What is the Loyalty Ladder?

22 October 2014 by Shweta Jhajharia

Do you know where on the “loyalty ladder” most of your customer base lies? Are they just customers or are they something… more? If you want to increase your profits and the speed at which your customers buy from you, this video about customer loyalty is a must-watch.

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How important is customer loyalty in your business? Has this video sparked some ideas for moving your customers up the ladder?

Let us know in the comments! You may also want to read this about the importance of customer relationship management in building customer loyalty.

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Prefer to read rather than watch and listen? No problem – here’s everything I said in the video as text:

What I want to do today is to introduce you to something called the Ladder of Loyalty. This is nothing to do with marriage, it is actually a business concept.


So it’s start with our Suspects, an interesting word. But what it really means is that a Suspect is anyone who you can do business with. That is, anyone to whom you could provide value to with your products or services. This is like your market size.


Now what you ideally want is for your Suspects to move up to Prospects. Who is a Prospect? A Prospect is a Suspect who has shown some interest in your product or service. This person has done something to engage with you to take that first step to say, “Hmm, this is of interest to me.” Especially with the digital age and the kind of of things that we can be doing online, with the whole database system availability and social media, it’s actually becoming quite easy to track how our Suspects are engaging with us, how they are becoming Prospects. Is it that they are reading some blog of yours? Is it that you know you they have engaged with an email that you have sent out? Or maybe on social media? Basically they have taken that first step of engagement.


Now ideally with all the marketing that you are doing in your business you want your Prospect to become shopper. Now a shopper is different from a Customer or a client. A shopper is a person, is a Prospect, who has transacted with you for the first time, who has actually given money in exchange for your product or service. So a shopper is a person who has had that first transaction with you and your business.


Now I just want to make something very clear to you, that up to this point this is all marketing, right? It is quite expensive because generally speaking the margin that you make on the first transaction with your shopper is not very high, assuming you have spent some money, invested some money in marketing to get that result. Now where you actually make good margin and good money is with the repeatability of transactions, the repeatability of business, which is where your shopper becomes a Customer. As soon as your shopper transacts for the second time and third time, the person is actually becoming a Customer.  He is having more transactions with you – there is repeat business happening.


Now, from this level you want your Customer to move to something called a Member. You want your Customer to become a Member, which means they have not just this transactional relationship but something more than that.  They have a relationship with you, they are engaging with you, they feel a part of what you are doing. And, again, with the technology the kind of things that are possible now, you can achieve this. Some companies have login places where you can login and go and track your order, and see how it is moving forward, that is a kind of membership area. When you have some kind of loyalty scheme running, it is a kind of a membership area. You can do something special for your customers, take them out for an event or something special designed for them, it is like giving them a sense of membership. This is a group, this is a community, this is a team that we a part of.


From this Member level the next is Advocate. An Advocate is someone that when asked about what to expect from you as far as your services or products are concerned, would give very positive reviews for you. They would actually say, “Yes, it’s amazing, I work with them and they are absolute fine yeah.  Would highly recommend them, you should work with them. The point is an Advocate is someone when asked they will give positive reviews for your business.

Raving Fans

I am sure you would want more Advocates in your business. You would want more Members in your business but just try and make the distinction of how this ladder works and the top thing where you really, really want your Customers is something called Raving Fans. A Raving Fan doesn’t need to be asked; they just so delighted with what you do, they will actually go around sharing that secret that they have found with everyone. They are the people of abundance and they would want to reach out because they have found something amazing, which is you, and they want to tell more people about it. Now do you think you need to do any marketing as far this person is concerned? No. They are doing marketing for you. They are not just Advocates but Raving Fans for you.

The Speed of Business and the Profitability of Business

Now the interesting bit of this ladder, if you look carefully from Suspects to Raving Fans is that the speed of business goes up as you climb the ladder. Pretty logical – people who are coming to you through Raving Fans, or through Advocates obviously will want to engage your services a lot faster because they heard from someone who is reliable. Also, if you think about the profitability of the business that you are doing, the profit will go up as your Suspects and Prospects move up the ladder.  Why? Because you are not spending too much time and effort on marketing – you have built a good base who are actually giving you a better lifetime value. They are actually referring clients; there is a proper strategy that is working.  There is a proper membership strategy that is working here. There is a strategy working to increase the repeatability of the business.

What You Need To Ask Yourself

The question that you have to ask looking at this ladder is where does bulk of your base, your customer base sit? Where do most of your people sit?  What I have realised working with business owners is that a lot of business owners are still at the Shopper and Customer stage. They work with their clients and customers at arms length. They have some people who they are very close with but there is no systematic approach or systematic strategy to move these people up the ladder. Because this is where you are building the asset value of your business.  You are improving the speed and profitability in your business. So the question therefore is where do your customers sit in this ladder? And what are the kind of strategies that you are implementing to help people move up the ladder?

If you would like to discuss any of the points covered here, please feel free to request a free call below.

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Shweta Jhajharia

Shweta Jhajharia is one of the leading authorities on Business Value Building and the creator of the unique 6M Model. Shweta is widely respected as an impactful, intelligent and results orientated professional who helps business leaders unleash their potential to reach meaningful, higher objectives. This realisation of potential and maximisation... Read more

We are looking to invest in good businesses.

If you would like to have an obligation free discussion about selling your business, please email shweta@growthidea.co.uk. You can find more about our investment criterion on https://growthidea.co.uk/private-equity.