Customer loyalty is vital to any business. Whether you’re an emerging startup or a thriving company launching a new campaign, knowing how to measure customer loyalty is essential to any growth strategy. Customer loyalty data can provide insight into your products and services, customer support, marketing, and more. It’s valuable for direct-to-consumer businesses (B2C) as well as companies that cater directly to other businesses (B2B).
Attracting first-time customers is important, too, but repeat buyers or returning clients are the backbone of your business’s long-term success. Loyal customers generate consistent sales and help your company expand by recommending your products or services to their friends and family. The most dedicated fans may even sing your praises on social media and message boards, resulting in highly effective organic marketing.
Define Your Loyalty Metrics
When you’re learning how to measure customer loyalty, the first step is to define your metrics. There are several different ways to measure customer loyalty and certain metrics may be more valuable to your business strategy than others. Customer loyalty metrics are frequently part of a company’s Key Performance Indicators (KPI).
Here are a few of the most popular metrics used for customer loyalty data:
Customer Retention Rate
Customer retention is defined as the rate at which your customers or clients keep coming back within a given time period. A high customer retention rate means that your business has a loyal following of customers who frequently purchase your products or services. If your company offers a subscription model, customer retention could reflect the number of subscribers who continue to renew month after month.
To calculate your customer retention rate, use the following formula:
Current Total Customers – New Customers / Customers You Started With
Then multiply this number by 100 to see your customer retention rate percentage. By comparing this percentage month-over-month, you’ll see how your customer loyalty fluctuates and be able to adjust your marketing strategies accordingly.
Customer Lifetime Value
Customer Lifetime Value, or CLV, is a predictive metric that estimates how much money your customers will spend at your company over their lifetime. To determine CLV, multiply Customer Value by Average Lifespan.
CLV can be combined with demographic data about your customers, such as age, gender, region, income level, or other variables relevant to your business. This will enable you to define your most valuable customers, which can allow you to enhance customer retention as well as target new customer segments for acquisition.
Repeat Purchase Rate
When considering how to measure customer loyalty for your business, Repeat Purchase Rate (RPR) is a highly effective tool. As the name suggests, RPR is the rate at which your customers continue to buy your products or use your services. A high RPR means you have a loyal customer base who return to your company over and over again.
To measure this customer loyalty metric, simply divide the number of Repeat Customers by the number of Total Paying Customers.
RPR is especially useful for digital marketing. When you are launching a new product or service, targeting repeat customers is often more cost-effective than new customer acquisition. Your loyal customer base will feel excited to try new offerings and may help spread the word, too.
Choose the Right Customer Loyalty Metric for Your Goals
Remember, no two businesses are exactly alike. Before you choose which customer loyalty metrics to focus on, consider your current goals and needs. You may also benefit from researching additional measurements such as Upsell Ratio, Customer Effort Score, Active Engagement Ratio, or other metrics.
Engage With Your Customers
In today’s business climate, numbers alone aren’t enough to measure customer loyalty. But the good news is that engaging with your customers is easier than ever. Surveys, social media, and reviewer websites or message boards can offer powerful insight into the minds of your customers.
If you crunch the numbers and you still aren’t sure how to measure customer loyalty, try a direct human approach with one of the following methods:
Customer Surveys
Customer surveys are a classic method for measuring customer loyalty. They can also help you identify ways to improve your business, or even develop new products and services based on what your loyal customers love.
An effective customer loyalty survey can be as simple as a short email questionnaire, a few questions on your checkout flow after customers complete a purchase, or cards to fill out if your business has a brick-and-mortar space.
For more in-depth information feedback, you can entice your customers into participating in longer surveys or focus groups by offering special discounts, free products, or entries in a giveaway.
Social Media
Social media is another powerful tool for measuring customer loyalty. In addition to the comments and messages you receive directly on your company’s official social media channels, make sure you are consistently searching any hashtags or keywords associated with your business to see what customers are saying.
You can also publish social media posts that ask your customers to share their opinions.
Review Sites and Message Boards
When was the last time you Googled your business? In addition to social media, many customers love sharing their opinions of a company on websites like Yelp, Reddit, Google Reviews, Trustpilot, and more.
Make it a habit to look up your business on these sites to see what your customers are saying. You can also set a Google Alert for your business or products to stay updated. Reading customer reviews will provide vital insight into your customers and help you increase loyalty.
Measure with Bloom Ads
If establishing how to measure customer loyalty seems complex, don’t worry — you can always partner with a trusted company that can help support your marketing goals. With over 25 years of proven experience, we have cracked the code of making smarter advertising investments across various verticals. Contact us today to get started.