From a Transactional Customer to a Loyal Customer

What is customer engagement?

According to both academic research and corporate practice, customer engagement behaviour is a key success component for businesses in the long run. Customers who are engaged are far more profitable for a company than those who are not. Firms have traditionally concentrated on building relationships with present customers to influence purchase and repurchase behaviour, classifying consumers with more transactional behaviour as better customers for firm profitability. However, when it comes to customer engagement, customer contribution to the business is not restricted to purchase-related indicators, as engagement behaviour leads to new product ideas or referrals of new consumers, for example. As a result, customer engagement goes beyond transactional customer valuation to encompass both transactional and non-transactional measures.

Transactional customers

As stated, transactional customers are those who contribute directly to the sales of the company by purchasing the goods. This might seem positive in achieving maximum profit but it might last only for a short while. These customers are significant because they are current consumers and importantly, they contribute to revenue. Analysing their purchasing behaviour, we might see that their purchasing activity is motivated by promotions or sales, vouchers, cash back or coupons. When there is no catch for them to push their purchasing action, the number of sales contributed will be smaller. Having promotions, sales, etc are worthful to attain new customers but targeting for repurchasing of goods, brands have to deliver values and qualities to retain them. Providing values and good qualities continuously will make customers feel that the relationship is significant and not just treating them merely as transactional customers. The next step for them is to nurture a strong, long-term relationship with your brand. This is in favour to retain the customers and make repeating sales which eventually shows an increase in customer loyalty.

Non-transactional customers

Non-transactional customers are defined as those who are a few steps ahead of transactional customers. They are considered hot leads that are loyal to the brand and already an avid repurchasing buyer. Study finds repeat customers are more valuable as they spend 67% more than new customers implying that they are happy with the products and satisfied with the overall customer experience. To make them stay longer and grow together with you, brands need to maintain an excellent relationship with them. If we think about a relationship, there is never a perfect one. These loyal customers might face some negative experiences in the past but customer service was able to deal with it professionally and guide them appropriately. That will build their trust with the brand as they feel important and appreciated. Hence along the time, businesses have to proactively reach out to these valuable customers to get insights and feedback from them to improve services and provide a better customer experience than their competitors. They will be your best honest critique who is willing to share their thoughts without being afraid of losing jobs or positions in the company. They are the best consultants that you can “hire” freely for product development and customer experience refinement. This targeted effort and active listening to the customers strengthens the relationship.

According to Paul Farris' book Marketing Metrics, a repeat customer has a 60% to 70% chance of converting. This means that the more loyal consumers you have, the less money you will have to spend on conversion strategies such as abandoned cart incentives. It is crucial to focus on developing a long-term relationship with transactional customers and maintaining a lifelong relationship with loyal customers. Building a real relationship is undeniably demanding work, it involves lots of resources but at the end of the day, it is worthwhile. You will create a community that supports your brand and spread good words to their friends and family.