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Customer retention vs customer loyalty: what’s the difference? – Part 1

10 November 2021 Myra Knoesen

Right now, many small business owners are worried about keeping in touch with their customers when they can’t connect in person.

Taylor Landis, contributor of Outbound Engine, said it’s more important than ever to use every resource you have to maintain and grow your book of business. Loyal customers are perhaps your most valuable resource — but only if you can activate them.

So, what is the difference between customer retention versus customer loyalty? Landis delves into this below.

What’s the difference?

The difference between customer retention and customer loyalty is more than a difference in vocabulary. While they share some similarities, retention and loyalty cannot be used interchangeably when describing customers.

A retained customer may buy from you again, or they might not. They may go with someone else once the time comes. They are retained simply by the fact that they haven’t shopped anywhere else yet.

A loyal customer will buy from you again and encourage others to do the same. This often results in quality referrals and positive word-of-mouth reviews. Loyalty goes beyond spending money. Loyal customers will vouch for you and serve as advocates for your business.

One study showed extremely happy customers are more than five times as likely to repurchase. In addition to a high return purchase rate, they are also almost seven times as likely to forgive a business. Those are pretty incredible stats!

As every small (or medium or big) business owner knows, the backbone of their success is people working hard to make customers happy. A customer that sticks by your business through positive and less than positive experiences is a truly loyal customer.

Do you have a loyal customer?

One way to find out the difference between customer retention and customer loyalty is to use something all consumers have seen at one point or another. Look familiar?

Image courtesy of QuestionPro

This survey is an example of the simple but effective Net Promoter Score (NPS). Companies and businesses use the NPS to see how customers perceive their business.

While it may seem like getting a majority of people rating you around 7/8 would be a good thing, those customers are neither unhappy nor thrilled. The difference between customer retention and customer loyalty lies right here. The customers ranking your company a 9/10 are the “promoters,” aka, loyal customers. Those loyal buyers will be serving as advocates for your business without you asking.

Image courtesy of QuestionPro

Those that rank your company between a 0-6 can provide valuable feedback. For most people, constructive criticism can be difficult to hear, but for a business, this information can make a big difference to your bottom line. What could you have done better to help serve them? That information may not mean these customers will ever go from a 0 to 10, but it could help push a customer who ranks you a 7 or 8 move into the loyal customer category.

In part two of the article, we take a look at how to take a customer and turn them into a loyal customer, according to Landis.

 

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