In a world where advertising-supported products, SaaS products with monthly renewals, and free trials are de rigueur, customers don’t have nearly as much incentive to stick around as they used to. With switching costs reduced to typing in a different URL or downloading an alternative app on their phone, consumers can be as fickle as they’d like with minimal impact on their wallets; not to mention avoiding painful personal interactions to cancel their subscriptions or the hassle of returning a physical product.
With plenty of choices and little incentive to stay if they’re not completely satisfied with their experience, customers hold all the cards when determining how long they’ll keep using or paying for a product or service. This puts the onus on the product team to not only create an experience people want to try, but one they will want to keep using over and over again.
Customer loyalty isn’t built in a day
Take a moment now and glance at your smartphone. Swipe and scroll through the dozens of apps you’ve installed over the years, including the ones hidden away in folders.
How many have been collecting digital dust for months? How many did you use a couple of times but now they simply sit idly in the background until you finally delete them when you’re running out of memory? How many were downloaded with the best of intentions, yet never opened?
Shifting the focus to loyalty
For the sales and marketing team, that download was the win. It’s the payoff for dozens of blog posts, articles, targeted ads, word-of-mouth campaigns, and brand building endeavors. But unless that app cost a whole lot of money in the app store, your company’s business model probably relies on people actually using it and generating monthly recurring revenue versus simply downloading it. A large install base is nice, but it’s not the same as an active user base and the loyalty that comes with that.
Driving usage isn’t the same as generating trials and downloads, yet in many ways it’s far more important. The cost of acquiring new users is much higher than retaining existing ones, yet many companies direct their resources toward the former instead of the latter.
There are two primary reasons for this—it’s much simpler to throw money and time at generating trials and immediately see the results, plus the total number of trials is a metric that always goes up. And when you compare one period to the next, it’s easy to get caught up in trying to outperform the past in the quest for even more new customers.
Customer loyalty is a team effort
Customers aren’t the same as users, and creating users versus samplers tends to fall on the shoulders of the product team; although other departments have much to contribute when it comes to fostering loyalty among the customer base.
Marketing should be encouraged to look beyond capturing customers and focusing just as much on how to keep them active and engaged.
They can create content aimed at driving consistent usage, not just trial signups. From how-to guides to case studies, these show customers how to extract value from the product instead of just driving them to the “front door.”
Drip campaigns based on customer behavior can also be developed that prompt additional engagement. These can take on the form of follow-up emails after a customer hasn’t used the product for a period of time or messages based on where customers “dead-ended” because they got stuck, confused, or discouraged.
While sales is often overlooked when it comes to building customer loyalty, they play an integral role in determining who tries and buys the product. If they’re not putting the right types of people and companies into the sales funnel then it means a whole lot of eventually unhappy customers that bail out the first chance they get.
Using product analytics and personas, product managers can furnish sales with the optimal customer profiles for active and engaged users. With this knowledge, sales can retarget their efforts on prospects with the most upside and potential to become loyal users versus those who will initially convert but not last very long.
Whether they’re called account management, customer service or customer support, this team is integral in nurturing a loyal customer base. Building out a robust and effective onboarding program is critical to fostering customer loyalty as it provides the right amount of education, support, and prompting to get new users engaged and realizing the full value proposition as quickly as possible.
These teams can check up on customers to make sure they’re progressing down the adoption path, offering hints, support, training, and webinars to complement existing tutorials and documentation. And via their customer interactions they’re a unique source of input to the product team regarding any barriers customers are encountering that might delay or derail their long-term loyalty.
As the first line of support for customers, their actual interactions with them also can go a long way in establishing strong feelings about the company beyond how the product itself performs.
The Executive Team
One way to ensure loyalty becomes a company-wide obsession is to prioritize it at the top. If the KPIs and talking points coming from the corner offices don’t include loyalty-related metrics, it will be an uphill battle to rally the rest of the troops around this measure of success.
Product teams can provide the data and analysis to spur this movement as well as illustrating the revenue implications of building a loyal base versus having a constant churn of short-term dabblers.
The benefits of customer loyalty
A loyal customer base has plenty of positive implications for your product and your organization. Adopters increase the ROI of acquisition costs, particularly as the average goes up once the low-hanging fruit of early adopters are used up. It also increases ARPU (Average Revenue Per Customer) and decreases the churn rate, which is not only key to the company’s finances, but also its valuation in the eyes of investors and potential acquirers.
Loyal, engaged customers also allow the product to deepen and expand its functionality in a more meaningful way. Instead of constantly adding new things to try and entice trial, product teams can focus on meatier features and capabilities that deepen engagement, creating even more loyalty (and higher switching costs) for adopters.
And those loyal customers also become a force multiplier when it comes to word-of-mouth marketing. Instead of having a bunch of people who tell their peers “yeah, I tried it and it was OK” you can build up an army of enthusiastic fans that preach your product’s benefits to anyone who will listen. This can also help boost your product’s net promoter score.
While loyalty programs may be more commonplace for burrito joints and airlines, rewarding customers for their repeat business is a time-honored method for encouraging behaviors. Mobile games have turned the dopamine-driven, urgency-creating promise of rewards into an industry standard; prompting users to keep dropping their virtual quarters into the machine for the promise of additional perks, points, and prizes.
Even if your product doesn’t feature a leader board and score keeping, it can still benefit from a loyalty program or other reward systems for frequent usage and desirable behaviors.
“Any rewards offered need to be meaningful to the customer and you need to have a simple system for them to cash-in. Be very clear on your goals and what your baseline measures are to start with, so that you can clearly see whether or not your program is successful or needs work,” says Richard Felix of Retained, adding that “Retention needs to be a priority before investing in any referral scheme for acquisition. You want to be able to keep those who come onboard.”
Sometimes loyalty programs are built directly into the product (such as ecommerce apps offering points toward rewards for repeat usage, i.e. Starbucks’ stars and Hotels.com’s one night free for every ten nights booked). Other products limit these programs to external marketing activities, such as referral programs that provide mutual discounts to both the referrer and referee (think personalized promo codes).
Another flavor of loyalty program is an exclusive “club” for premier users. While some companies charge a fee for these added benefits and perks (such as Amazon Prime), others reward loyal users with access to additional services and features just because they’re great customers.
Regardless of how the program is structured, they all serve to reward customers for doing what’s most important to the success of the product and maximizing customer lifetime value.
Building a sticky product
Although there are plenty of factors outside the product itself that are key to fostering and growing customer loyalty, what’s inside plays a role as well. If you want customers to love a product and use it regularly, then it must be sticky.
Building a sticky product shouldn’t be an afterthought; it must be baked into the product from the beginning. Users must not only be able to immediately understand the product’s value, but there should be proper incentives for relying on its benefits and features on a continual basis.
This means designing a user experience that puts those benefits front-and-center for customers. Highlighting how much money they’re making, cost reductions, time saved or progress achieved prominently showcases why they should keep using the product and spread the word about its merits. If this can be gamified to incentivize further engagement for additional rewards, all the better.
“It speaks to the way the human brain is wired – with a natural desire to grow, learn, and compete through interactive play,” says Michael Brenner of Marketing Insider Group. “It plays on people’s natural competitive game-playing instincts, so you can motivate action and influence buyer choices.”
Measuring customer loyalty
If customer loyalty is a goal, then it must be measured to track progress toward achieving and maintaining it. There are plenty of metrics to choose from, but here are some go-to selections for adding this yardstick to your dashboard:
- Customer Lifetime Value—If customers are loyal adopters, they should be generating more revenue (directly or indirectly) over their tenure as customers. Making sure you can trace back revenue-related metrics (whether it’s subscription dollars, sessions, clicks or referrals) is key.
- Net Promoter Score—Stack up the percentage of users that would recommend your product minus its detractors to see how your product is measuring up.
- Repeat Purchase or Renewal Rate—Customers put their money where their mouth is when it comes to giving your company cash on multiple occasions. If they keep buying (or don’t cancel when an automatic billing cycle commences) then you’re likely providing enough value that they think it’s worth it.
- Active Engagement Rate—What percentage of total users are actually using the product? This rate should be increasing or at least holding steady, otherwise you have some unhappy (or simply apathetic) customers in your midst.
- Negative Churn Rate—Even when you have some customers dropping our or cancelling, if you’re counteracting that by extracting even more additional revenue from existing customers it might mean you’ve found your niche and are maximizing the value you can extract from them.
- Customer Effort Score—This rating scale examines how easy or difficult customers found it to use your product. It’s a slightly different angle than surveying “satisfaction” and gets to the heart of whether your product is making their life easier by simplifying task completion. It’s a strong indicator of both future purchase behavior and the likelihood of referral.
While there are many ways to measure, it’s best to use multiple metrics to gauge your product’s performance. A single metric may be misleading or too dependent on seasonality to provide a full picture of customer loyalty.
Draw from your own experience
As you focus on building customer loyalty for your own products, it’s always a good idea to think about what makes you loyal to different brands and products. Is it reliability and dependability? Familiarity and simplicity? Belonging to a community you connect with? Or is it impeccable personalized customer service?
No one has exclusive rights to any of these characteristics, and they’re all attainable for any product that’s willing to devote the time and resources to invest in your customers. Talk to your loyal customers, your frequent buyers, your heavy users and ask them why they keep coming back for more.
When you know what’s driving and delighting those customers, you can double-down on those qualities and feature them in messaging to be sure the rest of your user base is just as aware of and engaged in the aspects of your offering that have created your initial loyal following.