Customer Retention Versus Loyalty

Recently I realized I had been using two marketing terms interchangeably, customer retention and customer loyalty. The reality is, they’re not same, and this post is about why and what makes them different.

First, let me fully acknowledge that while customer retention and customer loyalty are different, these two cornerstones of marketing definitely live on the same street (they may even be neighbours). At the end of the day, both share a common goal: extracting more money from your past customers!

TL;DR: Customer Retention Versus Loyalty

  1. Customer retention and customer loyalty are not the same thing.
  2. Loyalty is emotional, retention tends to be more transactional.
  3. Retention strategies relying on discounting don’t make customers loyal.
  4. Building customer loyalty is earned, taking time and money.
  5. Telling your brand’s story is a great way to build loyalty.

Emotional vs. Transactional

You do retain customers through building loyalty. You don’t increase loyalty using retention tactics – like discounting, and points programs. Why? Because of a key difference between the two.

Customer loyalty is emotional. Retention can be, but it doesn’t have the same requirement. Retention is better classified as a tactic. It’s more transactional, whereas loyalty is fuelled by things like camaraderie, shared experiences, and beliefs.

A company can retain customers using things like a discount strategy (‘Buy One, Get One’ deals, coupons, membership perks and points, etc). Those things don’t make customers loyal though, because it puts the focus entirely on price. The price game is one your competition can easily play, too.

Case Study: PetSmart

PetSmart Dog Food

A great example of retention is PetSmart, and ‘Treat Trail’, their mobile app game. It’s effectively retained me (and my dog food-buying needs). Every month, I can easily win a twenty-five percent off coupon that I can apply to anything in the store. When I do, I always put it against a $100 bag of food. Done deal.

But I’m a cheap date. If and when a better offer comes knocking, I’m taking it. Even though PetSmart has been generous with the discount, they have not won my loyalty at all. I don’t feel indebted to them in the slightest, and I won’t feel that I’m being disloyal if I shop elsewhere.

They’ve made the game about price, and remember: that’s a much easier game to play.

Customer Loyalty is Harder

Loyalty is much harder to pull off. It’s one-hundred percent built on having a connection with your customers: being involved in the community, giving back, being unique, funny, human, and so on – things that generally cost time and money.

For example, a lot of pet stores will do things like free nail trimmings, and nail trimming classes. How wonderful, and genuine is that? There’s a cost to that in their time, and having staff there to do it. But there’s no doubt that it builds connection, and makes customers want to support those businesses.

On the other hand, it’s a lot harder for a giant corporation to build loyalty. A company like PetSmart is up against built in corporate bias (warranted or not). For obvious reasons, big faceless companies marketing their “connection to the community” will always carry less weight than a local shop doing the same.

In either scenario, building loyalty relies on marketing people to get out and make sure people know about the good things the company is doing. We do this through storytelling: in blogs, on social media, and using video. In my experience, the companies that have earned a lot of customer loyalty also seem to be the most reserved when it comes to talking about it.

Abstract art of building customer loyalty

Final Thoughts

Retention and loyalty: they are closely related, and subtly different. You can retain customers through loyalty, but you don’t build loyalty through retention.

In marketing there are generally a lot of different strategies in play at any given time, and the differences between some of them can be pretty subtle. If you struggle always being able to articulate the differences, don’t fret. But do take action, and take advantage of the vast resources you have at your fingertips.

Could you marketing strategy use more clarity? If so, help is just a click away. Reach out and I will be happy to help.

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About Michael

Hello, I’m Michael Micacchi, and for twenty years I have been providing digital marketing services that help grow businesses into brands in the modern marketing world.

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