The Difference Between Customer Retention and Customer Loyalty

In the increasingly competitive world of business, customer loyalty and customer retention are inextricably linked. It is true that both are valuable aspects of business retention, but oftentimes the concepts are misunderstood. I would like to take the opportunity today to clear up the confusion, and explain the differences between the two. Trust me, you are going to need both to grow a successful business!

Customer retention is preventing decline

Retention is about keeping your customers yours, and making sure they do not leave. Retention efforts are short-term and reactive; they often respond to changes that threaten to shrink your customer base, such as a competitor executing a successful ad campaign or a sharp price cut. Retention campaigns are aimed at preventing the exodus of your at-risk customers to said competitor, and may include locking them into a more flexible or generous contract just to make sure they remain your customers. Retention is a separate phase of the customer journey that comes after customer acquisition and development, but precedes customer win-back.

Keep in mind that a retained customer is not per se a brand enthusiast; they might stay with a brand due to switching barriers, ignorance, or sticky habits. Just because you have kept a customer does not mean you have a brand advocate.

Customer loyalty is about growth

The term ‘loyalty’ in this discussion covers both customer loyalty and loyalty programs, both of which translate into marketing efforts designed to turn positive customer interactions with the company into positive outcomes for the customer. With these programs, you effectively create a “scratch my back, I’ll scratch yours” mentality that creates an emotional tie between you and the customer. You are ensuring that your customers will come back to you when they have to choose between you and your competitors. Loyalty has a broader reach and involves other lifecycle components – customer development, retention, and win-back.

Loyalty initiatives are more proactive than retention, and aim to build long-term ties with your customer base. Loyal customers are more difficult to win from their brand of choice, unlike retained customers, and also act more often as a brand advocate by word of mouth.

Both are important for your business

Retention and Loyalty are two different types of marketing campaigns, and companies should have both campaigns working in tandem as part of the on-going customer conversations. As covered, the two concepts clearly have different roles in the customer journey or lifecycle. Retention is a part of loyalty, and should not be confused as being the same thing! Intermingling of the two concepts can lead to trouble with your ROI.

Conclusion

In short, while retention is mean to prevent a customer ‘break up’ with a brand, loyalty instead strengthens the relationship so breaking up is never considered. When developing a marketing strategy to keep and develop existing customers in today’s turbulent market environment, make sure to further refine your objective: do you aim to lock your customers in a marriage of convenience, or do you strive for a true and lasting bond? Better make a clear strategic choice in advance, because omitting to do so will yield unmet expectations and squandered budgets.