A customer loyalty model is a strategic approach to business management that puts the retention of existing customers first.
It involves using systems, processes, software, and internal resources to increase customer loyalty. This, in turn, will help you reach other business objectives, including revenue growth and easier customer acquisition.
If you’ve often thought of customer loyalty as solely a B2C concern, think again.
At CustomerGauge, we firmly believe there are many advantages of customer loyalty in B2B.
For example, we helped H&R Block Canada build their “Refer a Friend” loyalty program. As a result, the company has seen a 17-point increase on their NPS score.
“The first step to understanding how our customers feel is to measure it,” Hilary Zaharko, VP of Marketing at H&R Block Canada, said. “From there, we can work to alleviate pain points our customers are experiencing. Our growth in our NPS Score is a result of us doing just that.”
That’s exactly why you need to invest in a customer loyalty model that works for you.
Let's take a look at 5 different options:
5 Customer Loyalty Models to Consider
Customer loyalty models are the frameworks you can use to strategize, measure, and improve loyalty and customer retention.
But while they all have the same goal, they come in a variety of forms, from ways to understand different customers to structured frameworks for growth. For businesses serious about securing continued loyalty, we recommend adopting a plan for action to drive your bottom line.
As you’ll see, Account Experience, which incorporates the Net Promoter Score, does exactly that.
1. Net Promoter Score
It centers around one simple question:
On a scale from 0 to 10, how likely is it that you would recommend our company to a friend or colleague?
It’s usually followed by several follow-up questions.
Once you’ve regularly surveyed enough customers, your average NPS score offers insight into the health of your customer base, including how loyal they are and how at risk they are of churning.
Knowing and consistently monitoring your NPS can help you to:
Understand your customers better by listening to their wants and needs
Tackle customer churn by identifying and addressing issues before they leave
Quantify word of mouth — happy customers are more likely to refer you to others
Benchmark your customer experience (CX) against your competitors
NPS is fundamentally about improving customer experience.
The knock-on effect of this, though (and it’s an important one), is that your customers stay loyal to you.
In fact, an incredible 94% of US consumers are likely to purchase again from a company that provided an excellent experience.
How to Calculate Your NPS
Calculating your NPS is a four-step process:
Run NPS surveys. Start by asking the ultimate NPS question (the one we mentioned above). Be conscious that how you design your NPS surveys will affect your response rate, the accuracy of results, and the usefulness of your data.
Divide your answers into detractors and promoters. How many of your customers are promoters (answered 9 or 10)? How many are detractors (answered 0 to 6)? From the results of your survey, calculate the percentage of each category.
Use the NPS formula. Calculate your headline NPS score using the following formula:
NPS score = % of promoters – % of detractors. Your score can be anywhere between -100 and 100. The higher the better.
Benchmark and keep measuring. Your NPS score is only useful if you measure it consistently over time. Use your current result as a basis to grow; it’s the only way to get an accurate sense of how you’re performing in the long run.
Find a Net Promoter system that works for you. NPS isn’t just about the score. It’s about what you do with that score that matters.
Need some help? We’ve dedicated our entire business to driving customer loyalty in B2B, and have been voted the leading solution for B2B customer experience management by Gartner.
2. Account Experience
CustomerGauge’s unique way of embedding your NPS score into your business is through our tried-and-tested framework, Account Experience.
We developed this system as a means of taking NPS to the next level for B2B and B2B2C businesses who want to act immediately to improve customer loyalty and achieve sustainable growth.
At the heart of Account Experience is what we call Monetized NPS, which brings your NPS score in line with your financial data. This way, you can track the revenue impact of NPS in real-time.
Like NPS, Account Experience is all about securing customer loyalty by making the customer experience a business imperative. But by monetizing NPS, Account Experience enables you to tie customer experience data closer to your revenue.
How to Use Account Experience
Account Experience focuses on three simple steps:
Measure. Account Experience is all about helping you ask the right question to the right people at the right times. The first step involves using NPS surveys to determine your score and identify where your customer experience can improve.
Act. Once the data is measured and analyzed, it’s time to act on it. Respond to your customers by closing the loop while optimizing business processes. If you do this quickly (within 48 hours or so), you stand a high chance of converting your detractors into passives.
Grow. By adding revenue figures to your NPS and customer data, you can identify opportunities for growth within your customer base. In this way, creating a stronger, more loyal base can have a material, long-term impact on your bottom line.
3. Apostle Loyalty Model
The Apostle Loyalty Model was developed by Harvard Business School. It divides your customers into four categories, not unlike NPS: loyalists or apostles, defectors, mercenaries, and hostages.
Loyalists/Apostles are your promoters. They’re satisfied with your product or service and are likely to continue to use it and recommend it to others. You want to keep these customers, and more of them.
Defectors are your detractors. They’re not happy with your product or service and are likely to churn. You better act quickly if you’re going to hang onto them.
Mercenaries are your passives. They’re satisfied, but it’s best you keep a close eye on them as their current satisfaction doesn’t guarantee their future loyalty.
Hostages are unsatisfied customers who will continue to use a product or service if there is no viable alternative. They’re likely to spread negative word of mouth, and the minute they can find something better, they’re likely to churn, too.
How to Use the Apostle Loyalty Model
There’s quite a lot of overlap between the Apostle Loyalty Model and NPS, in that it also prioritizes customer feedback as a means of securing loyalty.
Let’s take a look at its step-by-step process.
- Measure customer loyalty using NPS. Use this information to:
Identify and appreciate your loyalists/apostles
Acknowledge and address the concerns of your defectors
Keep an eye on your mercenaries
Pay attention to your hostages
Create space for feedback. Ensure that customers find it easy to get back to you, either by leaving positive feedback publicly, or contacting you privately with negative feedback.
Use online monitoring tools. Keep a firm handle on what your customers are saying about you on online review platforms and social media. Use this information to address pain points and improve loyalty.
Engage with your customer service team. They’re speaking to your customers every day. Make sure they have channels in place to transfer this critical information to the relevant teams internally.
4. Attitudinal Loyalty Model
A different way of thinking about customer loyalty defines what are seen as the two main types of loyalty: attitudinal loyalty and behavioral loyalty.
Business and tech author Richard L. Oliver has a definition of attitudinal loyalty. He says,
“A deeply held commitment to repurchase or repatronize a preferred product or service consistently in the future, thereby causing repetitive same brand-set purchases despite situational influences and marketing efforts having the potential to cause switching behavior.”
This means that a customer has a strong preference for your company because your company fulfills some of your customers’ key functional or emotional needs. Brands like Apple, which is as much a B2B brand as it is B2C, is a primary example of a company that fosters attitudinal loyalty.
Attitudinal loyalty is different to behavioral loyalty, which means that a customer is loyal to your brand out of habit, or because there aren’t any alternatives.
How to Use the Attitudinal Loyalty Model
Developing attitudinal loyalty among your customers often takes time.
You have to continue to prove the quality of your products, services and customer experience, as well as the integrity of your business practices and ethics, in order to secure their loyalty.
Once you do, you’re likely to have it for a long time to come.
Customers experience attitudinal loyalty because they consistently have positive experiences. CX, once again, is critical. Every interaction is an opportunity to integrate attitudinal loyalty more firmly into your customers’ experience of your company.
5. Dynamic Model of Customer Loyalty
The Dynamic Model of Customer Loyalty looks at several stages in a working relationship, as follows:
Expected value in relative terms. This refers to the ratio between the benefits the customer expects and the cost of these benefits. It’s influenced by comparing your company’s offering with what your competitors offer.
Perceived value after purchase. Once your customer has made their purchase, are they satisfied or dissatisfied? This will affect how they feel about the product or service they bought specifically and about your company more generally.
Perceived value in relative terms. Once they’ve used your product or service, they’re likely to compare it with what they might have received from a competitor.
Satisfaction. If a customer is satisfied, this is because there is an alignment between the expected and perceived value.
Trust. Being satisfied leads to another critical step in the customer loyalty process: trust. They’re slowly starting to trust your business to deliver what it promises.
Repurchase. This leads them to buy something else—they decide to trust you once again.
Behavioral loyalty. As they continue to purchase from your company, their behavior shifts, and behavioral loyalty is nurtured.
Monadic value analysis. Your customer then goes on to compare what they have experienced with you with what switching to another company might involve. Their decision-making process becomes increasingly monadic or focused on one unit. Their loyalty is leaning towards you.
Mental loyalty. Mentally, they’re becoming more certain of their decision, too. At this point, they might start considering broadening their scope and buying different products or services from you.
Dyadic value analysis. At this stage, your customer becomes aware that their repeat business is also of benefit to you. The relationship is dyadic; there’s two of you. They need to assess the fairness of this.
Customer loyalty. Finally, this is the point at which your customer establishes a strong sense that the relationship they have with your company is fair, equitable and reciprocal. They’re loyal to you at last.
How to Use the Dynamic Loyalty Model
The Dynamic Model is all about being conscious of the many opportunities your customer has to churn or to reinforce their loyalty.
It’s about gaining a dynamic and holistic view of this sequence of events.
Understanding this approach, and implementing in practice, is a complicated process, and is primarily the work of Italian marketing academic Michele Costabile. You can read one of his seminal studies on the subject here.
CustomerGauge Can Help You Choose Your Customer Loyalty Model
Still looking for ways of improving customer loyalty, and wondering which customer loyalty model might be right for you?
The great thing about navigating this fascinating, but at times complex, space is that you don’t have to do it alone.
Contact CustomerGauge today to receive a demo from one of our experts, and see how we can help you drive customer retention, improve word of mouth, and boost your bottom line.
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