My Customer Loves Me, They Love Me Not: The Role of Loyalty in Customer Value   |   +1 (720) 308 2960 (US)

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My Customer Loves Me, They Love Me Not: The Role of Loyalty in Customer Value

Part 3 in the Perfect Prospect Model Series




This series is based on a concept of measuring customer value as a means of identifying and focusing on your BEST customers (and then using that knowledge to pursue the PERFECT prospects).


Having covered PROFITABILITY last week, we now turn to a fluffier concept: LOYALTY.


It’s safe to say that all companies see loyalty as an asset in a customer but exactly what loyalty is and how to measure it can be a bit vague.


For the purposes of Perfect Prospect Model, we use the simplest definition of loyalty:

a loyal customer is one that would not change vendors. It can be looked at separately from upsell/negative churn (a result of loyalty + sales) and from customer satisfaction (a leading indicator of loyalty).


In a B2B world, we look at loyalty as spectrum that ranges from:

  • ACQUAINTANCES – Actively looking at alternate vendors

  • FAIR WEATHER FRIENDS – Would consider another vendor

  • BESTIES – Would reject another vendor (and encourage others to go with you)


NOTE: A word about “switching.” While we sometimes say loyal customers don’t switch vendors, in the B2B world, they often overlap vendors or transition them over time. This creates another tricky consideration when we assess loyalty.


Factors that drive loyalty are the usual suspects: price, service, ROI, fit for purpose, usability, brand attachment, and so on. Negative motivators like switching costs can also result in loyalty but that is generally false loyalty as a customer would gladly switch vendors if the path was cleared making them, at best, a Fair Weather Friend. The result of loyalty is customer retention.


How to build and maintain customer loyalty would be a whole other series of articles while this article is about the VALUE OF LOYALTY.


Here are some stats to get you thinking: It costs 5x as much to get a new customer vs keeping an existing one and 76% of companies consider lifetime value (LTV) as an important metric in their business. Plus, the probability of selling to an existing customer is 60-70% while selling to a new prospect is 5-20%.


In short, loyal customers are save money and generate revenue so there is clearly value in customer loyalty.  


But loyalty is a consumer behaviour and emotion, right? Yes, and that makes it difficult to assign a score to a company in a B2B scenario. Our belief is that your customer’s loyalty is only as strong as your weakest connection.


To assess loyalty for the purposes of valuing customers in the Perfect Prospect Model you can use customer satisfaction metrics, described and assigned values or any relevant measures that represent their relationship with other vendors.


Tune in next week for the fourth article in this series:

Put Their Name in Lights: How Valuable is Your Customer’s Brand to Your Business


Julie Holmes is a sales & marketing advisor, speaker and Whole Company Selling leader. She works with B2B companies that want to sell more and increase their customer lifetime value by helping everyone in their organization understand and share their value with prospects and customers.

Fun Fact: That’s Julie’s dog, Echo, in the photo!

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