Customer Loyalty Ladder - Definition, Importance & Example
What is Customer Loyalty Ladder?
Customer Loyalty Ladder is a systematic way of classifying customers of an organization into five different categories depending upon the business level engagement of customers with the organization. Customer loyalty ladder helps customers to identify potential customers who can remain engaged with their business for a long time and also become loyal to their brand.
Importance of Customer Loyalty Ladder
The concept of Customer Loyalty Ladder comes under relationship marketing and brand management which deals with establishing long term relations with customers. It is said that the cost of attracting new customers is 4-6 times more than that of doing business with existing customers. Hence it is worth for any organization to keep its existing customers happy and satisfied in order to do a more profitable business.
Customer Loyalty Ladder thus helps an organization plan engagement strategy wisely so that the customers would be tempted to move up the ladder.
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Customer Loyalty Ladder Categories and Examples
Customer Loyalty Ladder classifies the people related to the product based on their engagement. People are classified as suspects, prospects, customers, clients and advocates. The below mentioned diagram shows the customer loyalty ladder:
The five different categories under Customer Loyalty Ladder are:
1. Suspects
They are the potential customers for an organization. They may be aware of the promotional campaigns of the organization but are currently doing no business with that organization. For example, A person who is happy with the cab services right now but is aware of all the car options available in the budget.
2. Prospects
They are the ones who have been impressed with the organization’s promotions and are in serious consideration of buying products of the organization. The organization must treat them cordially and solve all of their doubts.
An example can be a customer looking to buy a car and places 5 particular cars in the consideration set. This person becomes a prospect for all the 5 companies as he or she would mostly buy 1 of these 5 options.
3. Customers
They have bought products of the organization for the first time and are currently using them. The organization must extend them all possible after-sales assistance in order to pacify their concerns.
These customers can be engaged with a loyalty program or a loyalty discount.
For Example, A buyer of a car or a buyer of a smartphone is a customer
4. Clients
They are doing business repetitively with the organization and are willing to foster the engagement in future. Clients if well engaged can help boost business with their brand loyalty. These can also become key accounts.
For Example, a client of a software company doing multiple projects in different technologies and domains
5. Advocates
They are not only doing repetitive business with an organization but are also recommending the organization to their own acquaintances. They are the most valuable players and the organization must treat them royally with the highest priority.
For Example, a person after buying the car of a company is so content that he or she tells people about it indirectly helping the brand.
Hence, this concludes the definition of Customer Loyalty Ladder along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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