3 Key Metrics To Measure Customer Loyalty

Published on:
Thu Apr 25 2024
Customer Experience

Customer loyalty is crucial for the success of the business. Repeat purchases are a vital aspect for any company aiming to grow sustainably.

It goes without saying that repeat purchases come exclusively from loyal customers or from those who come back to buy more from you.

Even in this age of technical innovation, word-of-mouth marketing still generates the most revenue. While marketers search for new ways to track customer loyalty, repeat customers add the most value by informing their friends about how happy they are with their most recent purchase.

What is Customer Loyalty?

Customer loyalty refers to having satisfied customers who prefer to buy from you rather than your competitors. The customer becomes loyal, once they form an emotional bond with your brand through positive interactions.

Customers who are loyal to you may buy from you repeatedly, interact with you across different channels, and actively spread the news about your company.

Tracking customer loyalty can assist you in developing customer retention tactics, nurturing existing customers, and developing strong brand advocates.

According to reports, “43% of customers spend more on brands that they are loyal to than those that they are not.”

Why is Customer Loyalty important?

Strong customer loyalty leads to increased verbal recommendations and a greater sense of trust between the brand and the customer. It’s a crucial aspect because existing customers are likely to be your most essential source of revenue. Some of the customer loyalty benefits are:-

  • Brand Image Improvement
  • More referrals are generated by loyal customers
  • Customers who are loyal will continue to purchase from you
  • Customers who are loyal do not actively seek out alternative suppliers
  • Customers who are loyal to you are more likely to buy your other items and services
  • Customers who are loyal are more likely to submit comments and reviews, which may help brands in an enhanced retention rate.

How to Measure Customer Loyalty?

For those who have not done it before, measuring loyalty is an exciting effort. After all, loyalty is an emotion. It gives you a sense of belongingness.

However, without customer loyalty measures, the company won’t be able to track its success. Marketers would get lost, and the entire marketing approach will be in vain.

To address these issues, we have listed here three key metrics that will assist you in measuring customer loyalty.

1. Net Promoter Score ( NPS )

The Net Promoter Number, or NPS, is a customer loyalty score that determines how likely customers are to promote Product X or Service Y to others.

The customer selects a score between 0 and 10 in an NPS survey. People who choose 0-6 are considered detractors. Promoters pick numbers 9-10. NPS can be measured by subtracting the percentage of detractors from the percentage of promoters.

A higher value denotes a positive NPS. A score of more than 50 is excellent, while one of more than 70 is outstanding.

You can utilize your NPS to determine how to improve the customer experience in order to increase the number of promoters, who are your most enthusiastic repeat customers and strongest brand supporters.

2. Customer Loyalty Index (CLI)

A customer loyalty index is a method for determining customer loyalty over time. It consists of a three-question survey that measures NPS, repurchases, and upselling:

  • How likely are you to tell a friend about [company]?
  • Are you likely to purchase from [company] again?
  • How likely are you to try other products or services from [company]?

For this, customers respond on a scale of 1 to 6, with 1 indicating “extremely likely” and 6 indicating “not likely.”

To calculate CLI, the company needs to find the average of all three scores.

3. Repeat Purchase Rate (RPR)

The percentage of customers who have returned to you for numerous purchases is your repeat purchase rate. While repeat purchases do not always imply loyalty but it is simpler to build loyalty in a returning customer.

To calculate RPR, divide the number of customers that made a repeat purchase in a particular timeframe by the total number of customers in the same timeframe.

You can gain a better picture of customer loyalty around your brand using the above metric. Also, you can use these insights to develop more loyal customers.

If you are looking to measure and optimize customer experiences to increase your customer loyalty, then Dropthought can certainly help!

Dropthought is a user-friendly, omnichannel, and real-time customer experience management platform. We empower companies in different verticals to create delightful experiences for customers across their journey. Get detailed analysis and insights from data to exactly know what your customers think and what actions you need to take to delight them.

With a dedicated customer success team, we would ensure that you are optimizing your Customer Experience programs and strategies to create great experiences!

Learn more by simply clicking here.