I am often asked, “Isn’t customer loyalty dead?” Many think it has forever vanished and that lowest price is the only thing that keeps a customer returning. But, take heart. Customer loyalty is alive and well. Look no further than Dell, Harrah’s, Starbucks, USAA, Chick-fil-a or Harley-Davidson, to name a few, and you’ll find companies that are consistently earning customer loyalty while their competitors struggle.

But, what is this thing called customer loyalty?
How can you recognize it?
Why is it so critical to every company’s long-term success?

A loyal customer is one who:

• Makes regular repeat purchases
• Purchases across product and service lines
• Refers others
• Demonstrates immunity to the pull of the competition
• Can tolerate an occasional lapse in the company’s support without defecting, owing to the goodwill established through regular, consistent service and provision of value.

There is a common denominator that runs through all these behaviors and helps explain why loyalty and profitability are so inextricably linked: Each behavior, either directly or indirectly, contributes to sales and profitability. The financial rewards of loyalty run deep. Bain & Co. research show that a decrease in customer defection of only 5 percent can improve a firm’s bottom line profits 25 to 85 percent, depending on industry. Likewise, in some sectors, according to Bain research, an increase in customer loyalty of just 1 percent is the equivalent to a 10 percent cost reduction. Bottom-line, loyalty pays.