September 11, 2013 | The XM Blog

5 Basic Forms of Customer Retention to Drive Success


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Keeping your customers is a very important part of revenue growth. It is far easier than replacing them. Many businesses use the words retention and loyalty interchangeably. In business terms, loyalty is faithfulness or allegiance to a company or brand. In short, when you are loyal to a company, that company is your first choice.

Five Forms of Customer Retention to Drive SuccessIn broader terms, you should consider five basic forms of customer retention:

Purchased Loyalty

A customer rewards program is the best example of purchased loyalty. Other examples include memberships, coupons, and rebates. The trick is that under purchased loyalty the customer is loyal to the system, not the company.

Convenience Loyalty

Your corner market, corner dry cleaner, the coffee shop on your way to work… you might be loyal to these businesses simply because they are convenient and because switching costs are too high or inconvenient. You are likely to remain loyal unless competitors come along who are equally or even more convenient.

Restricted Loyalty

Restricted loyalty exists when there is no other game in town. This may be true for cable companies, electric utilities, and yes, even Facebook.

Purchased, convenience, and restricted loyalty are really forms of retention. You can also retain customers by simply winning the competitive battle for the business every time.

Competitive Retention

If you can stay within the considered set of alternatives for your customers, you have a chance to get them to return. It might not be exclusively, but you can still keep them as customers. You can retain customers by winning the competition for their attention and business. When you are looking to buy electronics, you don’t have a preferred retailer. You look around and may purchase from one of many retailers. Each one that you return to is an example of customer retention. They may win on product selection, product availability, or price, but each time they are going to have to compete.

And then there’s true loyalty. True loyalty is the holy grail of the customer experience and what every business should aspire to create.

True Loyalty

True loyalty is earned loyalty. True loyalty is undying allegiance to a brand or product based on an incredible level of satisfaction. Customer satisfaction breeds true loyalty. When you are highly satisfied, when your needs are completely met, and your expectations are consistently met and even exceeded, you simply cannot imagine using another product or service.

When you measure the right things, listen to the voice of the customer, and make changes and improvements that increase customer satisfaction, you can create truly loyal customers.  In other words, loyalty is an outcome of satisfaction with the customer experience. To increase loyalty, you need to increase satisfaction. All forms of customer retention and customer loyalty are driven by having a satisfying customer experience. The satisfaction bar for true loyalty is a lot higher to obtain and to hold on to. Achieving and maintaining true loyalty will have very positive impact on your financial success.

To maintain customer loyalty, always understand customer needs and expectations, continuously measure the customer experience, and then make changes that positively impact the customer experience.

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About the Author

As a pioneer in customer experience analytics, Verint delivers superior technology and proven methodology to connect the customer experience to the bottom line. The result is better business for companies and a better experience for consumers.

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