As retention marketers, we are often asked about the difference between retention and loyalty. The widespread misunderstanding of these marketing specialties has presented us with many opportunities to clear up the confusion. Not sure what the difference is? Here’s a simple explanation.
Loyalty is about growth
When we talk about loyalty and loyalty programs, we are talking about marketing programs that work to transform a customer’s positive interactions with a company into positive outcomes for the customer. This is the “scratch my back, I’ll scratch yours” promise of loyalty programs. And when they are done right, they can have some amazing outcomes. The point of loyalty marketing programs is to grow the habits of a customer. To recognize the right behaviors and focus on the customer becoming more loyal results in a higher value customer for the business and higher value experience for the customer.
Retention is about decline
Retention is about the preservation, rather than growth of a customer. Retention campaigns are focused on a positive indication that this customer is on their way out the door. It’s no longer about growth or what could be, it’s about knowing what is about to happen to your customer and doing something about it. Most of the time we think of retention as the department we have to pass through when canceling a service, but that is a narrow view. Retention marketing has to do with education, evaluation, and fit. It’s about the value the customer sees in the service. So many companies err in using price reductions for retention. If the value is not established, it results in a temporary solution. And in most cases, those using pricing don’t value the consumer as much as they should. Education focuses on the value of the service, making sure they properly evaluate the product, and making sure its a good fit. If its not a good fit, you don’t want them as a customer.
You should do both
Retention and Loyalty are two different types of marketing campaigns. Companies should have both campaigns working in tandem as part of the on-going customer conversations. Without these campaigns, businesses miss critical communication points that could result in bigger returns and long lasting relationships.