Loyalty Business Model Explained

The loyalty business model refers to a strategic management approach that focuses on improving customer loyalty. Organizations can also target other stakeholders in this approach in an effort to attain or surpass organizational objectives. A company can place emphasis on the quality of its services or products, which in turn helps to improve customer satisfaction. When customers are satisfied they are more likely to remain loyal to a brand and this helps to boost profits.

Employees and Customer Loyalty

An organization cannot create customer loyalty if it does not take care of its employees. The employees have to be impressed by the quality of the services and products that an organization provides for them to recommend them to the customers. One of the most effective ways of achieving this is by appreciating the employees. They need to know that they are recognized and valued. This will motivate them to work hard and offer good customer service. Organizations have to appreciate the effort the employees make. Their requests should be handled as soon as possible. If this happens, they are more likely to extend the same courtesy to the customers they serve.

Customers Interactions with the Business

Customers tend to form an impression of an organization as soon as they interact with the business either directly or indirectly. Their impression may be based on what other people have said about the organization or their own individual experience. To create loyalty, an organization has to ensure that its target market has a good impression of the business. It is important for an organization to know how its customers interact with the business. This makes it easy to identify ways to serve them better. Organizations have to work with the employees to identify areas of the business that customer come into contact with. In some case, these areas are not obvious but it is important to identify them and determine the most effective approach to use to create customer loyalty.

Service Quality Model

The loyalty business model can be compared to the service quality model because both of them arrive at a similar conclusion. In the latter, customer satisfaction tends to be based on recent experiences with a service or product. A customer’s satisfaction is determined by the expectations that they have before they use a service or product compared to its actual performance.

If a recent experience surpassed their expectations, customer satisfaction will be high. It can also be high if their expectations were low and its performance was mediocre. Some customers can be dissatisfied even if the quality of the service or product is good.

The relationship between an organization and its customers also determines whether a customer will remain loyal to a brand. The strength of this relationship is influenced by customer satisfaction, perception of service or product quality, commitment, and bonds formed between the customer and the organization.

It is important to note that one disappointing experience does not necessarily have a negative impact on this relationship as long as there is commitment and strong bonds. There are various bonds that can be formed between organizations and customers, including cultural, planning, economic, technological, legal, social, knowledge, ideological, geographical, and psychological.

Successful organizations identify ways to enhance customer loyalty by improving their employees and customer’s experiences. They realize that it is not just about service or product quality. The loyalty business model allows an organization to take a broader look into customer satisfaction.


Matthew is the Lead Author & Editor of CXperience Blog. Matthew established the CXperience blog to create a source for news and discussion about some of the issues, challenges, news, and ideas relating to Customer Experience.