Many businesses mistake retention for loyalty.
They think that as long as a person makes repeated purchases...
Then it's a loyal customer.
That couldn't be further from the truth.
When a customer decides to stay...
It doesn't necessarily mean there's loyalty.
Because there are 3 different types of retention.
Not all retention is equal.
Loyalty is only present in Voluntary Retention.
It's absent in Utility Retention and Forced Retention.
When customers stay due to Loyalty Programs...
It's Utility Retention.
Let's dive deeper and explore why I say that.
A loyal customer is formed when there's emotional attachment involved.
They don't leave for a competitor just because of a lower price.
They don't switch camps just because of better bonuses.
The Retention Formula works here:
Trust + Meaning = Retention
The loyal customer is a strong advocate for the business.
Because they trust the business.
They know the business takes care of those it serves.
They know the business doesn't let people down.
When people stay willingly, happily, and actively recommend the business to others...
It's a sign of loyalty.
That's Voluntary Retention.
They stay even when they are not obliged to.
There's no contract to bind them.
There are no gimmicks used to lure them to stay.
They simply don't want to leave.
When this happens...
Customers tend to buy more often from the business.
They also tend to spend more money on the business.
There are different formats of Loyalty Programs.
We'll use one of them as an example.
They work on the same principle.
A common feature of Loyalty Programs is: Accumulating points or stamps.
When the customer meets a certain number of points or stamps...
They will be rewarded with freebies or discounts.
But this is what you need to be cautious about.
When customers are motivated to buy due to Loyalty Programs...
Their focus is on getting the discounts or freebies.
You have shifted their focus away from what actually builds loyalty: The relationship with your business.
Even though there's still a certain amount of trust...
The motivating factor to buy turns away from being relationship-based.
It becomes transaction-based.
Because they're trying to earn the benefits offered by the Loyalty Program.
You, are no longer the reason they stay and buy.
This also means something critical.
When the Loyalty Program stops...
The motivation for return purchase also drops.
If competitors have a better offer at a lower price.
The same group of people will also tend to leave for the competitor.
Loyalty programs can stimulate buying behavior.
They increase the desire for customers to make more purchases.
They can bring in more recurring revenue for the business.
But... They fail to nurture the very thing that they are named after: Loyalty.
Human loyalty is dependent on human connection and relationships.
It is an emotional attachment.
It's not something that shows up on the dashboard.
Even though it's not surprising for loyal customers to spend more and buy more often...
Repeat purchases cannot be attributed to loyalty definitively.
Because loyalty only correlates closely with Voluntary Retention.
Utility Retention can also lead to repeat purchases.
But there's no loyalty to talk about in Utility Retention.
For loyalty to take place...
A few things have to happen.
Customers must feel the business is trustworthy.
They must feel that they are valued and respected.
They must know their interests are prioritized.
When they feel safe...
They naturally stay.
Willingly.
And happily.
No gimmicks are needed.
No promotions and freebies are required.
Remember:
If Trust + Meaning is already built with the customer...
There's no need to resort to Loyalty Programs to keep customers.
For this to happen, you need a guiding business philosophy.
And sustainable businesses understand this:
People > Profits.
Always.
- Herek
P.S. If you'd like to explore more of my Client Retention content...
Feel free to follow me on the following platforms:
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P.P.S. In case you missed it... Read the Client Retention Top 10 FAQs HERE. Then you'll understand our philosophy behind everything we do.
I look forward to sharing more with you in the next post.
If you enjoyed reading this post... Feel free to check out the other posts!
#8: What Is The Retention Architecture Model: The 3 Layers Explained
#9: The Hidden Costs Of Ignoring Retention Principles (No One Talks About This)
#10: Why Clients Still Leave Despite Enjoying Great Service?
#11: Why Have Traditional Marketing Tactics Lost Effectiveness?
#13: Why Businesses Lose Clients: The Hidden Role Of Trust Leaks
#16: Where Does Client Trust Break Down? The Trust Leak Stages Explained
#17: Why Tactical Optimization Can't Fix Weak Business Foundations
#18: What Should Consultants Do When Clients Insist On Their Ideas?
#21: Why Do Clients Request A Refund? (It's Not What You Think)
#22: Case Study 1 - How Retention Principles Saved A Marriage...
#25: Read This If You Use AI In Business (It's Killing Client Retention... And More)
#29: How To Increase Client Lifetime Value Using Retention Principles
#30: Why Most Client Retention Tactics Don't Work (And What Actually Does)
#31: Why Business Partnerships Fail (And How Retention Principles Fix It)
#32: How To Increase Client Retention (Without Contracts & Loyalty Programs)
#33: Planned Obsolescence: How Software Updates Quietly Profit From Your Trust
#34: The Retention Architecture System: How All The Frameworks Come Together
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