Is Customer Loyalty Declining? 7 Key Areas to Investigate

by Jeremy Tang

This comprehensive guide dissected the critical elements that make or break customer loyalty, from the quality of your product to the adaptability of your brand. We’ve emphasized that customer loyalty is a financial imperative, capable of boosting your bottom line and customer Lifetime Value (LTV) significantly.

Table Of Contents:

A Wakeup-Call for Businesses

Gone are the days when a simple loyalty card was enough to keep customers coming back. Today, businesses face a myriad of challenges that make retaining customers a complex task. So, why is customer loyalty important, and what can you do to keep it from eroding? Let’s dive in.

Why Loyalty is Your Business's Best Asset

In a world where customer acquisition often steals the limelight, the real powerhouse—customer 

loyalty—gets sidelined. 

And here’s the wake-up call: what works for acquiring new customers doesn’t always get the job done when it comes to increasing customer loyalty. This is why many businesses keep seeing their churn rate skyrocket. Because they’re so focused on bringing in new faces, they forget that retaining existing customers is a necessity for their long-term success.

But what makes loyalty the cornerstone of business success? Here are a few reasons:

  • Repeat Business: Your existing customers are not just numbers; they’re your brand’s advocates. Studies indicate that the probability of selling to an existing customer is a staggering 60 to 70%, compared to a meager 5-20% for a new customer.
  • Higher Spending: Once trust is established, loyal customers often spend more per transaction. They’re not just buying a product; they’re investing in a relationship with your brand.
  • Word-of-Mouth Marketing: Forget expensive ad campaigns; your loyal customers are your best marketers. They’re the ones raving about your products to their networks, exponentially increasing your brand’s reach.
  • Cost Savings: From our decade-long expertise in marketing, we’ve found that the commonly cited cost of acquiring a new customer—often said to be five to seven times more than retaining an existing one—is actually underestimated. In reality, it’s nearly 10 times more costly to gain a new customer than to keep a current one. By focusing on loyalty, you’re not just keeping customers; you’re saving money.
  • Competitive Edge: In a saturated market, loyalty is your secret weapon. Loyal customers are less likely to switch to competitors, giving you a competitive advantage that’s hard to beat.
  • Profit Maximization: A Harvard study found that a mere 5% increase in customer retention could nearly double your profits. That’s not a statistic to ignore.

Where Loyalty Falls in LTV Calculation

Jeffrey Gitomer famously said, “Customer loyalty is priceless.” Indeed it is. On the flip side, ignoring customer retention comes with a price. And a great way to measure how customer loyalty affects business growth is by looking at your customer’s lifetime value.

Understanding the LTV of a customer is like peering into a crystal ball of your business’s future. It’s not just about a single transaction; it’s about the value a customer could bring throughout the entire relationship with your brand. 

Let’s briefly explore a formula for calculating LTV, one of several methods included in our e-book, From Sinking to Sailing:

Customer LTV = (A) x (B) x (C) x [1 + (D)]


  • A represents the average spend per transaction;
  • B signifies the purchase frequency;
  • C denotes customer loyalty; and
  • D stands for referral power.

By improving on the loyalty component (C), you can significantly influence your customer’s LTV. This is where the rubber meets the road: loyalty isn’t just a feel-good metric; it’s a lever you can pull to drive substantial growth. 

Now, you’ve probably clicked on this article because you’ve seen a decline in customer loyalty. Perhaps you’re not hearing from past customers as often, or sales from your once top-selling products are dwindling. Maybe you’re seeing a surge in “unsubscribe” clicks for your email newsletters.

Well, you can stop scratching your head now. The next sections will help you pinpoint the key areas where you could investigate, so read along.

#1 Check Your Customer Service

Customer service is the pulse of your business. A staggering 96% of consumers will sever ties with a business after experiencing poor service.

When a customer faces an issue, how you respond can make or break their loyalty. It’s the moment of truth, the pivot point that can either elevate your brand or send your customer into the arms of a competitor.

Your support team needs to be more than just reactive; they must be proactive, knowledgeable, and exceptionally responsive. Time is of the essence. A delayed response or an uninformed support agent can erode the customer’s confidence in your brand, and once that’s gone, it’s an uphill battle to regain it.

So, invest in training your support team, streamline your customer service processes, or hire a proactive live chat service provider. Your customer feedback is the roadmap to your business’s future.

#2 Assess Your Product or Service Quality

In a world saturated with choices, the quality of your product or service isn’t just a selling point—it’s the lifeline of your business. And meeting customer expectations isn’t a courtesy; it’s a mandate. Exceeding them? That’s your competitive edge.

A single misstep, one over-hyped marketing claim, or a product that doesn’t deliver can send even your most loyal customers to the competition. It’s not just about first impressions; it’s about every interaction, every touchpoint, every promise made and kept.

So, what’s the game plan? Set realistic expectations. Deliver consistently. And remember, in the battle for customer loyalty, the quality of your product or service isn’t negotiable—it’s the foundation.

#3 See If You’re Offering a Personalized Experience

If you think you can get away with a one-size-fits-all approach, you’re setting yourself up for a downfall. A lack of personalization actively corrodes your bottom line.

Why? Because when you fail to customize, you’re essentially telling your customers they’re not worth the effort. This leads to a decline in customer satisfaction and, ultimately, a higher churn rate. But the damage doesn’t stop there. You’re also missing out on golden opportunities for cross-selling and upselling, which are vital for maximizing revenue.

Start by segmenting your customer base. Tailor your messaging, offers, and recommendations to individual customer segments. You can check out our article about improving customer LTV through personalization for a more in-depth guide about this.

#4 Re-Evaluate Your Loyalty Incentives

You’re hemorrhaging money if you’re not incentivizing customer loyalty. You’re simply not giving additional reasons to make them stay. Here are a few things you can do: 

  • Craft a loyalty program that’s not just a points card gathering dust in a wallet. Make it a dynamic tool that adapts to customer behaviors and preferences. 
  • Use data analytics to offer personalized incentives that resonate with individual needs. 
  • Offer exclusive perks like early access to new products or VIP events.
  • Don’t underestimate the power of surprise. A random act of kindness, like a personalized thank-you note or an unexpected discount, can turn a regular customer into a brand evangelist. 
  • Leverage the power of referrals. Offer tangible rewards for customers who bring in new business, and you’re not just retaining one customer, you’re potentially doubling your customer base.

#5 Observe Your Competitors

If your customers are jumping ship, it’s not them—it’s you. They’re telling you that your brand is just another face in the crowd, indistinguishable from the competition. They’re not emotionally invested in your brand because you haven’t given them a reason to be.

In a saturated market, you can’t afford to be another “me too” brand. You need to carve out a unique space in your customer’s life. 

Identify what sets you apart and amplify it. Partnering with a trusted marketing agency like us at Area Ten will provide the leverage you need. Make your customers’ lives better, easier, or more exciting, and they’ll stick around even when competitors try to lure them away.

#6 Examine Your Engagement

In today’s hyper-connected world, mere communication won’t cut it. You need to truly engage. Forget the annual surveys; real-time, dynamic conversations are the new norm. 

Leverage analytics tools like Google Analytics to decode customer behaviors and preferences, then craft messages that resonate on a personal level. 

But don’t stop at broadcasting messages. Open up channels that invite customer input, turning your communication into a dialogue rather than a monologue. The goal? To make every interaction a meaningful exchange, one where customers don’t just feel heard—they feel understood and valued.

#7 Gauge Your Adaptivity Level

In today’s dynamic landscape, the brands that thrive are those that continuously refine themselves in response to customer preferences. Stagnation is the silent killer of customer loyalty. If you’re not evolving, you’re inviting your customers to seek alternatives.

You might recall that Forever 21 filed for Chapter 11 bankruptcy in September 2019, after experiencing a 20 to 25% sales decline in the preceding year. Their downfall? An overemphasis on expanding physical stores with high rent costs, while neglecting the digital shift that younger consumers were making. 

Although they had an online store, they failed to invest in improving it, allowing emerging competitors like Fashion Nova to seize the market. This serves as a cautionary tale that even established brands can falter with customer loyalty if they fail to adapt.

To avoid this, harness customer feedback to enhance your products, services, and processes. It’s not just about meeting their current needs but anticipating future ones. Cultivate a mindset of continuous improvement, where every feedback loop is an opportunity for growth.

Case Studies

Let’s delve into case studies that showcase how we transformed businesses and helped them achieve bigger results, faster:

Transforming a SaaS Provider in the United States

In the SaaS industry, one of our Australian clients was facing a significant challenge: low customer retention rates.

The data was quite telling: the bottom 18% of clients were consuming a disproportionate 77% of customer support resources without contributing much to revenue.

These low-value clients typically only used the basic features and rarely committed to longer-term contracts, unlike their high-value counterparts who were engaged with multiple product modules and often opted for annual subscriptions.

Our recommendation was to discontinue service for the bottom 18% of clients, who were essentially a drain on resources.

The strategy then pivoted to focus on high-value clients by offering them customized service packages and loyalty incentives such as priority support and complimentary quarterly business reviews.

Within a four-month timeframe, this change in strategy led to a 24% increase in customer retention and a 20% boost in recurring revenue from top-tier clients.

Revamping a Nail Polish Business in New Zealand

We partnered with a client in the nail polish sector in New Zealand who was facing stiff competition and losing their core customer base. What set them apart was their unique offering of vegan-friendly nail polish formulated to strengthen nails.

Our data analysis was eye-opening: a specific 22.9% of their customer base was contributing to 75.2% of their revenue. These weren’t just any customers; they were eco-conscious consumers who valued ethical and health-conscious products.

To leverage this, we honed their unique selling proposition in our marketing strategies and expanded their product line to include a broader range of vegan-friendly nail care kits. Additionally, we launched educational campaigns to inform these VIP customers about the health benefits of choosing vegan-friendly nail products.

In just seven weeks, the client saw an 11.1% increase in repeat business from this targeted group and a 23.5% rise in revenue.

Frequently Asked Questions

What are some pitfalls to avoid when implementing a customer loyalty program?

Being restrictive with rules: To retain and attract customers, businesses should offer generous rewards and avoid too many rules and conditions.

Quickly expiring points: Points should offer tremendous value to customers to encourage them to continue participating. If their points expire after a short period, it’s the quickest way to axe engagement.

Treating all your customers as the same: Businesses should segment their customers and offer different rewards and deals to different segments. This encourages them to move up tiers the better the rewards become.

What are some innovative ways to reward customer loyalty beyond discounts and points?

Stepping beyond the traditional, it’s essential to recognize that today’s customers crave experiences as much as they do rewards.

Gamification, for instance, changes everything. By integrating game-like elements into your loyalty program, you can offer an engaging experience that keeps customers coming back. Challenges, badges, or tiered levels can make loyalty feel like an exciting journey rather than just a transaction. 

Additionally, consider exclusive access to events, early product releases, or specialized content. The goal? To create a multifaceted loyalty program that resonates emotionally, offers value, and keeps your brand top-of-mind.

Is it worth going after a customer you already lost?

Winning back a lost customer can sometimes be more profitable than acquiring a new one. Why? They already know your brand; they’ve navigated your website, used your product, and there’s a good chance they’ll stick around if you win them back.

But before you go on a wild goose chase, consider their LTV. This metric will help you reveal how much a customer is worth in the long run. 

What You’ve Learned: Key Takeaways from the Article

In the ever-evolving landscape of business, customer loyalty stands as a beacon of success. It’s not just about transactions; it’s about relationships, trust, and mutual growth. As we’ve navigated the intricacies of this topic, here are the pivotal takeaways:

  • Customer Loyalty is Fragile: In today’s digital age, a single misstep can erode years of trust. It’s essential to be proactive, attentive, and responsive.
  • Loyalty is Profitable: Retaining existing customers is not only cost-effective but also boosts revenue. The top 20% of your customers can be your goldmine.
  • Quality is Non-Negotiable: Whether it’s your product, service, or customer support, quality is the cornerstone of loyalty.
  • Personalization is Key: In a world of generic interactions, tailored experiences can set your brand apart.
  • Adaptability is Essential: The ability to evolve with your customers’ changing needs is a hallmark of a resilient brand.

Actionable Advice

While insights are valuable, action is the real game-changer. Here’s a distilled list of actionable steps to fortify your customer loyalty:

  • Check Your Customer Support Team: Ensure your customer support team is well-equipped to handle queries and concerns.
  • Stay Ahead of the Curve: Anticipate market changes and customer needs. Be the brand that sets trends, not one that merely follows.
  • Engage Regularly: Don’t wait for customers to reach out. Engage them with meaningful content, updates, and offers.
  • Reward Loyalty: Beyond points and discounts, think of innovative ways to appreciate your loyal customers.

The Future of Customer Loyalty

The game of customer loyalty is undergoing a seismic shift, and if you’re still counting transactions, you’re already behind. The future belongs to the disruptors, the innovators—the brands audacious enough to build unbreakable bonds with their customers. 

Every interaction with your customer isn’t just a touchpoint; it’s an opportunity. Seize it to amplify trust and showcase the undeniable value you bring to the table. Remember, loyalty isn’t just another line on your metrics dashboard. It’s the ultimate litmus test of your brand’s grit, value, and relentless commitment to your customers. Get it right, and you’re not just surviving; you’re dominating.

Enough with the status quo. If you’re serious about not just understanding but mastering the art of customer lifetime value—and, let’s not forget, lifetime potential—then it’s time to act. We’ve got the playbook you’re missing: From Sinking to Sailing. This isn’t your run-of-the-mill e-book; it’s the most comprehensive guide to lifetime value analysis and optimization.

Why settle for incremental gains when you can revolutionize your approach and deliver bigger results, faster? We’ve been in the trenches, solving the challenges you’re facing right now for businesses just like yours. 

Our 100% solution philosophy ensures that we go beyond merely driving traffic through channels like SEO and paid media to ensure you’re extracting maximum value from that traffic.

Don’t miss out on this game-changing opportunity. Reach out and let’s set your brand on a course for unprecedented growth. Contact us at Area Ten today.

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