What’s the Difference Between Customer Retention & Customer Loyalty?

By: Dawn Fiala

August 19, 2015

Through the years I’ve often noticed that people use customer retention and customer loyalty synonymously. And as they are very similar, there is one distinct difference between customer retention and customer loyalty. Customer loyalty can begin when customer retention is continually increasing.

To increase customer retention many things must be going right with your business and its relationship with your customers. Businesses with higher customer retention rates know what their customers really want and they provide proactive, consistent and personal service. Their customers are happy enough with their business to continue to come back time and time again. These businesses are retaining more and more customers resulting in a higher customer retention rate.

Once a customer has been retained and has repeatedly returned to a business, they are ready to become loyal customers. Why are loyal customers important for your business? Why should you care if they become loyal as long as they are returning every time they are in need of your product/service? You care because loyal customers refer your business to their friends, family and colleagues. These wonderful customers will stick their neck out on the line for you. They will stay with you even if you mess up. They will stay with you even when your competitor starts to move in on them. Ultimately, they will help you grow your business.

To move a customer from a mere retained customer to a loyal customer, you simply start a loyalty program. A loyalty program rewards your customers for continuing to do business with you. You can provide them with a discount or something for free. Assuming your customer retention rate is increasing and you are ready to start a loyalty program, you should already know what matters most to your customers. Whatever that is, you should gear your loyalty program around it. For example, if price matters most to your customers, you could offer a “buy 9 and get the 10th one free”.

Loyal customers can be more effective than an advertising campaign. It is important to invest the time into customer retention and then customer loyalty. The pay off will be well worth it.