The financial impact of customer loyalty

In, The Walker Loyalty Report for Software and Hardware, Loyalty Leaders outperformed the Laggard on stock performance by 23 percentage points. And the impact of that differential is astounding. Over the past three years, if the stock of the Loyalty Laggards in this study had performed at the same level as the stock of those identified as Loyalty Leaders, an additional $90 billion of market value would have been created for shareholders of the companies earmarked as Laggards. Loyalty Leaders also have on average operating margins of 13 percent compared to just two percent for the Loyalty Laggards.

These financial results support the intuitive theory that companies with more loyal customers perform better financially. As such, managing customer loyalty is critical to growing a company's long-term, sustainable value. While many factors influence profitability, it seems logical the loyalty of a company's customer base is a significant factor because we know truly loyal customers are more likely to not only continue doing business with a particular firm, but also are likely to increase their purchases in the future.

Based on these financial results, it's clear why IT companies - and companies in every industry - should strive for the position of Loyalty Leader. What's often more difficult to determine, however, is how to get there. A careful examination of customer feedback will point companies in the right direction. As our recent Walker Loyalty Reports illustrate, treating your customers as assets by addressing their needs can have a direct and positive effect on the bottom line.

To learn more about these studies and the financial impact of customer loyalty, contact us today.