Importance of Customer Loyalty – 9 Benefits That Every Business Loves

Now you know what is customer loyalty and little bit about its benefits.

In this article, we will discuss more about ‘Importance of Customer Loyalty‘.

Yes, it’s true that…

Investments in customer loyalty and engagement are booming.

It is expected that the loyalty management market will grow from $1.4 Billion in 2015 to $4.0 Billion by 2020. (Source: PR Newswire)

More than 90% of companies currently have some form of customer engagement or loyalty program. (Source: Accenture)

But why companies are spending more and more on customer loyalty than before?

Why is customer loyalty important for an organization?


Mainly there are 9 reasons that make customer loyalty so important.

Let’s see in details.

Importance of customer loyalty to a business:

  1. Customer Acquisition And Retention
  2. Repeat Business
  3. Cross/Up Selling Opportunities
  4. Reduce Marketing Cost
  5. Minimize Service Cost
  6. Forecast Accuracy
  7. Improve Brand Image
  8. Stand Tall Among Competitors
  9. Honest And Quality Feedback

1. Customer Acquisition And Retention

Let me ask you this…

Is your business more focused on customer acquisition or retention?

If the answer is ‘Customer Acquisition’, then seriously you need to think about it.


Customer Acquisition And Retention

Though the above research is quite old but it is clear that organizations are moving focus from ‘Only Acquisition‘ to ‘Equal focus on acquisition and retention’. (Source: Econsultancy)

There are many good reasons behind this shift…

  • Acquiring a new customer is five times costlier than retaining an existing customer. (Source: Forrester)
  • A 5% increase in customer retention rate can increase profit by 25% to 95%. (Source: Harvard Business School)
  • Globally, the average value of a lost customer is $243 (Source: Kissmetrics)

Above 3 statistics explain a lot why customer retention is so important for a business.

Loyal customers stick to your business and buy more products and services.

Not only that, loyal customers speak about your business that helps to generate leads.

why is customer loyalty important to an organisation

Bottom line is that,

No matter you are startup or mature organization, customer retention should be your highest priority. This can be achieved only when a business focuses on building customer loyalty.

Customer retention is not an option, it’s a need.

2. Repeat Business

’61 percent of the SMBs surveyed report that more than half of their revenue comes from repeat customers, rather than new business.’BIAKelsey

Loyal customers are more likely to buy products and services again and again from a same brand or store than new customers.

A study says that existing customers are 50% more likely to try new products than new customers. Also they spend 31% more compared to new customers.

Now question is – what can motivate your customers to do repeat business?

There are many factors that help business to build customer loyalty as well as repeat business.

Here are 4 key points to remember –

  • Have you heard – ‘First impression is the last impression’?
    This is true for business as well. When you sell a product for the first time to a customer, make sure everything is in proper shape like customer greeting, product demo. This creates confidence and trust between you and your new customer. It helps to build customer loyalty and eventually it brings more business from that new customer.
  • Always stay connected with customers using their preferred communication channel. Let your customers know that you are there with your new products or offers or solutions always.
  • Improve customer service because 67% customers stop buying products from a shop/brand just for bad customer experience.
  • Introduce a loyalty program – every time customers buy products from your business, give them loyalty points or incentives. Customers can accumulate these points and redeem for a free product or loyalty card upgrade. This will motivate your customers to spend more in your business and collect points.

3. Cross/Up Selling Opportunities:

Cross and Up selling opportunities

‘The probability of selling something to a prospect is only about 5-20%, while the probability of selling something to an existing customer is 60-70%.’ Marketing Metrics.

Loyal customers already have a relationship with your business. They trust you more than a new customer.

This gives you a great opportunity to cross sell or up sell products and services. It increases sales volume without much effort on acquiring new customers.

4. Reduce Marketing Cost

This is a huge benefit of customer loyalty.


Because we trust our friends’ feedback more than a digital fancy advertisement.

importance of customer loyalty for marketers

Source: Nielsen

In this digital age, word of mouth is still the most effective marketing tool. It is considered as the most credible form of advertising.


What marketers think about WOM marketing?

Word of mouth - benefits of customer loyalty

Source: The State of Word of Mouth Marketing Survey

Word of mouth is an important tool in marketing. It helps to increase brand awareness, engage customers and generate prospects.

Loyal customers play a vital role in WOM marketing. As you have already won the trust of your loyal customers, you can influence them more than new customers.

Loyal customers talk about your brand, share feedback, refer their friends and families, like or share your post on social media.

Do you know?

72% of consumers take some sort of action after reading a positive review. (Source: BrightLocal)

5. Minimize service cost

Loyal customers are most cost effective to serve.

They are already familiar with a company’s products and services. This helps them to solve their issues by themselves or using self-service like knowledge base or FAQ.

Not only that,

Loyal customers can help to solve other customers’ problems as well.


Build a community where your customers can share their experiences, issues, solutions.

And then engage your customers more and more in that community.

Even you can give some incentives or loyalty points to those customers who solve others issues successfully.

There are many benefits of creating a community –

  • Customers get effective and faster resolutions of their queries as solutions come from experience of other customers
  • It increases customer loyalty as customers get incentives for giving solutions
  • Minimizes service cost
  • 24 X 7 support without huge investment
  • It creates cross sell or up sell opportunities

6. Forecast Accuracy:

Another importance of customer loyalty that business can’t ignore – Forecast Accuracy.

Forecasting is a crucial part in business planning and running. It enables management to get an overview of future expenses and revenue.

Accurate forecast helps business to decide expenditure, calculate growth rate, discounts and plan for the worst.

Without accurate forecast, it is difficult to attract investors as well.

But how loyal customers can help in forecast accuracy?


Feedback from loyal customers gives you valuable information about many parameters.


  • Customers are interested in your future products or not
  • Where your business sucks
  • Product or service pricing

More loyal customers you have, more accurate forecast you can prepare.

7. Improve Brand Image

What is ‘Brand Image’?

Brand image is the customers’ interpretation about products and services of a brand. A positive image helps business to acquire new customers, cross sell and up sell, reduce marketing cost and attract investors.

A brand image is one of the most valuable assets that a company possesses. It tells customers what they can expect when they buy a product or service like quality, post purchase behavior.

explain the factors that influence customer retention


Building a brand image is costly and time consuming process.

Customer loyalty and brand image are interrelated. Customer loyalty helps business to improve brand image. On the other hand, strong brand image helps business to glue customers.

Brand image is the reflection of customers’ mind. As brand has already won trust of loyal customers, they are more likely to share positive experience than new customers.

This eventually helps a brand to retain more customers and improve customer loyalty as well as brand loyalty.

8. Stand Tall Among Competitors

In today’s competitive market, it is really difficult to separate your products from competitors. Your most profitable product can be suppressed tomorrow by your competitors.

Customer loyalty can help you a lot here. Customer loyalty toward the brand affects the buying decision of customers.

If you and your competitors have similar kind of product but you have better customer loyalty, surely your product will have highest buying priority among customers and prospects.

This is an important factor that works behind Apple’s smartphone and table business.

Except Apple’s incredible product design and features, it has highest customer loyalty in smartphone and table business. It truly helps Apple to standout in this crowded marketplace.

importance brand loyalty

And last…

9. Honest and quality feedback

Another advantage of customer loyalty…

70% of companies that deliver best in class customer experience use customer feedback. (Source: Customer Experience for Executives)

Loyal customers give honest opinion about your business, products or services.

Customers feedback helps to

  • Improve products and services
  • Launch new products
  • Measure customer experience and satisfaction
  • Retain customers and reduce churn rate
  • Forecast accurately and take better business decision

importance of customer loyalty

Before closing this article on ‘Importance of Customer Loyalty‘, let me tell you…

Never, ever take your existing customers’ loyalty for granted. It is the most valuable asset of any business.

What do you think? Are you agreeing with this?

Please share your feedback below.

If you want to read more exciting stats, click here: Customer Loyalty Statistics

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Customer Loyalty Statistics - 29 Exciting Stats You Must Know


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