back icon Back Insights 02/26/2024

What is the Definition of Customer Loyalty?

All too often, business owners and decision-makers view customer loyalty as numbers and percentages, not names and people. Yet, while figures and decimals spell out your company’s financials, fans of your business and loyal demographics will ultimately impact your bottom line. When searching for a concrete customer loyalty definition, the emphasis should always be on your audience rather than your analytics.

So, how do you define customer loyalty? Beyond the popular key performance indicators (KPIs) and engagement metrics, customer loyalty is the personal commitment each buyer makes to consistently spend with your brand instead of your competitors. Keep reading to discover the most comprehensive definition of customer loyalty, complete with advanced concepts to measure the actual impacts of loyal shoppers. 

An Actionable Customer Loyalty Definition

As per the experts at Merriam-Webster, loyalty “implies a faithfulness that is steadfast in the face of any temptation to renounce, desert, or betray.” While this may seem extreme, in the context of a business-customer relationship, the core concept of loyalty is to remain devoted to one brand despite alternate recommendations from friends and family, potential shifts in price point, and business competition.

Emotional connections are at the heart of an actionable customer loyalty definition. This is because customer loyalty is a commitment each consumer makes to your brand, consistently giving you their repeat business instead of your competitors. Loyal customers are far more than just satisfied shoppers — they’re advocates for your brand who will continuously engage with, repeatedly purchase from, and trust your business. 

Key Characteristics of Customer Loyalty

So, what is true customer loyalty if it’s more than just a collection of metrics? Customer loyalty is the culmination of several micro-interactions over time. Key traits that characterize customer loyalty include complete customer satisfaction, value in products and services, and positive experiences often reflected in testimonials, reviews, and word-of-mouth recommendations. Loyalty is also the key to customer retention

Customer loyalty and retention go hand-in-hand, making it nearly impossible to share an actionable customer loyalty definition without referencing customer retention benefits. By building customer loyalty over a series of marketing engagements, purchases, and customer service interactions, brands can forge a reliable emotional connection that turns one-time shoppers into lifelong brand advocates.

The Importance of Customer Loyalty

It’s no surprise that building customer loyalty enhances customer retention. However, that’s far from the only benefit of loyal customers — instead, customer loyalty incurs tangible and intangible benefits with financial, operational, and reputational advantages for fan-favorite brands. On the tangible side, loyal customers drive a 15× higher repeat business rate and increase the average purchase value. 

Likewise, it’s up to 7× cheaper to retain loyal customers than acquire new ones. Achieving customer loyalty helps to not only save on customer acquisition costs but also to reduce marketing costs as a whole. With positive word-of-mouth marketing, frequent glowing testimonials, and even user-generated content (UGC) as expected intangible benefits of customer loyalty, your brand advocates become business assets. 

How Do You Measure Customer Loyalty?

Whether it’s solidifying a customer loyalty definition or deploying customer loyalty programs, there are several ways to measure customer loyalty. Net promoter score (NPS) and customer loyalty index (CLI) are two key customer loyalty analytics

  • Net Promoter Score (NPS) measures customer loyalty by rating the likelihood of recommending your company, product, or service to friends and family on a scale of 0 (highly unlikely) to 10 (highly likely). The higher your NPS, the higher the likelihood for positive recommendations — and the greater loyalty you’ll receive from your customers. 
  • Customer Loyalty Index (CLI) is another measure of how likely customers are to recommend your business; however, it doesn’t require a standardized 0 to 10 scale. Instead, customers can share how likely they are to make a repeat purchase or try a different one of your products or services to gauge overall brand satisfaction and fit. 

Young couple traveling and purchasing usinga digital wallet.

Advanced Concepts in a Customer Loyalty Definition

Alongside standard metrics like NPS and CLI are more advanced concepts in customer loyalty plans, namely share of wallet (SOW) and customer lifetime value (CLV). Share of wallet refers to the dollar amount an average customer regularly spends with your specific brand rather than with competing businesses in the same product or service category. Loyal customers often devote a high SOW to their preferred brands.

Customer lifetime value refers to the total worth of an individual consumer to a brand over the entire period of their business relationship. Rather than looking at the value of individual transactions, CLV considers all potential transactions throughout a customer’s lifetime and calculates the specific revenue from that customer. The CLV of loyal customers can reach an average 6.3× higher than unloyal ones. 

Leverage arrivia to Build Customer Loyalty

When seeking a concise definition of customer loyalty, the best answer is that loyal customers are the individuals who will choose your brand over and over again, no matter how many purchases they’ve made. Loyal customers will advocate and champion your business, regardless of market competition. Customer loyalty is an emotional connection you forge with your buyers — and the team at arrivia can help with that. 

Arrivia has been at the helm of customer loyalty rewards programs for nearly three decades, working alongside some of the world’s biggest financial, travel, and membership-based brands to simplify building customer loyalty with travel experiences that forge genuine emotional connections. With one of the highest NPS ratings across the loyalty market, discover how arrivia can help develop customer loyalty today.