Loyalty is defined as the firm, unwavering devotion to a person or cause. In business the term loyalty can refer to customer, brand, or employee loyalty.

Customer loyalty is very important in any business because it is the customer that comes back repeatedly to buy more of the same or related products that keeps a company going for a long time. New customers are, of course, always valued but a one-time customer will not have as large an effect in the company’s long-term well being as a loyal customer will.

Because of this, companies usually have different ways of enticing new customers to be loyal, as well as rewarding current loyal customers. Two of the common methods for turning new customer to return customers include:

1. Contracts/commitment periods – This business model is prevalent for service providers. When customers sign up for a service they usually also enter a commitment period (i.e. 12 or 24 month commitment) during which the customer cannot cancel their service without having to pay stiff cancellation fees. In some cases the basic service won’t entail a commitment period but to get premium services or very nice “freebies” a commitment period will be required.

2. New customer discounts – Discounts that are paid out in installments (in a period of 6 months or more) are given to new customers to ensure that they cannot cancel a service. Another type of new customer discount will be giving discount coupons for the next product purchased, which will entice the new customer to come back for more.

Brand Loyalty

Brand loyalty refers to a customer’s loyalty to a company’s brand, or what it represents, above and beyond the particular product it sells. For example, many Americans are loyal to all of Apple’s products, because they see them as high-quality and cutting-edge. People loyal to a brand are more likely to buy a new product from that brand based on their positive perception of what the company does. They’re less likely to consider the competition. This is why companies covet brand loyalty.

Employee Loyalty

This refers to employees being loyal to a company, because they believe in what the company does, like the culture, or generally have a good experience working for that company. A loyal employee wants to do a good job for her company. This, in turn, helps the company build a better product or service, because employees are engaged in their work. While employee loyalty doesn’t matter much to some companies, others see it as a competitive advantage and work to build it.

Reviewed by Ryan Hammill