Can You Measure Customer Loyalty?

When you go to buy a new phone, do you tend to buy the same brand or go for a new brand in the name of experimenting? If you ask an OnePlus or Apple user, the chances are that he/she will say that they will never switch brands. Why is it so? What allows some brands to have such a loyal fan base? The answer to this question lies in customer loyalty programs. But can we measure this metric in numbers to determine how high or low the brand is compared to others?The short answer is yes, you can measure customer loyalty with loyalty metrics. The long answer is that measuring customer satisfaction and loyalty is dependent on multiple parameters and requires insights from your customer loyalty programs.

What is Customer loyalty and why is it so important?

Customer Loyalty refers to the act of choosing one brand consistently over the competition. Customer loyalty can be seen in every industry and every sector. Users of Apple hardly change the brand of the phones, customers of Zara rarely step foot in other brand stores to search for daily use t-shirts.  Most of us have a brand preference for every item we have in our household and this is the best indicator of a brand’s customer loyalty. There are several customer loyalty indicators that are used by marketers to showcase their brand value and brand loyalty.Customer Loyalty of your brand is a direct indicator of your customer experience program. Using the loyalty program KPI, you can determine the actual score of your customer loyalty. However, other reasons why customer loyalty is so important in today’s customer experience is how it directly affects your business, growth, and revenue.In simple terms, high customer loyalty means that with decent marketing, you would be making a profit without having to spend much on marketing. This happens because your customer loyalty determines your customer retention. If we summarize the importance of loyalty in points

  • Drives Loyal customers to repeat the business cycle with you: Your loyal customers are bound to repeat the business cycle with you, next time they wish to make a new purchase.
  • Increase in profits: It has been proven that a returning customer spends 70% more than a new customer. This results in a direct increase in the overall profit for the brand.
  • Gain Brand Ambassadors: Returning customers are your biggest ambassadors.
  • Feedback goldmine: Your most valuable customers can provide you the best feedback about your products and services.

How can you measure the loyalty of your customers?

Your customer loyalty using loyalty metrics through various methods available.

Net Promoter Score

One of the most widely available loyalty programs KPI, Net Promoter Score helps you check if your customers are a promoter of your brand and products. NPS can be used in measuring brand loyalty by giving your brand a promoter score. In this, you ask your customers about their willingness to refer your brand to others. The score is divided into three segments:

  • Detractors: They are the ones who rate you between 0-6. They are least willing to promote you and more likely to detract from you. They might also damage your reputation by spreading negative word-of-mouth reviews.
  • Passives: They are the ones who rate you between 7-8. They are placed as ones who are satisfied with your service but won’t actively promote your brand. They won’t hurt your brand and will stick with you until they find a better alternative.
  • Promoters: They are the ones who rate you 9-10. They are your promoters who would stick with you throughout and will recommend your services to their families and friends.

Your total NPS is calculated by subtracting the percentage of detractors from your promoters. NPS is an indicator of how loyal your customers are to you. Survey2Connect offers you an NPS tool to assess your brand loyalty by creating intuitive and easy-to-make customer satisfaction surveys.

Repurchase Ration

The repurchase ratio is referred to as the ratio of repeat purchases compared to one-time purchases. This gives you an idea of how many of your customers are actively making repeat purchases with your brand. Repeat businesses tend to have different meanings as per differing business models. A subscription-based business model has a repeat business when users renew their subscription plan whereas an apparel store has a repeat business when customers buy again.

Upselling Ratio

A brand doesn’t just want its customers to focus on one product only. This is why brands are focussing on making an ecosystem where customers get everything in one place. Upselling Ration is a calculation of customers buying multiple products compared to those who are buying one product. Divide the number of customers buying more than one product by the number of customers buying just one product. Buying new products indicate your customers are loyal to your brand.

Customer Engagement Number

Engagement number is one of the most effective customer loyalty indicators in the market. They are easier to measure, easier to improve, and are the most accurate reflection of the profits and revenue. Positive interaction of a customer with a brand can help you create a loyal customer base and shield them from ever being taken by competitors. The ways through which you can measure these numbers are:

  • Activity Time: This tracks the amount of time a user is active on your platform. This can be checked for activity over a day, week, month, or year.
  • Frequency: This tracks the number of times a user visits your platform over a period of time. Although, different platforms have different requirements of frequency. Brands selling solutions will have different frequency rates compared to an e-commerce brand.

Customer Loyalty Index

This is one of the most trusted and reliable methods to check your loyalty score. It uses NPS, Customer Upselling and repurchasing. It required you to ask your customers three questions:

  • How are you likely to recommend us to your friends?
  • How likely are you to buy from us again in the future?
  • How likely are you to try other products from us?

In each question, you would be rated on a scale of 0-6 and the average score determines your customer loyalty.

Sales Per Customer

Another metric to assess the loyalty of the customer is sales per customer. This is calculated by total revenue divided by the total number of customers. Now, the accepted value for sales per customer can differ on the basis of industry and product segment.

Customer Lifetime Value

A loyal customer spends throughout his customer lifetime and seeing that he/she is loyal to your brand, the chances are that the lifetime value of the customer would be a good indicator of how your loyal customers are shopping with your brand over the period. You can calculate it by subtracting your cost per acquisition(CPA) from the product of the value of the average transaction  & the average number of times a customer shops with you.These are the few metrics through which you can measure your customer loyalty. These customers are the ones who would be there with your brand till the very end.If you need help creating surveys that can help you measure your customer loyalty, Survey2Connect helps you create DIY surveys in minutes.

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