Measuring Customer Loyalty
Wouldn’t it be great if after making their first purchase, more of these same customers kept returning to your business?
Well, they will be more likely to if they have a positive relationship with you and you are making them feel good. Both are essential in building customer loyalty towards your company and brand.
What is customer loyalty?
Customer loyalty refers to the customer’s commitment to continue purchasing from you, thanks to having a positive relationship and experience with you. This experience is typically driven by factors including product and service quality, value and rewards.
Why is customer loyalty important?
It stands to reason that the more customers buy from you the greater your profits and success. And if the same loyal customers return, this drives sustainable growth, which is healthiest growth for long-term success.
It’s also worth bearing in mind that a loyal customer is more likely to:
- Refer you to their friends and contacts.
- Continue buying from you.
- Not consider looking at other suppliers.
- View other products and services you market towards them.
- Be patient with you if any issues emerge that you need to fix.
- Provide feedback about how you could improve.
Considering these benefits, it’s not surprising that the most successful organisations have developed loyalty programmes, to retain and attract new customers, reduce turnover and drive profits. Without this they risk losing business to their competitors.
Subsequently, obtaining feedback through a range of customer surveys, is essential to identifying what customers most like about you and keep them returning. If you’re new to customer surveys, it’s useful to have some example survey templates to view and get you started. Why not take a look at some of the sample ones we provide in the link above.
The ladder of customer loyalty
Given the many benefits of customer loyalty, it makes good business sense to create as many advocates for your brand as you can. This is where the ladder of customer loyalty comes in.
Based on the relationship marketing concept, the loyalty ladder is an approach where customers gradually move through different relationship levels with you. From the bottom that contains those who intend to purchase but have not yet done so, to the summit containing advocates actively promote your brand. Using the loyalty ladder, the marketer’s objective is to help move as many customers as possible to the highest levels.
How to increase customer loyalty
Having recognised the importance of customer loyalty and moving prospects up the loyalty ladder, it’s prudent to have a plan to improve customer loyalty. Here are some points to be thinking about:
Prioritise customer service
Given that 96% of consumers say customer service is critical to their brand loyalty decisions, it makes sense to deliver the best customer service you can. And the same levels of service need to be delivered across all touchpoints that a customer has with you.
Keep your product quality high
It might seem obvious, but your customers will keep coming back if the quality of your products is good. According to KPMG, product quality is critical in determining brand loyalty among 74% of all consumers.
Reward your customers
One of the best ways to retain customers is to reward them for their loyalty. Whether it’s customers discounts, gifts and exclusive offers. Rewarding customers makes them feel more appreciated, subsequently making them more likely to want to stay with you.
Personalise their experience
No one likes receiving anything that’s not relevant to them. So, if you can deliver a personalised service for each customer, that maximises their experience, they are more likely to stay with you for the long haul.
Ask for their feedback
One of the most important things is to ask your customers for feedback, as without this you can’t improve. One of the best ways to do this is through a survey.
How to measure customer loyalty
From customer satisfaction and customer service feedback to voice of the customer and customer experience. There’s lots of customer surveys that can give you a better indication of customer happiness and what you need to improve to increase their loyalty.
However, to get a more accurate measure of customer loyalty, there are some more specialised surveys and metrics you should be using.
Here’s some methods that will help get you on track with measuring customer loyalty.
Customer loyalty surveys
With a customer loyalty survey, you can get a better idea of how customers feel about your brand.
From what they most like and dislike about you, to whether they would use you again. The questions from this survey type will give you a better idea of what’s needed to gain increased customer loyalty.
Net Promoter Score® Survey
The net promoter score (NPS) survey, is one of the best ways of measuring customer loyalty.
‘How likely is it that you would recommend our company/product/service to a friend or colleague?’
The NPS survey asks customers the above question. It then asks customer to rate you on a scale of 0 to 10. From this you’re able to identify your detractors, passives and promoters, and calculate your NPS score, to measure levels of customer loyalty towards your organisation.
Customer retention rate
Another critical measure of customer loyalty is the customer retention rate (CRR).
It’s calculated by looking at the customers you had at the start (S), the end (E) and those customers you acquired during the period you’re measuring (N).
It can be worked out with the following formula:
CRR = ((E-N)/S) x 100
Spend per transaction
It can also be helpful to track the spend per transaction of a customer.
Spend of transaction helps indicate the depth of investment that a customer is making in your business. By tracking changes in spend per transaction, it can help you to spot any subtle or more fundamental changes in customer behaviour.
While this could simply be the result of a price change, it could also be a consequence of customers starting to split purchases, potentially spending with your competitors. So, it’s a useful measure to keep an eye on.
Customer Lifetime Value
You can also get a better sense of customer loyalty, by calculating the total amount of money a customer throughout their journey with you.
Known as the customer lifetime value, this is worked out using the following formula:
‘Average order total multiplied by the average number of customer purchases in a year multiplied by the average retention time in years.’