Customer Loyalty vs Customer Retention: What's The Difference?

Customer Loyalty vs Customer Retention: What's The Difference?

Customer Loyalty and Customer Retention are often used interchangeably.

However, both terms are quite different. Knowing the difference between them will allow you to better plan out strategies for each term.

Customer retention refers to the set of practices to prevent customer loss while customer loyalty refers to building larger relationships.

However, let’s break down each definition and explain the difference between the two terms.

Customer Loyalty vs Customer Retention

What is Customer Retention?

Customer Retention refers to a set of practices and procedures that seek to prevent customer loss and increase recurring revenue.

A customer is considered “retained” when they transact with the business again within a set time period. A customer is considered lost when they buy from a competitor or fail to buy from your business again.

Customer Retention strategies can be key to the success of many businesses. After all, increasing your customer retention by 5% can increase recurring revenue by over 25%.

What is Customer Loyalty?

Customer Loyalty focuses on building larger relationships with your customers.

Customer Loyalty results in customers who engage with business and brand, advocate for it, recommend your products and become members of communities built around your business.

This results in customers that buy more products from your business and act as promoters for your brand. This boosts both your recurring revenue and brand presence. In fact, 43% of customers will spend more money they are loyal to!

What’s the difference between Customer loyalty and Customer retention?

Customer Loyalty vs customer Retention
Customer Loyalty vs Customer Retention

Customer Loyalty takes the concept of Customer Retention much further. It goes beyond transactional interactions with customers.

For example, not every retained customer is a loyal customer but every loyal customer is a retained customer.

Look at it this way, there’s a difference between the customer that buys the newest iPhone every 1-2 years and the customer that buys every new Apple device that is released. The most loyal ones will camp outside the Apple Store to be the first ones to get their device.

Closing Thoughts

Now that you know the differences between both terms you can correctly strategize for both.

Your Customer Retention strategy and your Customer Loyalty strategy should look quite different. After all, they seek to achieve different results.

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