, customer training is one of the best places to start. We’ve seen consistently that customers who spend money on customer training go on to spend more on your products and services – at a staggering $1:$10 ratio.

When a customer invests in training they are aligning themselves with the way you do things. This means that not only have they given up capital and time to learn from you, they’ve also brought you into their value structure. 

Once you feature as a part of their identity, and help them become successful in their own role, you are seen as a supportive figure in their professional and even personal world. There aren’t many better ways to develop loyalty in a customer than consistently helping them achieve their goals.

If the training you put together is relevant, informative, and delivered in a way that works for the user, then your customer will have no reason to ever consider moving to a competitor. By pairing high quality training with a dedication to helping your clients, retaining them and boosting their loyalty is almost a given.

If you haven’t already begun your journey as a training provider then we’ve got some great pieces on how to create a customer training program and even how to make remote training work

At Raven360 we specialize in helping our customers provide training which boosts loyalty and retention and turns their customers into ambassadors for their brand. If you want to find out more then get in touch today to find out how our digital customer academy can help.

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