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The Difference Between Customer Loyalty and Customer Retention

By MBO Partners |

Updated Wednesday, August 19, 2020

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As an independent professional, you’ll quickly learn that a key to sustained business growth is retaining a pool of reliable, loyal clients. Finding and acquiring new clients requires a big investment of time and energy. If you can establish a consistent pipeline of work, you can spend more time doing the work you love rather than worrying about where your next project will come from.

Customer retention and customer loyalty are two important pieces to this puzzle, and while related, there are a few fundamental differences.

What Is Customer Retention?

Customer retention is your ability to retain clients. Any action you take to ensure repeat business from clients falls under the banner of customer retention. If you have a high customer retention rate, clients will choose your services over those of a competitor.

How Do You Improve Customer Retention?

Think back over a specific period of time such as the past year or the past quarter. How many clients did you start out with and how many did you end up with? Why do you think these people are staying or leaving? Thinking through and answering these types of questions will provide insight into how to improve customer retention for your particular business.

The type of clients you want to attract and retain will be unique to your service offerings. There are some general guidelines, however, that can help to improve your client retention rate.

  • First, always set and discuss expectations before starting work with a new client. This will help to ensure you are both on the same page regarding deliverables, results, and goals.
  • Second, prioritize communication. Keep your client updated on each step of the project and consistently communicate your progress towards set goals. Track and report on metrics that matter to your client.
  • Third, ask for feedback and act on it. Try to identify and proactively deal with issues before they become larger problems. When your client gives you honest feedback, take it seriously even if it is hard to hear. If a client sees that their voice is being heard and that you respect their opinion, this will increase their level of trust in you.
  • Lastly, keep a recorded history of each client you work with. Note any problems you encountered and how you solved them, the goals you reached and how you got there, and any feedback you received and how you reacted to it. This will help you build your relationship with individual clients as well as apply lessons learned to similar problems you may encounter in the future.

What Is Customer Loyalty?

Customer loyalty measures a client’s willingness to return to your business again and again. Loyal customers are advocates for your company and are willing to share their positive experience with others. 72% of customers say they share good experiences with others and 67% say they’ll pay more for a great experience. Investing time in customer loyalty can lead to sustainable growth that you can rely on.

How Do You Improve Customer Loyalty?

To create more loyal customers, many of the same principals of customer retention apply. Remember, customer loyalty is about the entire experience your clients have with your company, from good communication to meeting expectations and ultimately providing long-term value.

  • First, understand the needs of your client and do everything you can to help them feel comfortable working with you. Each interaction you have with a client is important­—communicate clearly, proactively solve issues, and actively listen to what they say.
  • Second, personalize the client experience. Each client is different and you’ll benefit from modifying how you accommodate and interact with each of your clients. For instance, a daily check-in may help some clients feel secure that their project is progressing as planned, whereas others may be happy with a monthly status report. Take the time to really get to know your clients and their preferences.
  • Third, consider how you can reward your clients. While offering discounts has its time and place, there are other ways you can make a client’s day. Small gestures like delivering something ahead of schedule when possible, sending a personalized thank you note, or remembering a client’s particular interests and asking about them will go far in building a relationship that extends beyond that of client and contractor.
  • Lastly, be loyal. Creating a positive experience for your clients doesn’t end when a project does. Check in with clients to ask about how you can improve their experience and talk to them about future goals they have that you might be able to assist with. Proactively leave detailed reviews for your clients as motivation for them to endorse your services. Consider their needs and customize future marketing campaigns accordingly.

Looking for more ways to improve your customer retention and loyalty? Check in with our team of experts for advice.