Unlike customer retention, which you can measure with churn rates , or customer satisfaction which can also be measured using CSAT or NPS , loyalty remains a little more difficult to understand.
Still, customer loyalty is critical for many businesses.
High loyalty denotes high customer satisfaction, retention, and engagement. It can boost customer acquisition and even impact revenue.
So how do you capture loyalty, if it's so elusive? Lucky for you, we've got you covered.
This article shares how to measure loyalty and why to do it, before diving afghanistan telemarketing data into the best customer loyalty strategies and how to set them up for your business.
Here we go.
What is customer loyalty?
Customer loyalty is when a customer is willing to commit and repeatedly purchase from a brand over the competition.
Loyalty is built through positive customer experiences that create an ongoing emotional relationship between customer and company, and build trust.
“Simply put, customer loyalty is when you deliver outstanding experiences that form a strong emotional bond with your customers, resulting in high engagement and repeat purchases,” says Arttu Haho, CEO of Trustmary US.
what-is-customer-loyalty
Measuring customer loyalty
Making the effort to build a loyal customer base can yield high returns, but first we need to know how to measure it.
There is no quick and easy way to measure loyalty per se. Instead, many companies use a combination of different metrics.
Net Promoter Score (NPS)
It measures the likelihood that your customers would recommend your product or service to a friend or colleague, and is rated on a scale of 0 to 10.
NPS is calculated by subtracting the percentage of those who would not recommend your company (Detractors) from those who would (Promoters).
Repurchase rate
Percentage of a group that has placed another order within a certain period of time since the first order.
The repeat purchase rate is calculated by dividing the number of customers who have made more than one purchase by the total number of customers and then multiplying by 100.
Upsell ratio
Measures the proportion of customers who make purchases above and beyond the initial product they intended to buy.
The upsell ratio is calculated by the number of customers who have purchased more than one type of product divided by the number of customers who have purchased only one.
Customer Loyalty Index (CLI)
Combine multiple metrics to get a more complete picture of customer loyalty.
The averages of NPS scores, repurchase rates, and upsell ratios are combined into one metric that gives you a baseline measure of customer loyalty.
Customer Lifetime Value (CLV)
It measures the average income generated throughout the customer's relationship with the company.
To calculate CLV, you first need to calculate the customer value and then multiply the customer value by the average customer lifetime in years.
Customer Engagement Score
Measure your customers' engagement based on their activity and use of your products and services.
Customer engagement score calculations can vary, but combining frequency of use, time spent, and specific actions taken can give you a single metric to track over time.
