The Competitive Advantage of a Retained Customer

By Ken Gosnell, writer
Oct 03, 2019
Image Credit: scyther5/Getty Images

Does your business have a customer loyalty strategy?

Customer loyalty is an essential competitive advantage to stand out in a competitive marketplace. However, many companies and business leaders are focused more on attracting new customers than on working to retain the customer they have already acquired. For example, a company will release special pricing to gain and attract a new customer, but very seldom will it offer specials to customers who have been using its products or service for some time.  

A retained customer can translate into a profitable and personal competitive advantage for a business. Retained customers are more likely to have opportunities to interact with the values of the leader and the principles embodied by and through the people in the company. Additionally, a loyal customer will have opportunities to recommend a company and potentially increase the profitability of the company through word-of-mouth marketing. Even though customer loyalty is critical to business success, very few companies have a customer loyalty strategy.

Customers are the lifeblood of all companies. Long-term customers serve as the foundation for the success of growing businesses. Customer acquisition is an essential aspect of a growing business, but so is a customer loyalty strategy.  

Small Business Trends recently reported on how customer retention impacts and affects business. In an insightful article, Matt Mansfield related a series of important statistics related to customer retention. The following statistics might be helpful as you consider developing an effective customer retention strategy:       

  • The average repeat customer spends 67% more in months 31-36 of their relationship with a business than they do in their first six months.
  • A 5% increase in customer retention can lead to an increase in profits of 25 to 95%.
  • Nearly 80% of businesses surveyed rely on email marketing for customer retention.
  • Roughly 27% of small business owners estimate that 11% to 20% of first-time customers don't return to their business.

Savvy CEOs value the relationships they have with their customers. They work diligently to know their customers and how to extend the life of the relationship with customers.

Here are five recommendations about how you can boost customer loyalty. 

1. Work to enable a personal connection between the customer and the company.

Customer loyalty happens more frequently when there is a personal connection between the customer and a contact in the business.

In fact, employees at your company (e.g., sales reps, customer service reps, account managers) who establish friendships with your customers will have more success in keeping those customers longer. Companies that develop loyal customers train their employees to smile and greet potential customers, ask questions, and solve problems quickly and to the customer's satisfaction. Every company should seek out ways to grow its friendships with customers.  

2. Solve problems effectively and to the customer's complete satisfaction.

Frustration and disappointment are likely to happen in any long-term relationship, and it's no different with customers. How your company handles these issues often determines how long a customer will remain a customer. The longer a customer has been with a company, the more emphasis should be placed on providing a positive solution. 

One key question that every customer-facing employee in the organization should learn and ask dissatisfied customers is, "What could the company do to resolve this issue so you are completely satisfied?"  

This question effectively communicates to a customer that they matter and the organization wants to ensure they remain a satisfied customer. Further, the goal of complete customer satisfaction should be discussed and highlighted frequently in team meetings, and case studies of the customer experience should be examined to enhance interactions with customers in the future.  

3. Develop and retain customer-facing employees. 

One of the best ways to retain customers is by keeping employees, especially those who excel at providing quality service to your customers. When you have skilled, loyal employees, they help develop loyal customers in turn.

In his insightful book, Loyalty Rules: How Today's Leaders Build Lasting Relationships, author and business consultant Frederick Reichheld writes about how companies that focus on retaining their star employees have a higher level of success. Reichheld highlights two companies, Southwest Airlines and Chick-fil-A, that excel at employee and customer loyalty.  

"Southwest Airlines (is) the only consistently profitable major airline in the United States for every year since 1973," Reichheld writes. "The airline has employee turnover rates of 4 to 5%, in an industry with rates typically double that. In the notoriously cyclical airline business, Southwest has never had a layoff … Chick-fil-A, whose store operator turnover runs 5%, (compares) with the competition's 35 to 40% [turnover rate]. Founder Truett Cathy has so effectively marshaled loyalty effect economics that he can afford to let his operators earn compensation double or triple industry averages, while still generating sufficient cash to grow the chain while remaining a private company."

Both companies understand that retaining employees leads to a higher customer retention rate. Companies should examine the average period of time a person is employed with the organization as well as the main reasons cited by employees about why they leave and accept new jobs.  

4. Explain to your customers the bigger vision of the company.

Customers in today's economy enjoy connecting and staying with companies that have a bigger purpose and vision than just making money.  When customers relate and connect to the bigger "why" of an organization, they will stay loyal. 

You can explain the purpose, or mission, of your company on the company website or social media sites. Your vision can be related to a community cause or an international issue. When customers find a profound reason to support and stay supportive of your organization, they are likely to remain customers longer.  

5. Build customer enthusiasm and excitement through innovation.

Companies lose customers when they are afraid to innovate and introduce new products and new initiatives. Your customers want to learn about new initiatives your company is involved with. 

When companies do not innovate, they lose customers to companies that are introducing new ideas or products in the marketplace. A key question that companies should consider is, "What new products or services have you added in the last year, and what potential change could you introduce in the next 12 months?"  

Companies that don't innovate and improve will fall behind competitors that are upgrading. Businesses are like leaders: The best ones improve daily, knowing that their tomorrows depend on their improvement today.  


Customer loyalty is essential to success. Companies and leaders that focus on retaining customers will take a step toward profitability and long-term success. Customer retention is a crucial strategy to maintain a competitive advantage in the marketplace. 

Ken Gosnell is the CEO and Servant Leader of CEO Experience (CXP). His company serves CEOS and leaders by helping them to have great experiences that both transform them and their organizations that enable to go further faster. Ken is the publisher of the CXP CEO Executive Guide that is designed to help leaders learn faster by encouraging to give themselves a monthly learning retreat. His monthly CEO retreats have helped thousands of CEOs and their leadership teams to enhance strategic, operational and people accomplishments. He is an author, keynote speaker, executive coach, and strategic partner with CEOs and successful business leaders. Connect with @ken_gosnell on Twitter.