Think back to the last time you bought a new phone or a laptop. Well, if you’re an Apple user, there is a good chance that you’ll consider them again. A whopping 92% of Apple’s customers are fiercely loyal to the brand. Wouldn’t it be great to develop a similar following and customer loyalty for your business?
In today’s hyper-competitive business environment, customer loyalty is incredibly valuable.
Keeping customers close to your business or brand is a great way to make them your long-term customers. Here we’re talking about subconsciously linking them to your business. But this is not an easy task. And unless you’re measuring loyalty, you can’t take meaningful steps to improve upon it.
This article will explore all the essential customer loyalty metrics you need to consistently measure to help you understand whether or not your efforts are impacting the bottom line.
Why Does Customer Loyalty Matter?
Consumer loyalty is the positive emotional connection your repeat customers experience with your business. Loyalty is all about keeping your customers wanting and coming back for more. It results from creating compelling value for your customers and consistently providing positive interactions with your brand.
Loyal customers may purchase from you regularly, communicate with your brand across many channels, and aggressively promote your business. Hence, businesses need to measure the right customer loyalty metrics to know whether their efforts are impacting the bottom line or not.
How Do You Measure Customer Loyalty?
Here is a list of the essential customer loyalty metrics that your business must keep a close eye on:
#1 Customer Retention Rate
As the name suggests, the customer retention metric tells you the percentage of customers you managed to retain over a certain period. When measuring customer loyalty, your retention rate is crucial as it shows the percentage of customers returning to your business and shopping repeatedly.
The higher this number, the better you’re doing in servicing your customers.
Customer Retention Rate = (No. of active customers/ total customers) X 100
Tracking customer retention rate is an indicator of whether your efforts at improving customer loyalty are working.
#2 Repeat Purchase Rate
The repeat purchase rate is one of the most useful metrics for your business as it provides valuable insights into how sticky your product is and how many loyal customers make up your base.
Repeat purchase rate measures the percentage of customers making more than one purchase within a set period.
Repeat Purchase Rate = Number of Repeat Purchase Customers ÷ Total Number of Customers.
This metric is specifically relevant for assessing your complete customer experience and understanding how much value your customers find in your store.
Depending on the industry, what is considered a good RPR will vary. While this metric does not apply to all businesses, such as products with long life cycles and business models oriented around one-time purchases, it helps gauge customer loyalty.
Read Mobile App Stickiness: A Path to Engaging Digital Experiences to learn how to increase your mobile app stickiness
#3 Customer Lifetime Value
This metric gives you the total financial value of the business you have been generating across the customer lifecycle. It is the net profit earned from a customer over a given period.
CLV = Average Purchase Value * Average Purchase Frequency * Average Customer Lifespan
CLV tells you how much each customer is worth over time; hence, driving CLV should be up on your to-do list if you want your business to succeed. Your focus should be on getting the maximum value out of each customer relationship, as loyal customers contribute considerably more to your business than new customers.
#4 Net promoter Score
The Net Promoter Score (NPS) is a metric that uses the customer experience to measure the likelihood of your customers referring it to their friends and family.
It predicts your brand’s potential for growth. It is calculated by asking your users how likely they are to recommend your brand to others on a scale from 0-to-100 and is used to segment users based on answers into detractors (not likely to recommend), passives (not enthusiastic but satisfied), and promoters (brand advocates).
Based on their answers, it clarifies your prospects’ future by dividing your customer base into three different segments:
Promoters (brand advocates)
Customers who answered the question with 9-10. This group is more than satisfied with your product and will be pleased to spread the positive word about it.
Passives(not enthusiastic but satisfied)
Customers who responded 7-8. This segment is satisfied enough with your product to use it. Usually, they will not churn, but they will also not promote it.
Detractors (not likely to recommend)
Customers who replied 0-6. Detractors are customers who will likely churn and spread negative words about your product.
It is a simple metric to track and calculate loyalty as it clearly shows your customers’ views about your brand or product. Hence, it would be best if you tried to put more effort into creating promoters who come back consistently and bring along the people they know.
#5 Customer Satisfaction Score
Customer satisfaction (CSAT) is the measurement of your customers’ happiness or satisfaction with your product(s) or service.
To measure CSAT, first, you’ll need to collect the data required to calculate your CSAT scores via a customer satisfaction survey.
A Customer satisfaction survey asks the customers to rate their experience with a service, product, interaction, or experience on a rating scale of 1 to 5 and then proceeds to ask why.
For example,
A typical CSAT survey would include one or more variations of this question –
‘How would you rate your overall satisfaction with the [goods/service] you received?’
Customers will then be given the option to provide an answer on a rating scale, say 1-5, for example.
- Very Unsatisfied
- Unsatisfied
- Neutral
- Satisfied
- Very satisfied
CSAT (%) = No. of Positive Responses / Total No. of Responses x 100
Conclusion
Customer loyalty is created when customers feel satisfied with your product across multiple interactions. Measuring customer loyalty will give you insight into your most valued audience segment. This is why measuring customer loyalty is of paramount importance, and the metrics mentioned above will go a long way toward helping you accomplish the same.
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