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How Customer Loyalty Impacts Revenue

AvatarCloudCherry | September 30, 2015

Loyal. Devoted. Faithful. Call them what you want but you owe it to this ‘special‘ breed of customers if you’re still in business. Yes, they are really special!

Special because these are customers who would keep coming back to you by resisting to go to other competitors, stay by your side even if you have slipped up a bit, understand your business and its value inside-out. More difficult than designing a great customer experience and delivering on the promise, is building a loyal community of customers.

In realizing the importance and need for loyal customers, customer loyalty is something brands are sincerely targeting in recent times. Reason being, at the end of the day, your most loyal customers also make up for the most of your revenue.

With this in mind, let’s a take a look at how customer loyalty impacts revenue.

1. Power-packed Word-of-Mouth Publicity

It goes without saying that loyal customers are also your most economic source of wide scale publicity and traction. The kind of publicity no amount of money can get you. Based on a research by Nielsen, 77% of consumers are likely to buy a new product when learning about it from friends or family.

As your brand name permeates through the masses, more and more new customers would be engaging with you. And if what they experience is consistent with your brand promise, these prospective customers are likely to scale further and convert into loyal ones.

You might ask now, how does this impact revenue? Well, according to Bain & Co., returning customers spend on an average 67% more than first-time customers!


2. Retention leads to revenue

With most organizations facing rising expenses from all sides – right from R&D to Marketing, Maintenance and Sales, wouldn’t it be nice if there was a way to cut down on customer acquisition costs?

According to Forrester Research, it costs 5 times more to acquire new customers than to keep current ones. Moreover, on-boarding a new customer and then taking your time in developing a strong trustworthy relationship with him, is a long, tiring process.

On the other hand, your existing customers, since they know you well enough, are easier to cater to as their expectations are generally more reasonable. Do your best to not let them slip to your competition. According to Bain and Co., a 5% increase in customer retention can increase a company’s profitability by 75%!

So, the next time you win a customer for a lifetime, there’s customer delight and… more revenue 🙂

3. Increased Average Revenue Per User (ARPU)

One of the most important characteristics of a loyal customer is that he is less cost-sensitive than the rest (prospective customers, disgruntled customers and the other window-shoppers).

What others might perceive as over-priced, your loyal customers don’t. They are quick to realize the value behind any and every feature you offer.

Repeat customers are, therefore, likely to pay up front with less hesitancy, even if there is a price surge. Consequently, your business receives more revenue per customer, within your loyal customer base. This, in turn, shoots up the Average Revenue per User (ARPU).

Customer loyalty is an old-age concept. However, the implications it has on your business has grown tenfold over the past couple of years. This has been mainly due to the fact that the competition has become really stiff in every vertical and customers have the widest possible range of brands to choose from.

If you are willing to embrace customer loyalty as more than just another concept, and if you’re willing to implement action plans that generate repeat customers, a bad income flow would be the least of your worries!

Are you keen on improving customer loyalty and building your own army of loyal customers?