Top 5 Metrics that Aids Customer Loyalty Measurement & Tracking

Top 5 Metrics that Aids Customer Loyalty Measurement & Tracking

As the importance of customer loyalty gets unravelled by brands and marketers daily, the need to measure your brand’s customer loyalty base becomes important. You cannot properly measure your brand loyalty base if you do not keep proper records and tracks.  The thought pattern that measuring customer loyalty is only for brands that run an existing customer loyalty program is not entirely true.

Measuring customer loyalty is easier to run when you have a database as well as a customer loyalty program and structure in place, but also you ought to be able to measure it even without a program in place, to decide if you need a program in place and the type of program you would rather put in place.

There are various ways to go about tracking and measuring your brand’s customer loyalty whether you have a customer loyalty program or not, we shall take an extensive study into the top 5.

Metrics that Aids Customer Loyalty

Customer Lifetime Value (CLV)

Customer Lifetime Value (CLV) is defined as the total revenue generated from the patronage of a customer. From the concept of “lifetime”, it includes the past patronage, present patronage and future patronage of a customer.  The way customer value is calculated is to multiply the average purchase value with the average number of purchasing times (frequency).

To get the CLV, the customer value is multiplied by the average customer lifespan. For customer lifespan, it varies with businesses and products sold. It varies based on the average amount of years or months an average customer would buy the things.

For example, for a shoe store, assuming the average shoe price is 5000 Naira, and customers make purchases like 5 times a year, we assume the customer lifespan here to be 5 years. The customer lifetime value here will be 5000× 5×5= 125000. The CLV is a key metric in measuring your customer loyalty, as it puts the spotlight on the amount a customer will spend in your business in a lifetime. As much as your goals are to see a monthly revenue increase, you must use this as a guide to investing in customer relationships, which will boost customer retention and loyalty.

This metric helps you segment the various types of customers you have, and how you can increase the lifetime values of your customers.  Knowing your CLV should also serve as a tool towards setting strategies that will increase your customers’ patronage as well as make further decisions related to customer service, advertisement, sales and loyalty program development.

The frequency and lifespan of a customer’s patronage are very important to your business and customer loyalty base, because the more the patronage and frequency, the higher the level of loyalty.  As you track and measure your customer loyalty, ensure to analyse and follow up with decisions that will help your brand’s health and financial wellness. 

Net Promoter Score (NPS)

Net Promoter Score is another metric or way of measuring your customer loyalty. This concept is born from running an NPS survey where your customers get to score you on how likely they will recommend your brands to friends and family. The NPS survey is run on a scale of 1-10, with 10 being the highest and 1 being the lowest. The answers gotten here tell you a lot about how your brand is perceived by your customers. With this simple question, customers will be more inclined to participate in the survey, and with the answer comes indirect answers to questions about their satisfaction and loyalty without you having to ask a long series of questions. The different figure ranges are segmented into various categories;

  •   Promoters: Customers that answer with a score of 9 or 10 on how likely they are to recommend your brand are considered promoters. It shows that they are truly loyal to and confident in your brand, and will keep patronising you and boldly recommend you to others. 
  •   Passives: Customers within the scoreline of 7 to 8 are most likely very confident in your brand, but do not care about recommending your brand to others. They do not see the necessity in recommendations. 
  •   Detractors: Customers that answer the question of how likely they are to recommend your brand within the scores of 1 to 6, are called detractors. They are either not satisfied with your brand and its offerings or they are satisfied but are not loyal and do not see the need to recommend you. Customers under this class can communicate the negative feelings they got from you to others rather than the positive sides.  They can be easily swayed by other brands. To help you with customers in this group, you should follow up on their responses, show care and concern in how they feel about your brand and why they would rather not recommend your brand. The responses on service experience, quality and feel from your customers’ perspective will give you directions on what to do better going forward. With strategic follow-up, even your detractors can be converted to promoters.

Now that you have the various categories of your responses, calculate the percentage of your promoters, passives and detractors, to derive your NPS, subtract the percentage of detractors from the percentage of promoters.

Your NPS shows you how strong your customer loyalty base is. You must also note that the results of your NPS show your customers’ perception of your brand. It can also be a pointer to the quality of your offerings and products, which is why you should follow up and also keep improving your brand.

Another tip is to use this metric in combination with another metric to have a better look at your analysis. For instance, in addition to your NPS, you can analyse your CLV too, as the CLV will show you how frequent a customer patronises your brand. A customer that consistently patronises you, but gives a score of 7, is an indication that he loves your products and services, but is not outspoken or bothered about recommendations.

Repeat Purchase Ratio

This is the ratio of customers that come back for repurchase. You can get this value by calculating a ratio of repeat purchasers to one-time buyers. Your services determine how to calculate this, for services and offerings that are subscribers-based, the ratio is derived by calculating the ratio of repeat subscribers to that of those who unsubscribe after the first subscription ends.

A lot of brands focus on gaining new customers daily and overlook the customers who keep coming back, which is detrimental to the overall health of their brands. Running an analysis on your repeat customers versus the one-timers will give you a start on what your focus and direction should be. Rather than waste your investment on one-timers who won’t come back, you can focus your investment on repeat buyers who will feel more connected.

Your knowledge of your repeat purchasers will help you in targeting them and boosting their lifetime value. Not all customers will patronise you all the time, though they are loyal. For example, a loyal customer to an airline can travel every month because of the nature of his job, while another only travels during public holidays and celebrations, it can be quite tasking but with the right tools and program, you can target your customers separately and engage them in personalised manners such that only relevant and peculiar information gets to them. Reward your loyal customers, make offers that will be peculiar and interesting to them, even with the partly consistent ones, send emails and updates to them.

It’s possible to have customers that patronise your brand more than once but are not loyal. If you can get the same customer to patronise you three times, you are on your way to winning a loyal customer.

You must know your repeat purchase rate and your repeat purchasers per time, as it will give you a clear understanding of what they love and how they love it. This knowledge will guide you in your relations with new customers in the future. 

Upsell Ratio

Another way of measuring your customer loyalty is via your Upsell ratio. This is the rate at which your customers buy new products asides from what they have been buying. For example, if a customer patronised your brand just to design a flier, and then comes back for you to design a logo, and then comes back for a website design and creation, it is an indication of trust in your brand and services. This is specifically the ratio of customers who buy more than one product to that of those who only buy one type of product. This is certainly different from the Repurchase ratio as it is strictly for existing/repeat customers. Those who buy a different product from what they usually buy takes into consideration two classes; Up-selling and cross-selling. 

Up-selling refers to a customer that buys a product that has a higher value instead of the usual or intended one.  

Cross-selling refers to customers buying more than the intended or usual product. These two are combined in the Upsell ratio, as long as a different product and service are bought. Your brand is more likely to sell new products to existing customers more than new customers, as new customers come with a specific need in mind. 

You should learn new trends, know what people look out for, what new products to add and when to upgrade your offers. Your upsells must be important to your customers, or else there will be no need to buy them. You have to do your upselling and cross-selling right, so as not to chase your customers. A tip that will prove helpful is to sell or offer services that complement each other, like with the designer example used above, as a graphic designer, it is great that you design fliers, logos and websites, not that you design logos and then sell computers, it will only drag your brand’s sales methods and keep loyalty low.

Customer Loyalty Index

Customer Loyalty Index (CLI) is a professional and standard tool used in the tracking of customer loyalty over a while. As mentioned earlier, customer loyalty cannot be tracked, analysed and measured using just one metric, rather more than one metric is required to make various deductions and gain a better perspective into your customer loyalty base. Customer Loyalty Index takes into consideration the combination of Net Promoter Score, Upselling and repeat purchasing, which centres on 3 answers;

  • Your customers’ recommendation of your products to others.
  • The likelihood of them patronising your brand again, and 
  • The likelihood of them buying another type of product from your brand.

The CLI of your customers is the average score of the three responses above. The answers here range from value 1 to 6, with 1 being “Strongly Yes”, and 6 being “Strongly No”.

You have to evaluate your CLI regularly, with caution and planning as you don’t want to get your customers upset and bothered by your incessant questions. This metric is very effective and detailed as it gives insight into your customers and how to go about raising the loyalty rates of your customers. It is possible that your customers won’t be sincere in their answers, so you should also place this side-by-side their physical behaviours and patronage rate. 

The 5 metrics listed above are the top ways to track, measure and analyse customer loyalty, whether you have a customer loyalty program in place or not.

Top 3 Tips for a Good Customer Loyalty Program

There are 3 tips you can put in place to follow strictly if you have a running customer loyalty program;

  • Redemption Rate

This is done by calculating the percentage of redeemable points that get redeemed as rewards. If your customers pay attention to your program and work to earn the rewards on offer, it shows their commitment and interest in your brand.  If people don’t bother in your program it’s a sign that there is no loyalty or interest. A redemption rate of 20% and below is a sign that you need to improve your customer relationship and connection.

  • Active Engagement Rate

This works hand-in-hand with your program’s redemption rate. The engagement of customers with your brand via the programs, reward systems and social media is a pointer to your loyal customers.

  • Participation Rate

This is derived by dividing the total number of customers you have by the number of program members you have.  Just like the engagement and redemption rate, it shows you whether or not your customers are loyal and connected to your brand and offerings. It gives insight into how well your program is doing, as well as what you should stop, change and improve upon.

There are various ways to measure your customer loyalty base, you can follow the ways that have been shared with you above. Most importantly, it is time to have a rewards program in place to increase customers. 

With a good customer loyalty program in place and a firm grasp of these metrics, you certainly are on your way to retaining the best customers who will always be loyal. 

ThankUCash offers one of the best reward systems you can ever think of. To see to it that your customers are well rewarded, cashback is given on patronages made to your brand. With the right strategies and actions, an increase in customer retention is promised.

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