The Top 4 Customer Loyalty Metrics

How to measure customer loyalty across your customer experience program.

Articles

Jeannie Walters

March 18, 2020

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It’s easy to say all customer experience metrics track loyalty, but understanding how to measure loyalty versus customer happiness, can lead to better overall understanding of your customer journey, your potential business builders, and your customers wants and needs. 

Loyalty is an emotional state and it’s reflected in the behaviors customers exhibit with your brand: 

  • Do they stay with your brand instead of your competitors?

  • Do they buy more?

  • Are they willing to pay a premium?

  • Will they refer your brand to others?

Let’s explore some of the ways to track these behaviors which can help predict how loyal customers feel about your brand.

Loyalty Metric 1

Retention

Probably the most straightforward way to track your customers’ loyalty is a simple one. Are they continuing to be your customer, year after year? 

Different industries have different ways of tracking retention, so be sure to use the way that makes the most sense to your business and industry. When possible, track retention based on individual customers. Retention should not be measured as a whole number (ex: do we have more customers in May than April?) because that may include new customers and ignore churn.

When discussing retention and churn, it’s important to distinguish the two metrics. Retention is best tracked when you can see "this many specific customers from this specific group stayed," versus churn, which is "this is how many customers left this month, compared to our overall customer number." 

Here are the quick definitions: 

Retention = % of customers who stayed this month from customers who were already customers.

Churn = % of customers who left this month compared to all customers this month (including those just acquired).

So, let's say there are 100 total customers when we start the month; 80 are ongoing customers and 20 are new. But 10 leave.

Retention rate = 87.5% retention (80-10=70/80)

Churn rate = 10% (10/100)

Retention measures how long our customers stay with our brand. By tracking at the individual level, we can determine not just the percentage of customers who remain, but also the length of time they are likely to stay. By identifying, for example, how many customers remain until month 6, we can evaluate what key touchpoints happen at that point in their journey.

Your customers are “voting” with their loyalty to your brand. This shows up in your retention rates. Think of the cost of gaining a customer (sales, marketing, onboarding, etc.) versus keeping a customer. Your cost to keep the customer is much lower, but your organization gains so much more. If customers are sticking with you longer, they are telling you they are happy with the experience. Pay attention! These customers won’t stick with you if you don’t recognize and reward that loyalty.

Loyalty Metric 2

Share of wallet

Loyalty is about more than just staying as a customer. Loyal customers also spend more with your brand. Knowing what the average customer spends on your products or services and knowing if your company earns that number (or more or less) can tell you a lot about loyalty.

Trusted brands earn the loyalty of their customers and that shows up in customer experience metrics like CSAT and NPS. But those metrics are not enough to truly gauge loyalty or understand how your brand fits in the landscape.

If your customers are willing to buy multiple products from you, look for more services, AND recommend you to others, they are more likely loyal to your organization.

In fact, better customer experience can be directly linked to higher likelihood to purchase more products or services. By investing in the experience, your customers will be more loyal in both their time spent with you and their money invested in those experiences!

Loyalty Metric 3

Cross-sales and up-sales

Share of wallet can sometimes be tricky. You may not feel totally confident in the industry averages, or those numbers can often lag behind reality. A direct way to track a similar behavior in your customers is measuring cross-sales and up-sales.

Your business probably offers more than one service or product. Customers will buy more, and be more willing to pay a premium, with companies that have earned their trust. 

Tracking month-over-month or quarterly sales per customer and translating that to cross-sale percentages is another way to predict loyalty. If you do have premium products or obvious “up-sale” opportunities, identifying those in your metrics can contribute to understanding how your most loyal customers behave. 

Watch for patterns, like:

  • Did your customers who made a second purchase do so at a similar place in the customer journey?

  • How did your up-sales occur? Did they require salespeople or high-touch relationships?

  • Did any customers ask for refunds or discounts for these sales?

Then, calculate what does a higher percentage of premium sales mean for your organization. If you have an existing 500 premium purchases per year from existing customers, and each premium sale means a $500 increase, then that means today these sales are providing $250,000 annually. Increasing by 50% in sales from existing customers means an additional $125,000 for your brand. 

And remember, these are existing customers who are happy and loyal. They see the value of the premium and appreciate the offer. This isn’t about increasing sales tactics. This is about improving the customer experience to drive this sort of loyalty.

Loyalty Metric 4

Referral rates

It’s challenging to think of a better way to measure loyalty than referrals from your best customers. These customers are loyal because they feel a sense of ownership over your brand. This level of advocacy means they feel so connected to your brand they are willing to put their own name and reputation on the line to share what they love with others!

If you don’t already have a loyalty and referral program, that is worth evaluating. Referrals are incredibly valuable to your organization. They don’t require the same costs of marketing, sales or even prospect education as other methods of customer acquisition. They literally come to your brand and say “I want to work with you!”

Rewarding those who are kind enough to refer these customers to us is an important way to build on their loyalty. Many of these advocates are happy with recognition from a brand they love.

Tracking your referral rates is a great way to see if you are creating and developing these advocates in your organization.

Loyalty is a state of mind

It’s easy to think once we have a loyal customer, they will remain loyal to us. Brands big and small are guilty of becoming complacent with these loyal customers who help our businesses grow. But the best brands recognize the need to continue to innovate and improve around the customer experience. 

Loyalty is not a simple “are you loyal” question. It’s a nuanced and fluctuating state of mind. Using these metrics to track and understand how your customers feel is one step in a journey to really cultivate customer loyalty.

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About the guest author 

Jeannie Walters, CCXP, CEO, Experience Investigators™ by 360Connext 

Jeannie Walters is a Certified Customer Experience Professional (CCXP) and is CEO of Experience Investigators. She is a customer experience speaker, writer, and consultant with more than 20 years of experience in assisting all types of companies, including Fortune 500. Specialties include in-depth customer experience evaluations, customer journey mapping, user experience analysis, and leading workshops and training programs. Her mission is: To Create Fewer Ruined Days for Customers.™ Connect with her: experienceinvestigators.com | @jeanniecw

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