How can customer loyalty improve profit?

- [Narrator] Companies spend billions on customer loyalty. Fortune Business Insights estimates the market for customer relationship management software will be nearly $150 billion globally by 2029. Is this investment in customer loyalty justified? Loyal customers hold positive beliefs and act in ways that benefit their preferred brands. Loyal customers tend to have longer and more frequent relationships with their preferred brands. They tend to be cheaper to market to, and they tend to spend more than the average customer. They trust the brand and share its espoused values. Accordingly, they're willing to participate in a brand community, recommend it to others, and try other products the brand launches. Brand inertia means that because they've had positive experiences with the brand in the past, loyal customers are predisposed to repeat purchase. J.D. Power reports that 61% of Subaru owners purchase another Subaru when it's time to replace their car. Subaru loyals stay with a brand much longer than nonloyals. Loyal customers have more frequent and more valuable experience with their preferred brand. Forbes magazine reports that Starbucks loyalty program customers are 5.6 times more likely to go to Starbucks every day than the average Starbucks customer. And that greater frequency means that they contribute almost half of the sales of the company. And Business Insider reports that the average member of Amazon Prime spends more than $1,500 per year higher than the average customer. Sales and marketing expenses are also lower for loyal customers. Communications expenses are lower because the company knows the customer's contact and their preferred channels. Starbucks uses its app to communicate directly with customers, offering them free drinks on their birthdays, and inviting them to engage through playlists and games. The Starbucks loyalty program also rewards purchases with free products, but what makes the program successful is that it engages customers rather than simply rewarding them for transacting. Loyalty is a relationship, not just a series of mutually beneficial interactions. Fostering relationships is even more critical to loyalty in complex categories where purchases require a bigger financial and emotional commitment like cars or motorcycles. The more involved the purchase, the more customers seek the advice of their peers prior to committing. And once they've made the jump, they find affinity with others who have come to similar conclusions about what they value. Brands like MINI Cooper, Harley-Davidson, and even Stryker medical devices foster customer communities, encouraging them to share brand stories that are self-reinforcing and strengthen commitment to the brand. Finally, loyal customers trust their preferred brand and are willing to try its innovations while resisting attempts from competitors. I don't just own a single Dyson vacuum cleaner; I have several, and I also buy their hair dryer and fans. I do know that there are cheaper alternatives that claim to do the same thing as Dyson, but do they really deliver? I guess I'll never find out. No wonder companies choose to spend big money on fostering customer loyalty.