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Customer Loyalty

Why Satisfaction Isn’t Enough and What Actually Builds It

Customer Loyalty

by Braden Kelley and Art Inteligencia

Customer loyalty is the most misunderstood concept in business. Organizations spend billions annually on loyalty programs — points, rewards, tiers, and perks — while the research consistently shows that programs are not what makes customers loyal. Customers are loyal because of how an organization makes them feel, how reliably it delivers on its promises, and how effectively it helps them succeed. The program is the mechanism. The experience is the cause.

This distinction matters enormously in practice. Organizations that invest in loyalty programs without fixing the underlying experience are building an expensive structure on a cracked foundation. Organizations that invest in experience first — and use programs to reinforce the relationship — build the kind of loyalty that is genuinely difficult for competitors to disrupt.

What is Customer Loyalty?

Customer loyalty is the sustained preference a customer shows for an organization — expressed through repeat purchases, resistance to competitive alternatives, willingness to pay a premium, and active advocacy on the organization’s behalf. It is not the same as customer retention (which can be driven by switching costs and inertia), and it is not the same as customer satisfaction (which measures a moment in time, not a sustained behavioral pattern).

True loyalty has three dimensions:

Behavioral loyalty — customers consistently choose you over alternatives and purchase repeatedly, even when alternatives are available
Attitudinal loyalty — customers have a genuinely positive disposition toward your organization, feel emotionally connected to it, and trust it
Advocacy loyalty — customers actively recommend you to others, defend you when criticized, and invest their social capital in your brand

Most loyalty metrics measure only the behavioral dimension — repeat purchase rates, retention rates, and NPS scores as a proxy for advocacy. The attitudinal dimension is harder to measure and receives far less management attention, which is why so many organizations are surprised when behaviorally “loyal” customers defect at the first attractive alternative: they were retained, not loyal.

The Business Case for Customer Loyalty

The financial argument for investing in customer loyalty is among the strongest in business strategy:

80% of future profits will come from just 20% of existing customers — making the retention and deepening of existing relationships the highest-ROI investment available to most organizations.
Customers with an emotional bond to a brand have a 306% higher lifetime value than those who are merely satisfied — the gap between satisfied and loyal is not incremental, it is transformational.
Acquiring a new customer costs 5x more than retaining an existing one — and loyal customers require less acquisition investment, less service investment, and generate more referral value simultaneously.
Brands that align customer experience and brand experience unlock up to 3.5x revenue growth compared to those that manage them separately, according to Forrester’s Total Experience Score research.
Customers who trust a brand are 88% more likely to be repeat buyers — trust is the foundation of loyalty, and trust is built through experience, not programs.

Why Loyalty Programs Alone Don’t Build Loyalty

Loyalty programs are ubiquitous — and their limitations are increasingly well documented. In 2026, roughly 59% of consumers are more likely to join a loyalty program than 12 months ago, and loyalty programs now account for 31.4% of total marketing budgets. Yet the research on whether programs actually build loyalty is sobering.

The fundamental problem with loyalty programs is that they address behavior without addressing attitude. A points program can change what a customer does — encouraging them to concentrate purchases with your organization to maximize rewards — without changing how they feel about you. Behavioral loyalty driven by a program is fragile: it persists only as long as the program’s economics are attractive. The moment a competitor offers a better program, the “loyal” customer transfers their purchases immediately.

This is the difference between loyalty that is earned and loyalty that is purchased. Earned loyalty — built through consistently excellent experience, genuine trust, and emotional connection — is durable. Purchased loyalty — maintained through rewards and discounts — is ephemeral.

Forrester’s 2025 CX Index reached a new low after four consecutive years of decline, with 25% of US brands seeing CX scores decline for a second straight year. This is happening at the same time that loyalty program investment is rising — a clear signal that programs are not compensating for experience failures.

The Real Drivers of Customer Loyalty

The research on what actually drives sustained customer loyalty consistently points to the same factors — and none of them are primarily program-driven:

1. Consistent, reliable experience delivery
80% of customers state that the experience a company provides is just as important as its products and services. Consistency matters as much as peak quality — customers who know what to expect from you, and reliably get it, develop a form of trust that is the foundation of genuine loyalty. Inconsistency, even when punctuated by excellent experiences, creates uncertainty that erodes trust over time.

2. Trust
Trust is both the prerequisite for loyalty and its most fragile component. In PwC’s 2025 CX research, 93% of consumers say a brand will lose their trust if it mishandles personal data. Trust is built slowly through consistent behavior and destroyed quickly through specific failures — particularly failures of honesty, competence, or care at critical moments. Organizations that treat trust as an implicit asset rather than an explicit management priority consistently underinvest in the behaviors that build it.

3. Emotional connection
Customers with an emotional bond to a brand have a 306% higher lifetime value than those who are merely satisfied. Emotional connection is built when customers feel genuinely understood, when the organization demonstrates that it knows and values them as individuals, and when interactions feel human rather than transactional. It is the hardest loyalty driver to manufacture deliberately — and the most durable when it exists.

4. Value realization
Customers are loyal to organizations that reliably help them succeed — that deliver the outcomes they purchased for, consistently and predictably. Value realization is distinct from product quality: a high-quality product that customers can’t fully use, don’t know how to use, or aren’t supported in using does not build loyalty. Organizations that invest in customer success — in helping customers actually achieve the outcomes they bought — build the kind of loyalty that survives competitive disruption.

5. Personalization
91% of consumers now prefer brands that offer personalized content and offers. Personalization signals that you know the customer as an individual — that they are not interchangeable with every other customer you serve. At its best, personalization is not about data and algorithms; it is about demonstrating through every interaction that you understand who this specific customer is, what they value, and what they need.

6. Shared values
89% of consumers prefer brands that share their social or ethical values. Values alignment has become an increasingly important loyalty driver, particularly among younger customers. Organizations whose behavior visibly aligns with values their customers hold — environmental responsibility, social equity, community investment, employee treatment — build a form of loyalty that transcends the transactional relationship entirely.

7. Exceptional service recovery
The service recovery paradox — the well-documented phenomenon where customers who experience a problem that is handled exceptionally well become more loyal than customers who never experienced a problem at all — is one of the most actionable loyalty drivers available. Every service failure is a loyalty opportunity if handled correctly. Organizations that invest in exceptional service recovery — not just adequate resolution but genuinely impressive response — consistently outperform on loyalty metrics.

The Satisfaction-Loyalty Gap: Why Satisfied Customers Aren’t Always Loyal

One of the most important findings in customer loyalty research is the non-linear relationship between satisfaction and loyalty. Satisfaction and loyalty are not the same thing, and the gap between them is where most loyalty investment goes to waste.

Research by Xerox consistently found that customers rating an experience 5 out of 5 were six times more likely to repurchase than customers rating it 4 out of 5. The difference between “satisfied” and “completely satisfied” — between adequate and excellent — is enormous in its loyalty implications. This is why organizations that manage to average satisfaction scores miss the point: the goal is not average satisfaction, it is the consistent delivery of genuinely excellent experience at the moments that matter most.

The practical implication is that loyalty investment should focus on the moments of truth — the high-stakes interactions that define whether customers feel excellent or merely adequate — rather than on incremental improvements to already-acceptable baseline experiences.

How Customer Experience Drives Customer Loyalty

Every loyalty driver identified above is fundamentally an experience outcome. Trust is built through experience. Emotional connection is built through experience. Value realization is built through experience. Personalization is delivered through experience. Service recovery is an experience intervention.

This means that the most direct path to building customer loyalty is investing in customer experience — specifically, in understanding where the current experience is falling short of the standard required to build the trust, emotional connection, and consistent value realization that sustain loyalty over time.

A customer experience audit is the most systematic way to identify the specific experience gaps that are preventing loyalty from forming — or actively eroding loyalty that has been built. An experience audit walks the actual customer journey across all touchpoints to identify:

The moments of truth being handled adequately when they should be handled exceptionally
The consistency failures creating uncertainty and undermining trust
The personalization gaps signaling to customers that they are not truly known
The service recovery processes that are resolving problems without rebuilding loyalty
The value realization gaps preventing customers from achieving the outcomes that sustain engagement

The result is not a loyalty strategy — it is a prioritized experience improvement roadmap that addresses the specific gaps preventing loyalty from forming in your specific customer base, which competitive experience benchmarking can help identify.

Building a Loyalty Strategy That Actually Works

A loyalty strategy that produces genuine, durable loyalty — not just behavioral compliance maintained by program economics — is built in this sequence:

Step 1: Understand what loyalty actually looks like in your customer base
Before investing in loyalty, define what loyalty means in your specific context. What does a genuinely loyal customer do that a merely retained customer doesn’t? How do your most loyal customers behave differently from your average customers? This profile becomes the target state for your loyalty investment.

Step 2: Audit the experience that loyalty is built on
Identify the specific experience gaps — the moments of truth handled adequately rather than exceptionally, the consistency failures, the personalization gaps — that are preventing your average customers from becoming your most loyal customers. This is the foundation that programs and campaigns are built on, and it must be solid before those investments will pay off.

Step 3: Fix the experience failures before layering on programs
The most common loyalty investment mistake is launching a program to compensate for experience failures. Programs attract customers who are loyal to the program, not to you — and they attract your competitors’ customers on the same basis. Fix the experience that builds genuine loyalty first, then use programs to reinforce and reward it.

Step 4: Design moments of truth for excellence, not adequacy
Identify the five to ten moments in your customer journey where the quality of the experience has a disproportionate impact on loyalty — typically onboarding, first value realization, first service incident, renewal, and expansion. Invest in making these moments genuinely excellent rather than merely adequate. The gap between adequate and excellent at these specific moments is where most of the loyalty value lives.

Step 5: Build loyalty measurement that captures what matters
NPS is a useful signal but an incomplete loyalty measure. Build a measurement approach that captures all three dimensions of loyalty — behavioral, attitudinal, and advocacy — and tracks them over time. Understand not just whether customers are renewing but whether they feel genuinely connected, whether they trust you, and whether they would actively recommend you unprompted.

Frequently Asked Questions About Customer Loyalty

What is customer loyalty?

Customer loyalty is the sustained preference a customer shows for an organization — expressed through repeat purchases, resistance to competitive alternatives, willingness to pay a premium, and active advocacy. It has three dimensions: behavioral loyalty (consistently choosing you over alternatives), attitudinal loyalty (genuinely positive feelings and trust toward your organization), and advocacy loyalty (actively recommending you to others). Most loyalty metrics measure only behavioral loyalty, missing the attitudinal and advocacy dimensions that determine whether loyalty is genuine and durable or merely habitual and fragile.

What is the difference between customer loyalty and customer retention?

Customer retention measures whether customers continue purchasing — it can be driven by genuine loyalty, switching costs, inertia, or lack of alternatives. Customer loyalty is a more specific condition: customers are retained because they genuinely prefer your organization, trust it, and feel positively connected to it. A retained customer who is not loyal will defect at the first attractive competitive offer; a genuinely loyal customer will resist competitive alternatives even when they are objectively similar or cheaper. The distinction matters because retention-focused strategies and loyalty-focused strategies require different investments — retention can be managed operationally, but loyalty requires experience investment.

Do loyalty programs actually build customer loyalty?

Loyalty programs can reinforce loyalty in customers who are already loyal, but they rarely create loyalty in customers who are not. The fundamental limitation of loyalty programs is that they change behavior without changing attitude — they can encourage customers to concentrate purchases with your organization, but they cannot make customers trust you, feel emotionally connected to you, or advocate for you. Behavioral loyalty driven by program economics is fragile: it persists only as long as the program’s rewards are attractive relative to alternatives. Organizations that invest in loyalty programs without fixing the underlying experience failures limiting genuine loyalty are building on a cracked foundation.

What is the most important driver of customer loyalty?

Research consistently identifies consistent, reliable experience delivery as the foundation of customer loyalty — before emotional connection, personalization, or program incentives. Customers who know what to expect from an organization and reliably get it develop a form of trust that is the prerequisite for all other loyalty dimensions. Trust, once established, is the single most powerful loyalty driver: customers who trust a brand are 88% more likely to be repeat buyers, and customers with emotional bonds to a brand have a 306% higher lifetime value than those who are merely satisfied. Both trust and emotional connection are built through experience — not through programs.

How does customer experience affect customer loyalty?

Customer experience is the primary mechanism through which loyalty is built or destroyed. Every loyalty driver — trust, emotional connection, value realization, personalization, and service recovery — is delivered through experience. Organizations that invest in understanding and improving their customer experience build the genuine loyalty that resists competitive disruption and generates advocacy. Organizations that manage experience to adequacy while investing in loyalty programs are managing the symptom while neglecting the cause. The most direct path to improving customer loyalty is identifying and fixing the specific experience failures that are preventing trust and emotional connection from forming — which is what a customer experience audit is designed to do.

What is the service recovery paradox?

The service recovery paradox is the well-documented phenomenon where customers who experience a service failure that is handled exceptionally well become more loyal than customers who never experienced a problem at all. It occurs because exceptional service recovery demonstrates, in a high-stakes moment, that the organization genuinely cares about the customer — producing a stronger emotional signal than routine good service. The paradox is real but conditional: it requires genuinely exceptional recovery, not just adequate resolution. Organizations that treat service failures as loyalty opportunities and invest in recovery processes that produce genuine customer delight consistently outperform on loyalty metrics.

Ready to identify the experience gaps limiting loyalty in your organization? Learn more about the Experience Audit →

Image credits: Google Gemini

Content Authenticity Statement: The topic area, key elements to focus on, etc. were decisions made by Braden Kelley, with a little help from Google Gemini to clean up the article, add images and create infographics.

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Why a Customer Experience Audit is Non-Negotiable in 2026

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An Analysis of ROI, Retention, and Brand Resilience

Why a Customer Experience Audit is Non-Negotiable in 2026

LAST UPDATED: May 29, 2026 at 8:20PM

by Braden Kelley and Art Inteligencia

In the current business landscape, the traditional boundaries of competition have dissolved. Pricing is transparent, product features are rapidly emulated, and global logistics have leveled the playing field for distribution. What remains as the final, most defensible frontier is Customer Experience (CX). However, many organizations operate on assumptions rather than evidence, relying on outdated journey maps that don’t account for the rise of generative AI, omnichannel complexity, and the heightened emotional expectations of the modern consumer.

A Customer Experience Audit is not merely a “health check”; it is a rigorous diagnostic process designed to uncover the “silent killers” of conversion and loyalty. It bridges the gap between how a company thinks it is performing and how the customer actually feels at every touchpoint. By systematically evaluating the friction, flow, and emotional resonance of the brand journey, organizations can transform from being reactive service providers to proactive experience leaders. Below, we explore the ten most compelling reasons to initiate this audit, backed by the latest industry data.

Top 10 Reasons to Conduct a CX Audit

1. Identify and Eliminate Friction Points

An audit maps the real-world customer journey to find where users drop off. Small changes to these “micro-moments” can yield massive returns.

The Statistic: Simplifying a complex sign-up form can increase successful registrations by 20% (Reform).
The Insight: 53% of consumers say being kept on hold alone is reason enough to stop doing business with a brand (Webex/Futurum Group).

2. Improve Customer Retention and Reduce Churn

Acquiring a new customer is significantly more expensive than keeping an existing one. Audits identify the specific negative experiences that drive customers to competitors.

The Statistic: Resolving CX issues can reduce churn by 85% (Esteban Kolsky).
The Insight: 60% of customers will leave a brand after just one or two negative experiences (Zoom, 2025).

3. Maximize Revenue and Upsell Opportunities

Satisfied customers aren’t just loyal; they are less price-sensitive and more open to higher-value offers.

The Statistic: Companies that excel at CX see an average 80% increase in revenue (Zippia/Zendesk).
The Insight: 61% of customers will spend at least 5% more with a brand they know provides a good experience (Emplifi).

4. Optimize the Onboarding Experience

The first post-purchase interaction sets the tone for the entire relationship. Audits ensure your onboarding isn’t frustrating or confusing.

The Statistic: Effective onboarding makes customers 92% more likely to renew their subscriptions (TSIA/OnRamp).
The Insight: Interactive and engaging onboarding content can boost early product usage by 55% (Wyzowl).

5. Validate AI and Automation Strategy

Many companies layer AI over broken processes. An audit ensures your bots are actually helping rather than “getting stuck in loops.”

The Statistic: AI adoption can increase the number of issues resolved per hour by 15% (Quarterly Journal of Economics, 2025).
The Insight: 80% of customers expect bots to escalate to a human when needed, but only 38% say this actually happens (Zoom, 2025).

6. Align Internal Silos

Audits reveal when different departments (Sales, Marketing, Support) are providing conflicting information, which destroys customer trust.

The Statistic: 90% of customers expect consistent interactions across all channels (SDL/Renascence).
The Insight: 54% of organizations cite “fragmented or siloed data” as their biggest barrier to leveraging customer insights (Zendesk).

7. Benchmark Against Competitors

In 2026, CX is the primary differentiator as products and pricing become easier to replicate.

The Statistic: 89% of businesses are expected to compete primarily on CX this year (Gartner/OnRamp).
The Insight: Customer-centric brands are 60% more profitable than those that do not focus on CX (Deloitte).

8. Personalize with Purpose

Generic “Dear [Name]” emails no longer count as personalization. Audits help you use data to anticipate needs and determine the most authentic places to personalize customer interactions and experiences.

The Statistic: Brands with mature personalization are 71% more likely to report high customer loyalty (Deloitte).
The Insight: 80% of consumers are more likely to purchase from a brand that offers tailored experiences (Epsilon).

9. Enhance Employee Satisfaction

When customers are frustrated, frontline employees bear the brunt of that anger. Fixing the CX reduces agent burnout.

The Statistic: 62% of respondents identified a defined relationship between Ex and Cx, stating that the impact was “large” or “significant” and measurable. (Workstep).
The Insight: Companies with strong CX leadership are 2x more likely to have engaged employees (Temkin Group).

10. Turn Feedback into Action

Most companies collect feedback, but few act on it. An audit creates a structured roadmap for implementation.

The Statistic: Acting on customer feedback can lead to a 25% reduction in churn (Forrester/Renascence).
The Insight: 77% of customers view a brand more favorably if they proactively invite and act on feedback (Microsoft).

Summary Table of Audit Benefits

Benefit	Impact Metric	Source
Revenue Growth	80% increase	Zippia/Zendesk
Retention	25-30% improvement	Martin Newman
Profitability	60% higher than peers	Deloitte
Operational Efficiency	10-15% cost savings	Martin Newman

Conclusion: From Insight to Transformation

A Customer Experience Audit is the bridge between organizational intention and customer reality. In an era defined by rapid technological shifts and declining brand loyalty, the ability to see your business through the eyes of the consumer is your greatest competitive advantage. The statistics provided throughout this analysis make a clear case: companies that invest in understanding and optimizing their journey are not just surviving—they are significantly outperforming their peers in revenue, retention, and employee engagement.

However, an audit is only as valuable as the actions that follow (for more see Customer Experience Audit 101). The true power of this process lies in its ability to align internal silos, validate high-stakes investments in AI, and foster a culture of continuous improvement. As we move further into 2026, the question for leadership is no longer whether you can afford to conduct a CX audit (aka Customer Experience Risk and Revenue Leakage Diagnostic), but whether you can afford to continue operating without the clarity one provides. By prioritizing the human-centered elements of your business, you secure not just a transaction, but a long-term piece of your customer’s future.

Download the ‘Top 10 Reasons to Conduct a CX Audit’ flipbook PDF

Image credits: ChatGPT

Content Authenticity Statement: The topic area, key elements to focus on, etc. were decisions made by Braden Kelley, with a little help from Google Gemini to clean up the article and add citations.

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Are You Getting Your Fair Share of $860 Billion?

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Are You Getting Your Fair Share of $860 Billion?

GUEST POST from Shep Hyken

According to Qualtrics, there is an estimated $860 billion worth of revenue and cost savings available for companies that figure out how to create an improved Customer Experience (CX) using AI to better understand and serve their customers. (That includes $420 billion for B2B and $440 billion for B2C.) Qualtrics recently released these figures in a report/eBook titled Unlock the Potential through AI-Enabled CX.

I had a chance to interview Isabelle Zdatny, head of thought leadership at Qualtrics Experience Management Institute, for Amazing Business Radio. She shared insights from the report, including ways in which AI is reshaping how organizations measure, understand and improve their relationships with customers. These ideas are what will help you get more customers, keep existing customers and improve your processes, giving you a share of the $860 billion that is up for grabs. Here are some of the top takeaways from our interview.

AI-Enabled CX Represents a Financial Opportunity

The way AI is used in customer experience is much more than just a way to deflect customers’ questions and complaints to an AI-fueled chatbot or other self-service solution. Qualtrics’ report findings show that the value comes through increased employee productivity, process improvement and revenue growth. Zdatny notes a gap between leadership’s recognition of AI’s potential and their readiness to lead and make a change. Early adopters will likely capture “compounding advantages,” as every customer interaction makes their systems smarter and their advantage more difficult for competitors to overcome. My response to this is that if you aren’t on board with AI for the many opportunities it creates, you’re not only going to be playing catch-up with your competitors, but also having to catch up with the market share you’re losing.

Customers Want Convenience

While overall CX quality is improving, thanks to innovation, today’s customers have less tolerance for friction and mistakes. A single bad experience can cause customers to defect. My customer experience research says an average customer will give you two chances. Zdatny says, “Customers are less tolerant of friction these days. … Deliver one bad experience, and that sends the relationship down a bad path more quickly than it used to.”

AI Takes Us Beyond Surveys

Customer satisfaction surveys can frustrate customers. AI collects the data from interactions between customers and the company and analyzes it using natural language processing and sentiment. It can predict churn and tension. It analyzes customer behavior, and while it doesn’t look at a specific customer (although it can), it is able to spot trends in problems, opportunities and more. The company that uses this information the right way can reap huge financial rewards by creating a better customer experience.

Agentic AI

Agentic AI takes customer interactions to a new level. As a customer interacts with AI-fueled self-service support, the system can do more than give customers information and analyze the interaction. It can also take appropriate action. This is a huge opportunity to make it easier on the workforce as AI processes action items that employees might otherwise handle manually. Think about the dollars saved (part of the $860 billion) by having AI support part of the process so people don’t have to.

Customer Loyalty is at Risk

To wrap this up, Zdatny and I talked about the concept of customer loyalty and how vulnerable companies are to losing their most loyal customers. According to Zdatny, a key reason is the number of options available to consumers. (While there may be fewer options in the B2B world, the concern should still be the same.) Switching brands is easy, and customers are more finicky than ever. Our CX research finds that typical customers give you a second chance before they switch. A loyal customer will give you a third chance — but to put it in baseball terms, “Three strikes and you’re out!” Manage the experience right the first time, and keep in mind that whatever interaction you’re having at that moment is the reason customers will come back—or not—to buy whatever you sell.

Image Credits: Pexels

This article was originally published on Forbes.com

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When You Don’t Have What the Customer Wants

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When You Don't Have What the Customer Wants

GUEST POST from Shep Hyken

I recently responded to a question on LinkedIn: A customer is furious about an out-of-stock item. How do you turn their frustration into satisfaction?

I added a second part to that question. What if what the customer wants is something you’ve never had in stock? Some customers might still be angry that you do not have what they want. And even if they aren’t, whether the item is out of stock or you just don’t carry it, that doesn’t mean you can’t make the customer happy.

Before we go further, let me do a very quick recap of how to deal with any upset or complaining customer. This is my five-step process for handling complaints:

Apologize for the problem.
Acknowledge what the problem is.
Discuss the resolution. (In a moment, I’ll cover this in detail.)
Accept ownership. It may not be your fault, but now you own taking care of the customer.
Act with urgency.

So, back to #3, the resolution. Is the item the customer wants temporarily out of stock? If so, when will it be in, and when can the customer expect to receive it? Giving customers information gives them a sense of control.

Shep Hyken Empty Shelves Cartoon

What if you’re out of the item and won’t get any more back in inventory? This is an opportunity to shine. If you can’t suggest a reasonable alternative, does a competitor have what the customer wants? Yes, I’m suggesting sending the customer to a competitor. Even if the sale goes to a competitor, the customer will realize you’re more interested in getting them what they want and need versus making a sale, which can go a long way in building trust that takes the relationship to a higher level.

One of my favorite examples comes from an Ace Hardware store. It was a very cold winter, and a customer was upset to find out the store was out of space heaters. Rather than say, “Sorry,” and send the customer away, the associate called a competitor, confirmed they had a space heater, and asked them to hold it for his customer. And who do you think the customer loved after that experience? (It’s a rhetorical question, but just in case you can’t figure it out … Ace Hardware!)

Any time a customer is unhappy or has a complaint, it’s an opportunity to resolve the problem and turn a Moment of Misery™ into a Moment of Magic®. For inventory issues, it’s an easy fix. Always think to yourself, even if you have to give up the sale to a competitor, “Is what I’m doing right now going to get the customer to come back?” When you have the customer’s best interest in mind, they will!

Image Credits: Unsplash, Shep Hyken

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How to Create a Good Loyalty Program

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GUEST POST from Shep Hyken

What is a loyalty program? It’s a program designed to get customers to come back. That’s different than true customer loyalty, but it’s a pretty darn good start. In our 2024 State of Customer Service and CX research (sponsored by RingCentral), we included a section of questions that focused on customer loyalty and rewards programs. Before we get into the findings, let’s look at three examples of some of the best.

1. Amazon Prime: When I Googled the question, “Is Amazon Prime a membership program or a loyalty program?” the first answer came from an NBC News article that included this description: “Amazon Prime is Amazon’s paid loyalty program. …” First, Amazon offers tremendous value for its program, including free shipping, Prime TV and more, which by itself is worth paying for. However, there is also the psychology that if you pay for something, you want to get value from it, so use it. Therefore, many Amazon customers choose Amazon over competitors because they pay for the loyalty program and want to get the most value from it. Of course, Amazon is known for its stellar customer experience, so that combined with the Prime program gives it a competitive advantage over other online retailers.

2. Restoration Hardware: When you pay $200/year for its RH Members Program, you get 25% off all full-priced merchandise and 20% additional savings on sales items. In addition, you get complimentary access to its designers. The RH program is more of a discount program than a true loyalty program, but it does what it’s supposed to do, which is to get customers to come back. Like Amazon, I Googled the RH Members Program to see what others said, and many referred to it as a “Premium Loyalty Program.” And with that premium price, an RH customer expects a premium customer experience, and Restoration Hardware delivers.

3. American Airlines: American Airlines consistently ranks high among frequent flier programs, and The Points Guy rates AA as the best for earning status without ever flying. Using the AA credit card (most airlines have affiliations with credit card companies), you can rack up miles for free trips and status. An Omnisend.com article on loyalty programs included AA as the only airline in its list of 10 Businesses with the Best Loyalty Programs. I’ve been in the AA program since the 1980s and have amassed miles, perks and status. Reaching any level of status on the airline gives you more than perks. Employees recognize when passengers are members of their program and, quite simply put, “They treat you right.”

These are examples of paid and/or free loyalty programs and membership programs. There could be a book written to describe the many versions of loyalty programs. Most are marketing programs, focused on repeat business. There are points, discounts, perks, and now, experiences. Zsuzsa Kecsmar, co-founder of Antavo, a customizable loyalty platform and publisher of the Global Customer Loyalty Report, adds, “Loyalty programs used to be earn-and-burn. You spend a dollar and earn a point. But today’s loyalty programs can do much more with experiential rewards, early access and rewarding other activities outside of purchasing.”

As mentioned, are many versions of loyalty programs. A restaurant may offer a punch card where every fifth sandwich is free. Customers may be willing to pay to be part of a “loyalty program” to get perks and discounts. With all that in mind, here are some interesting findings from our research to help you decide if the effort to create a loyalty program is worth it:

61% of customers said rewards programs were important to giving a company or brand repeat business.
46% are willing to pay more for a company or brand that has a good loyalty or rewards program.
76% are more likely to return to a company that has a good customer rewards program.
57% would choose to switch to a brand that has a loyalty program if another brand did not.
55% have recommended a brand or company to others because of its loyalty program.
39% have made an unplanned purchase just to earn more points or rewards.

If a loyalty program is part of your business model (or if you’re considering it), these findings make the point. The numbers make a compelling argument for developing a loyalty program. The last finding is especially intriguing. Almost four in 10 customers made a purchase just to earn more points or rewards.

Realize that a loyalty program is more often a marketing program. Some consumers become loyal to the program more than to the company or brand. True loyalty is about a customer being emotionally connected to a company, not just to the perks and points in a loyalty program. If you combine an amazing customer experience with a loyalty program, you have a winning combination.

Image Credits: Unsplash

This article originally appeared on Forbes.com

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The Loyalty Gap

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The Difference Between Repeat Customers and Loyal Customers

The Loyalty Gap

GUEST POST from Shep Hyken

In a recent Shepard Letter, I discussed the Trust Gap, which is the difference between an organization’s belief that their customers trust them and the percentage of customers who actually do. I’ve covered different gap concepts in the past, and it’s time to add yet another to the list, and that is the Loyalty Gap.

By the way, this is a perfect time to mention International Customer Loyalty Month, which happens every year in April. It is a time to focus some extra care and attention on your loyal customers. You can learn more at www.CustomerLoyaltyMonth.com.

So, back to the Loyalty Gap. This is the gap between the percentage of customers you think are loyal and customers who actually are loyal. If you’ve been following my work, you may remember that I preach there is a big difference between a repeat customer and a loyal customer. A customer that comes back again and again could be mistakenly labeled as a loyal customer. Before we can call someone a loyal customer, we must find out why they keep coming back and buying from us. And there are many reasons why customers might return that have nothing to do with being loyal. For example:

1. The Price Is Lowest: Customers who buy based on low price aren’t loyal to you. They are loyal to the price. The moment a competitor has a lower price, the customer disappears. And you thought they were loyal!

2. The Location Is More Convenient: Does the customer buy from you because you are closer than your competition? You don’t know if you don’t ask. As soon as a competitor moves into the area, if their location happens to be more convenient, the customer moves on. Again, you thought they were loyal!

3. The Customer Is Satisfied: This one is super important. There’s a big difference between a satisfied customer and a loyal customer. Satisfied customers are just … satisfied. The experience is good, but not great. It’s enough to get them to come back until they find another brand or organization that satisfies them just a bit more.

A loyal customer not only comes back but also spends more than a typical customer and evangelizes your brand by sharing word-of-mouth referrals. This is because there is an emotional connection. Maybe it’s the way the customer is treated. Or maybe there is an employee the customer loves to work with. Maybe it’s the confidence that’s created when a customer interacts with the brand. There are many reasons, but they all evoke an emotional connection.

So, what’s the Loyalty Gap in your business?

Do you understand your customers’ buying patterns?

Do you know why they come back?

In a perfect world, there shouldn’t be a gap. But that’s not reality. There will always be customers who don’t have the emotional connection needed to drive loyalty. There’s nothing you can do but keep trying. For the rest of your repeat customers, understand why they return, then keep delivering the experience that makes them want to return.

Image Credit: Pexels

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How to Turn Customers into Superfans

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How to Turn Customers into Superfans

GUEST POST from Shep Hyken

What do Apple, Zappos, and Chick-fil-A have in common? They are considered “rockstar” brands. Their loyal customers—and they have many—keep coming back and evangelizing these brands, singing their praises to the world. The customers are also willing to defend their favorite brand should someone say something negative about it.

There is a word to describe these types of customers. They are fans, and more specifically, they are superfans. Brittany Hodak may be the foremost expert on the concept of creating superfans in business. In her recently published book, Creating Superfans: How to Turn Your Customers Into Lifelong Advocates, she defines a superfan as “a customer or stakeholder who is so delighted by their experience with a brand, product or service that they become an enthusiastic advocate.”

Hodak’s mantra is:

If your customers aren’t telling their friends about you, you’re in trouble.

So, how do you get your customers to come back, defend your reputation, and spread compliments about you? Follow Hodak’s SUPER model. The word SUPER is an acronym. To whet your appetite for this important literary contribution to the world of customer experience, I’ll share what each letter of the acronym means, followed by my commentary. Some of this is my own interpretation of Hodak’s model, but you will get the idea. So, here is Brittany Hodak’s SUPER model:

S – Start With Your Story: Sharing your “story” is powerful. Just make sure it’s the story that will get your customer excited about doing business with you. How should it start? Ask yourself, “Why does a customer want to do business with us (instead of our competition)?” Responses that are truly different will be important to the story. Hodak says, “Your story is your superpower.”

U – Understand Your Customer’s Story: Why do customers need you? The answer is their story, and when their story intersects with yours, you have the opportunity to do business, grow the relationship and create a superfan.

P – Personalize: The concept of personalizing the experience is a hot topic. Using data about the customer (in the right way) will create a connection. Abuse the data, and the customer will disassociate from you. Hodak uses Chewy, the online pet food, and supply retailer. The company not only know its customers’ buying habits but also often knows their pets’ names—and they use that information to create a better relationship and emotional connection with the customers. This is an excellent example of personalization.

E – Exceed Expectations: People often think exceeding expectations is difficult. The reason is because they confuse exceeding expectations with going above and beyond. There are opportunities to do that in special situations, but most of the time, you just need to be a little better than expected. Even the slightest bit better. When you’re at a restaurant, and you are told the wait will be ten minutes, but your name is called in eight minutes, that’s an example of exceeding expectations by being slightly better than expected. The key is to do this consistently. You want your customers to use the word always followed by something positive, such as, “They are always helpful,” to describe their experience with you.

R – Repeat: I love the idea of repeat. Create the system with an outcome that drives a positive customer experience every time. The key word here is system. A system can be scaled and is repeatable. It is consistent, and customers love consistency. If the initial experience was good, the next time they come back, they want more of the same. When it happens again and again, the customer “owns” the experience. They can count on it happening. Their confidence about the experience is so high they not only come back, but they also tell others. Creating superfans is an everyday, never-ending effort. Do what works again and again.

Okay, I admit it. I’m a Brittany Hodak superfan. I fall under the category of evangelizing her brand, and recommending her to clients, and now I’m writing about her book. I’m a perfect example of one of the ways Hodak describes a superfan, which is a great way to wrap up this article:

Superfans are customers who create more customers!

This article was originally published on Forbes.com.

Image Credit: Shep Hyken

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Trader Joe’s Loyalty Program Has No Points or Perks

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Trader Joe's Loyalty Program Has No Points or Perks

GUEST POST from Shep Hyken

If you’ve shopped at a Trader Joe’s grocery store, you are familiar with their combination of high-quality products and a great customer experience delivered by friendly, helpful, knowledgeable employees, also known as teammates. The retailer has an incredibly loyal base of customers. Its loyalty program, if you want to call it that, has nothing to do with points or perks. There’s no loyalty card to punch. Its loyalty program is simply about creating enough value to turn a one-time customer into a loyal customer.

This type of loyalty is the envy of many retailers—and any other business with a formal “loyalty program.” It’s been my position that most loyalty programs aren’t really based on loyalty. They are marketing programs that drive repeat business. Often there are incentives such as points that accrue for free merchandise and discounts. Take the airlines, for example. Almost all have a frequent flier program that offers points/miles and perks to returning passengers. The more you fly, the closer you get to a free trip or a complimentary first-class upgrade. But what happens if the points and perks go away? Would the passenger still choose that airline? Or would they go with an airline that offers a lower price or a more convenient schedule?

True loyalty is about an emotional connection. The customer enjoys the experience, the products and the employees so much that they wouldn’t think of doing business elsewhere. And as a bonus, this level of loyalty makes price less relevant.

This is precisely what Trader Joe’s has done. Without the typical customer loyalty program, it has created an experience that drives repeat and loyal business. In a sense, it is a throwback to an era of simply taking care of the customer with a good, old-fashioned customer experience and product quality. Furthermore, they don’t participate in e-commerce and other shopping options that you might find at other grocery stores and retail outlets.

Is this type of loyalty sustainable? It’s worked in the past. It’s Trader Joe’s brand reputation. Will it take them into the future?

In a recent RetailWire article, experts weighed in on the question, “Will the lack of e-commerce, a loyalty program or discounts found at other grocers become bigger liabilities for the chain down the road?”

Neil Saunders, managing director of GlobalData says, “The lack of e-commerce at Trader Joe’s may not be everyone’s preference. However, the proposition is so strong across so many attributes—value, quality, taste, uniqueness of offer—that most consumers are willing to overlook this and visit stores. This shows up in Trader Joe’s strong trading numbers over the past few years: it has gained market and shopper share.”

Bob Amster, principal at Retail Technology Group, says, “The store experience is the brand at Trader Joe’s. They are unequaled in their segment.”

George Anderson, editor-in-chief at RetailWire, weighs in with his comment, “Trader Joe’s rationale has been that it offers the lowest price possible to customers on a day-in and day-out basis and that added expenses such as loyalty programs will only drive prices up. The company counts on developing true loyalty with its customers, in the human sense, by offering products they value and backing them up with a no questions asked and no receipt required guarantee. It also excels at hiring people who are true brand ambassadors who customers value for their knowledge and willingness to help. If there was ever a retailer that didn’t need a loyalty program—Trader Joe’s is it.”

There are many more comments, and most of them reflect the views of the experts above.

Trader Joe’s is a benchmark of value that other retailers (not just grocers) should aspire to reach. They have good products, competitive pricing and incredible service. That keeps them in the game—and at the top of the game. And as for a loyalty program, Trader Joe’s already has one. It’s their customer experience. That’s what gets customers to say, “I’ll be back!”

This article originally appeared on Forbes

Image Credit: Pixabay

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Emotional Connections Drive Customer Loyalty

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Emotional Connections Drive Customer Loyalty

GUEST POST from Shep Hyken

There are many reasons a customer might come back to a business again and again that have nothing to do with loyalty. A repeat customer can come about because of a convenient location, a lower price, a bigger selection and more. But those don’t create loyalty. It just looks as if the customer is loyal.

Actually, you could say that they are loyal—but not to the company. They are loyal to the price, convenient location, etc. The customer who comes back again and again for those types of reasons can deceive you. Not on purpose. It’s their behavior that imitates loyalty. Consider a retail store with repeat customers (not loyal customers), and ask this: If a competitor moves into the neighborhood, has a more convenient location and advertises lower prices, would the customer switch?

If you want your customers to be loyal, you must find a way to create an emotional connection.

Meet Zhecho Dobrev, a principal consultant at Beyond Philosophy and the author of the newly published book, The Big Miss: How Organizations Overlook the Value of Emotions. I interviewed Dobrev for an episode of Amazing Business Radio, and he shared his insights on what drives loyalty.

According to Dobrev, “Emotional connection creates preference over the competition. Customers don’t just come back out of convenience. They see a difference between doing business with your company and other companies.” His research has found that the amount of business a company gets is dependent on its relationships with customers.

The relationship you want with customers is rooted in emotion. A good experience creates a positive memory. Dobrev is a fan of Professor Daniel Kahneman, who says that people don’t choose between experiences. They choose between the memories of their experiences.

Often, memory is based on interactions customers have had with a salesperson, customer support or a process that a company has. Ideally, it’s a good memory. And when the customer comes back a second time and third time and has similar experiences, the memories of those interactions become an owned experience. The customer expects it. They know it’s going to happen, just like last time. That’s where the relationship starts to solidify, with a consistent and predictable experience. It goes to an even higher level when the customer feels valued and appreciated. Ultimately, the brand becomes more important than just a place to stop and do business.

Dobrev surveyed more than 19,000 customers in the U.S. and UK and determined that emotional attachment was the biggest driver of value, being responsible for about 43% of business value. Compare that to a company that promotes product features, which came in second at 20%. “Customers don’t know what they really want,” says Dobrev. “They say they want a product, but what really drives business value is emotional attachment.”

Emotions can start to develop even before the customer chooses to do business with a company or brand. Emotions can be found in a marketing strategy. Consider the automobile manufacturer BMW, which in the 1970s used the slogan The Ultimate Driving Machine — a description of the car — until it switched its focus to the emotion of owning and experiencing the car with the slogan BMW is Joy. While BMW still includes The Ultimate Driving Machine in its descriptors, today’s slogan is Sheer Driving Pleasure. Joachim Blickhäuser, head of corporate and brand identity at the BMW Group, says, “The ‘Sheer Driving Pleasure’ slogan delivers positive emotions and does exactly what a claim should.”

While an emotional connection may help create customer loyalty, you can’t ignore other competitive features. While loyalty makes price less relevant, there is a breaking point. Being easy to do business is also a big factor, so eliminate the friction that will potentially cause customers to run to your competition.

So, here is your assignment. Ask your customers, “Why do you do business with us?” Their reasons will help you define the differences between features and benefits compared to feelings and emotions. Once you have your features and benefits in place, work on creating emotional connections, and your customers will come back for the right reasons—because they love doing business with you.

This article originally appeared on Forbes

Image Credit: Pixabay

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Black Friday Shows No Loyalty

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Black Friday Shows No Loyalty

Marketers love to hold up points-based loyalty programs as proof of their contribution to their company’s financial success through repeat purchase behavior.

But traditional loyalty programs are nothing more than complicated, and expensive to manage, discount programs.

Black Friday is a faux holiday devoted to the religion of discounting.

This begs the question…

Do Black Friday deals do anything to create loyalty of any kind?

The idea behind Black Friday deals is almost as old marketing – the loss leader.

By offering one or more items at a substantial discount, the company and its marketers hope that a larger than normal group of potential customers will flood the shop (physical or virtual) and buy the loss leader (aka Black Friday deal) AND many other items they may (or may not) have been intending to buy.

Whether this is how it plays out in practice is a closely-guarded secret and debatable at best. Complicating the situation is the fact that Black Friday has become a virtual arms race that companies of all shapes and sizes are almost forced to participate in.

This means that nearly every retailer is offering some sort of Black Friday deal today, resulting in consumers:

Best Case — Your existing customers start at your shop (online or virtual) and make a transactional purchase of one of your Black Friday deals (usually unprofitable for the company) and hopefully many other products or services to make your existing customer’s overall purchase profitable, plus they tell their friends and families to shop with you

Worst Case — Your existing customers buy nothing or only your Black Friday deals, tell none of their friends and family, and you spend a lot of money on advertisements to attract non-customers to your shop that only buy your Black Friday deals

One of my marketing professors at London Business School – Mark Ritson – recently published a very funny video on the relationship between marketers and consumers:

Bridging the Gap Between Black Friday Deals and NextGen Loyalty

Marketers have an overly optimistic perspective on customer loyalty and their implementations of customer loyalty programs.

The reality is that very few customers are loyal and much of what we speak of as customer loyalty is no more than repeat transaction behavior.

In my article Next Generation Loyalty – Part One I look at how to excavate sources of NextGen Loyalty using Loyalty Archaeology™.

True loyalty (customer or otherwise) is when someone engages in a behavior that is not in their most obvious best interest because of a higher commitment.

Very few customers will ever behave against their best interests, but engaging in Loyalty Archaeology™ you can better understand where the value comes from in your products & services and work backwards to identify potential sources of customer loyalty.

Continue reading Next Generation Loyalty – Part One here.

Image credit: Pixabay

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