How to Retain Customers and Build Brand Loyalty To Increase Revenue

Major Points of the Article

  • Acquiring brand loyal customers will generate significant value for your business.

  • Strong customer relationships set a foundation for how to retain customers and build brand loyalty.

  • Focus on attracting, rewarding and retaining profitable customers rather than focusing on increasing the number of new customers.

  • Be proactive and reduce customer churn by implementing CRM.


What is Brand Loyalty?

Brand loyalty is one of the six elements of brand equity and is when customers have a psychological commitment to one brand over other alternative brands regardless of price or convenience. Take Apple for example, which releases a new and more expensive iPhone every year. Although their prices are constantly increasing, people who are brand loyal to Apple will continue to buy the new iPhone without even taking a second to consider any of their competitors.


Why is Customer Retention and Brand Loyalty Important?

Acquiring brand loyal customers and moving through the seven stages of customer retention (attract, establish, create, develop, maintain, enhance, retain) over time will generate significant value for your business.


Where a loyal customer may leave when they find a cheaper alternative following your brand’s price increase, a brand loyal customer is not influenced by price and will stay with your business. This allows you to generate both a consistent revenue and charge a premium price.


Once a level of trust and comfort has been established, brand loyal customers will perceive your business with less anxiety and risk, making it easier to cross-sell new or additional products/services. Essentially, you can sell more to the same customer and be more profitable.


Brand loyal customers who have become accustomed to your business, your products and your procedures help reduce your operating costs by asking fewer questions, having fewer problems and making fewer demands.


Another benefit of customer retention is highly satisfied customers will climb up the customer ladder and become advocates for your business, promoting your brand and attracting other customers through positive word-of-mouth.


With trust and satisfaction also comes increased spending on your business. For example, if you were the Westpac Bank, brand loyal customers might open bank accounts for their children, and apply for a car loan, home loan, or personal loan. Buying more of your products and/or services because they trust you and are loyal.

Graph showing customer ladder and seven stages to retain customers and build brand loyalty over time

7 Methods to Retain Customers and Build Brand Loyalty

Now that you know why brand loyalty is so important, you might be wondering how to retain customers and build brand loyalty for your own business. Here are seven of the best ways to do it.


1. Build strong customer relationships

Building strong relationships with your customers is the foundation of brand loyalty and starts with a good fit between the customers’ needs and the value that your business is offering. Therefore, it is essential that you either deliver or exceed your promises.


However, good customer relationships are not just transactional. Developing a personal bond with your customers is just as important. Think about the barista who greets you every morning, asks about your day and has memorised your name and coffee order. How does that make you feel?


2. Focus on value, not just volume

Many businesses focus on increasing the number of customers they serve, rather than the value of each customer. It is important that you attract and acquire the ‘right’ customers. Generally, these are the heavy users who spend more money, and buy from your business more frequently and in greater volumes.


On the other hand, occasional light users are prone to brand switching and only purchase from you during a promotion (i.e. they just want the cheapest alternative). Attracting the ‘wrong’ customers will lead to high customer turnover which will be costly for your business to replace, whereas attracting the ‘right’ customers will increase revenue, repeat business, and lead to higher profitability.


3. Reward profitable customers

We just talked about switching your focus to attracting the ‘right’ customers, but how can you retain them and build brand loyalty? By rewarding them and making them feel special. One way you can reward profitable customers is through tiering. This strategy involves classifying your customers into segments based on their value and adjusting your level of service or benefits accordingly.


A prime example of tiering is airline clubs such as the Qantas Frequent Flyer membership. The Qantas Frequent Flyer member tiers move from Bronze through to Silver, Gold, Platinum and Platinum One, where customers who fly more each year (i.e. spend more) are rewarded with exclusive benefits such as lounge access, upgrades and better service. This type of loyalty program is effective as it allows you to establish emotional customer connections, encourages long-term engagement and deeper loyalty by illustrating to your most loyal customers how important they are. Plus the more they spend with Qantas, the more get. It’s a form of gamification in business that builds brand loyalty for you.

Customer tier pyramid used to retain customers and build brand loyalty with four segments from low to high profitable customers

4. Create psychological switching barriers

Switching barriers are costs that occur when customers switch from your brand to another alternative brand and can take the form of financial, psychological, emotional, time and effort.


Financial switching barriers are monetary disincentives attached to switching. A common financial switching barrier is when your bank charges you penalty fees when transferring your home loan from one bank to another. Though financial switching barriers do work, customers don’t enjoy feeling trapped in contracts and are not truly brand loyal in these situations. These customers aren’t staying with their bank because they love their services. They only appear loyal because the cost of switching banks requires too much money and effort.


Instead of locking in your customers financially, you should implement emotional, psychological switching barriers by building rapport over a long period of time. The stronger the social bond between your brand and your customers, the greater the barrier to switching as customers value the personal side of your relationship and feel reluctant to leave. Think about your hairdresser who you have become so comfortable talking to over the years that they also feel like your best friend and therapist. How could you betray them by going to someone else to get your hair done?


5. Analyse and address key churn drivers

So far, we have discussed strategies to attract and pull customers closer to your brand. But what if you notice you are losing more customers than you are retaining?


Reducing customer churn involves understanding the key churn drivers for switching and working towards eliminating those drivers. A study by Susan Keaveney on customer switching behaviour in the service industry found that 44% of respondents mentioned core service failures as the main reason for switching. This was followed by service encounter failures by 34%, deceptive or unfair pricing by 30%, inconvenience (i.e. location, business hours, delays) by 21% and poor response to service failure at 17%.


Keaveney suggests generic solutions to address key churn drivers by delivering consistently high-quality service, minimising inconvenience and ensuring fair and transparent pricing. However, you can yield a more detailed understanding of your business’ key churn drivers by conducting a churn analysis. An example of this is when staff conduct exit interviews when customers cancel their accounts to gain a better understanding of why customers are switching.


6. Regain customers

Once you have understood the reasons why your customers are switching, you need to develop strategies to win back profitable customers by being proactive. To do this, it is crucial that you have a customer database (i.e. CRM). This will allow you to keep track of all your customers’ touch points and monitor the actions your customers take when they are planning to leave.


When you notice a customer is about to switch brands, you can take pre-emptive steps to offer a unique selling point that either addresses or reverses the reason that prompted them to leave.


7. Implement a Customer Relationship Management (CRM) system

As we have just mentioned, having a Customer Relationship Management (CRM) system is essential for predicting and preventing customer churn. However, there are also a number of other advantages of CRM that can help you retain customers and build brand loyalty.


CRM allows you to identify those high-value profitable customers we talked about earlier to reward them through tiering as well as target specific customers with customisation and personalisation.


Coles uses CRM to manage their customer relationships through their Flybuys rewards program which collects information each time their customers scan their Flybuys card. This allows Coles to build loyalty by delivering personalised marketing emails each week that contains coupons, rewards and other items the customer would enjoy.


To summarise, brand loyalty starts with developing strong connections with your customers and ensures that they stick with your brand regardless of market changes. Not only can brand loyalty help maintain and grow your business revenue, but brand loyal customers can become advocates that spread positive word-of-mouth. Do you need help with building an army of brand loyal advocates for your business?


In fact, you should consider Paradelta Strategy, a business strategy and brand equity building company that specialises in this area to review and improve your business. Over the years, we have helped businesses across Australia to grow and expand, nationally and internationally and grow significantly in profits. To get assistance with your business, simply email us at hello@paradeltastrategy.com.au or schedule a no-obligation discovery call here.





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