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Marketing and Branding Blog | SilkCards

One Huge Difference Between Customer Loyalty and Customer Retention

[fa icon="calendar"] Aug 3, 2016 10:00:00 AM / by Brielle Yang

Brielle Yang

business holding heart and illustrating the difference between customer loyalty and customer retention

The primary difference between customer loyalty and customer retention is that customer loyalty focuses on individualized performance of each customer. Customer retention focuses on growth.

Customer retention, on the other hand, focuses on the negative and is about mitigating decline. In effect, this practice is all about the preservation of the customer instead of growth: You see the customer with one foot out the door, and then you take action to retain that customer’s business.

Related: VIP, Loyalty, and Rewards! The Difference Between Customer Retention Programs

Customer Loyalty

The customer loyalty score of each individual customer includes details such as how often a particular customer made a purchase, how much an individual customer purchases, how often the customer visits your site or when the customer made his or her last purchase from your website. Obviously, the customer loyalty score differs from one customer to the next.

It is imperative to understand, as INC contributing editor Geoffrey James points out, “There are few things more valuable (or more rare) than customer loyalty. Customer loyalty cannot be bought. It must be earned…”

Is it possible for your business to stand out, to make customer loyalty work for you?

Take the example of Green Hills Farms, a small family grocery store in New York that successfully competes with large-scale chain grocery stores, leaving large chains wondering about Green Hill’s secrets.

Green Hill decided to “Stop helping the thieves and start rewarding its loyal customers.” Those customers get personalized service, a free fresh turkey for Thanksgiving, a free live Christmas tree and many personalized rewards for loyalty throughout the year. Focusing on your most loyal customers provides a strategy to save in the long run, saving all those dollars marketing to the “thieves” of the business who you might see once a year.

Strengthening customer relationships by offering something of unique value gives you a distinct edge over competitors. Determine the customer loyalty programs and incentives that work best for your customers to grow customer loyalty.

Related: Perfect Your Restaurant By Making the Most From Customer Feedback

Customer Retention

While customer retention revolves around the customer who is on the way out, all is not yet lost. It is crucial to understand that customer retention rates measures the behaviors of your overall customer population compared with the individualized performance measured in customer loyalty.

  • To measure customer retention rate, most businesses count their customers who were active at some time, usually one year prior, and then determining how many of those customers are still active.
  • Focus on studying behaviors of former customers. Determine what happened that left those customers with one foot out the door.
  • Use information obtained from customer retention rates to develop new retention strategy and set goals accordingly.

While customer loyalty focuses on growth, therefore making it different from customer retention, both are crucial to marketing campaign strategies.

Related: The Complete Guide to Gift Cards for Small Businesses

One of the most effective tools to retain customers and increase customer loyalty is using gift card promotions or other card-linked offers, which are increasing in popularity. Contact 4ColorPrint today and get the best ideas for plastic card products and all your marketing materials.

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Topics: Business Gift Cards

Brielle Yang

Written by Brielle Yang

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