Even though, the marketing industry has showcased that it is the long-term customer and his loyalty that are at the centre of a business, businesses still fail to recognize their true importance. With numerous advertisements, on TV, billboards and online, they spend more time acquiring new customers than retaining existing customers, when it has been proven that gaining new customers is six times more expensive than maintaining a relationship with the customers they do have.
Some companies only spend 5% of their marketing budget on existing customers, but spend 95% of that budget on new customer acquisition. Which is why the customer loyalty ladder is so important. It helps save time and money.
What is a customer loyalty ladder?
It is the level of loyalty relationship and engagement you have with your customers. It concerns the behaviour they have with your business, whether it be buying or promoting your brand. Furthermore, its use is to give a picture which determines people’s position that have found your brand, to how to keep them. It helps target the right customers.
Thanks to customer loyalty ladder, companies can understand what loyal customers are and how much more they can be and how to make them climb the ladder. Marketer use personalised marketing tools every step of the way.
The customer loyalty ladder is classified in 5 stages.
Why is a customer loyalty ladder important?
Loyalty customers are repeat purchasers. It could be for a product the customer loves or just the need to try a new product but, whatever the reason, loyalty customers make retention key as they require great experiences but less money or marketing from your business.
They increase revenue and value for business. While new customers may hesitate to buy, loyal customers purchase more because they got that good contact from your business. Believe it or not, customers buy because they got that trust in the company and the product suppliers sells. When a vendor proposes a new product, they won’t think twice. Loyalty customers usually purchase, no matter the cost. It allows the company to reap the benefits like lower cost of marketing and increase better engagement.
It creates brand advocates. They are extremely loyal and are marketers for your company. It is unlikely for them to descend the ladder as their loyalty ranks high. They love everything about the company, the product and service. But, that does not mean that they should be neglected, it is a never-ending relationship.
You create competition for your competitors. Every cent spent on your product, your company, is money taken out of their pockets. A great loyalty program can also be the reason for customer retention. So, make sure to focus on them.
Finally, you get good feedback from loyal customers and their loyalty.
What are the stages of a customer loyalty ladder?
The customer loyalty ladder is composed of 5 stages. It is the relationship and experience the customer has with your company. You have the:
- Suspect: It involves the first rung of the ladder and anyone who finds or has heard or come in contact with your company, whether it be through ads, brochures or comes across a promotion.
- Prospect: They are the ones who pay attention to the promotions of your company. They are very important because they are usually the ones to become customers and spike your sales.
- Customer: They are the ones to actually make a purchase from your business. They are the first-time buyers. They either buy a product or they request a service. This is where businesses need to take customers into consideration, to provide a good experience, so the relationship can go well. You want them to come and buy your product or service again.
- Client: This part is above the customer because if your service had really pleased the customer he becomes the client. He makes a second purchase because he had a great experience with your company. Your customer service was as he or she expected.
- Advocate: This is the person that gives free promo for the company’s brand amongst their circle. As they liked what you offered because the product or service was so great, they (the customers) speak about it. It is what you called word-of-mouth marketing.
And eventually, this ladder’s ascendance does not occur themselves, as the company also has to obtain customer satisfaction and loyalty. The company has to invest time in the customers every step of the way.
Between thee prospect step and customer step on ladder, the business should put forward efforts on the market, by studying what new product or service they can deliver. A business should reach and meet people’s needs to get the aspired attention. Then, they need to transform those prospects into customers.
Likewise, once that customer has purchased, hence why he is now the customer, a business should improve on the loyalty section of retaining the customer on the ladder. Once the customer service and experience is up to the customer’s expectations, he will willingly and unknowingly become your advocate. This increases sales, recognition and creates long-lasting bonds between the customer and the company.
Examples of customer loyalty ladder
There are many reasons a customer is loyal. He doesn’t necessarily have to be a consumer.
Take a look at Tesla from Elon Musk.
Many people who rave about Tesla don’t even own one. But it’s the image and what it represents that make people speak or buy one. It reduces oil impact to zero and offers avant-garde technologies at the same time. He gives off the sense of I can accomplish anything like going to Space and that what I am doing with Tesla can contribute to that while saving Earth.
Then you have Disney, whose supporters are most likely customers or clients. They are not so much considered as advocates, not that Disney really needs it. But, because of what it represents such as childhood memories, the Disney parks, the cartoons and more, people continue to watch their movies and go to Disneyland.
So, no matter how exciting a new customer may seem, nothing beats a loyal long-term customer. Everything is about creating bonds. At some point, you would want them to stick with your company and re-purchase. And it is also easier to deal with their needs because you have dealt with them many times. A closer relationship, no matter the industry, always feels more rewarding than new ones all the time. You just have a mutual understanding.