8 Metrics to Measure Customer Loyalty
When it comes to managing the customer lifecycle, it can sometimes be difficult to gauge your progress with a given customer, or how well their lifecycle is going. There are plenty of ways to tweak your strategy to optimize your chances of achieving and retaining loyal customers, such as CRM tools, email automation, loyalty programs - the list goes on. However, with so many tools across so many customer lifecycle stages, what is the best way forward in gauging success within the customer lifecycle?
1. Impressions & Conversions
Impressions and conversions are also metrics for the early phases of the customer lifecycle. When it comes to awareness and acquisition, driving impressions and conversions should be one of your main goals. Typically, impressions refer to online advertising where views are tracked. However, you should look beyond this and also take into account less measurable impressions, particularly if you’re a brick-and-mortar store.
Regardless of whether they’re digital or otherwise, you should be looking at your impression-to-conversion ratio. Pay attention to the difference in success rates across your various strategies and variations of approaches to gain insight into what works best for your customer base.
2. Transaction Value
This one is easy to measure - just look at your receipts. Plus, it's much more indicative of how you're doing once the customers are just that - customers, no longer potential customers. The monetary value of your customers is one of the key indicators of how profitable or successful their customer lifecycle has been (and is) for your business.
This ties into customer lifetime value and understanding the varying nature of customers' respective customer lifetime values. While certain customers will stay with you for life, others might only make one purchase. Understanding this and being aware of it is something that can only be advantageous to you, as you’re then in a position to make informed decisions on who’s worth chasing and who isn’t - which brings down that average cost per acquisition we talked about.
3. Transaction Frequency
In the context of longevity, this matters. However, in the context of profitability, transaction frequency doesn’t come into the equation as much as people think. If your focus is on being convenient and facilitating small, last-minute purchases, then higher purchase frequency is great. However, if you’re looking to be profitable with a more standard business model, focusing on frequency won’t do much for you.
As we said, understanding that not all customers were created equal is a great realization to come to. Some customers have the lowest purchase frequency possible - one - yet still contribute more revenue than customers with high levels of purchase frequency and require constant attention and service. Aside from this, using transaction frequency as a marker for customer lifecycle management.
4. Customer Lifetime Value (CLV)
Customer lifetime value is exactly what it says on the label. However, it can be based on a certain period rather than 'lifetime' value - like monthly or quarterly value, for example. For the full lowdown on customer lifetime value and how you can use this metric to boost your business, take a look at our customer lifetime value article.
When it comes to customer lifetime value, you should again have a benchmark against which you can rate a given customers value. Additionally, being aware of the average CLV of a given segment will allow you to gauge the success of campaigns and other marketing activities targeting said segment.
5. Customer Retention Rate
While this isn't a metric looked at on a customer-by-customer basis, it's important nonetheless. Your customer retention metric is the number of customers you manage to retain within a given period. Customer retention may not necessarily equate to loyalty, but it is undoubtedly one of the key ingredients. Your strategy for achieving and growing customer loyalty should be intertwined with your customer retention strategy. This prevents customers churning and increases the percentage of customers that increase their lifetime value upon retention.
To calculate your customer retention rate, you simply need to look at the amount of customers you had at the beginning of a given period versus how many you had left at the end of that period, less any customers acquired during that period. For example, let's say that you had 100 customers at the beginning of a one-month period, but lost 12 of these customers and gained another 11 new customers. At the end of the month, this leaves you with 99 customers. Here's how you would calculate your customer retention rate:
[(99 - 11) / 100] x 100 = 88
Hence, your customer retention rate for that period was 88%.
6. Customer Satisfaction
When it comes to retaining customers and ensuring you grow your customer loyalty over time, ensuring customer satisfaction is essential. Measuring customer satisfaction should be an ongoing activity, with clear benchmarks and consistent practices. The most typical way of gauging customer satisfaction is via customer satisfaction surveys, which are typically embedded within a certain stage of the customer journey.
When measuring customer satisfaction, the questions you ask are largely up to you. However, it's vital to note that your questions should remain constant over certain periods so that you can more effectively gauge improvements or disimprovements.
7. Net Promoter Score (NPS)
A close cousin of the customer satisfaction survey is the Net Promoter Score (NPS). The convenient thing about a net promoter score is its efficiency in gauging customer satisfaction in just one question. The NPS is calculated based on the question of how likely a customer is to recommend a product or service to a friend or colleague. The number indicated on the scale is then the number used as that customer's NPS. This question can be asked on a product or service level, but can also be asked in the context of an entire company or brand.
8. Customer Engagement
Customer engagement is incredibly important when it comes to optimizing your customer journeys and lifecycles. This is because it can increase purchase frequency among all customers, transaction value, conversion rates, and acquisition costs. Why? Engagement is essential for customers to enjoy your brand, your content, and your products. It’s rare that a customer loves a brand and what it represents, yet then starts to purchase less than before they developed an affinity for the brand. If you’re going to focus on just one metric, make it this one.
While customer engagement is difficult to track in a very concrete way, it is essential to track it in some way. This can be equated to scans if you have loyalty or rewards cards, or it can be equated to something more abstract and difficult to measure. The reason for this is that it helps you to map out customer lifecycle marketing, identify stages based on engagement metrics, and subsequently deploy the most relevant content and strategies for the respective stages.
Tips to Increase Customer Loyalty & Retention
No, not how smart your audience is. How much you know about your audience. Having strong and deep knowledge when it comes to your audience means that you can create eye-catching ads that address their pain points, create content to solve their problems, and optimize their use and enjoyment of your product.
This ties into your knowledge of your audience. If you know what people want, you’ll increase customer engagement with every piece of content you produce. Make sure your content is of high quality, contributes value, and is relevant to the stage of the customer lifecycle that the respective customers are in. Not only does good content build trust, it gives you a connection with your audience.
Customer Service Tools
Employing customer service tools will allow you to analyze frequently occurring issues, address customer problems in more structured and resolution-oriented ways, and also carry out surveys and create a knowledge base to eradicate the risk of customers having to ask the same thing twice. Not only will many customer service tools record the 'category' of the issues coming in, but they will ease your employees' workload. Better still, they can be tweaked based on data to give more optimal responses.
As we said - nobody provides valuable resources such as industry reports, blogs, infographics, and more without the intention of them leading to a sale or two. Make sure your marketing efforts achieve the goal of conversions by including obvious and easily understood calls to action.
If you’re not including a clear, strong, and compelling CTA within your content and advertisements, you might as well not be providing or posting anything at all. Plus, there’s nothing more frustrating as a consumer than when you finally find what you want but have to go on a scavenger hunt to actually get it or even sign up for an account.
Customers want personalized experiences and offers, but they’re not getting them. Using the right loyalty or CRM software should allow you to monitor consumer habits and preferences easily, allowing you to subsequently adapt how you communicate with certain customers.
Not only will this lead to higher satisfaction rates among your customers, but it will lead to far higher conversion rates on each of your campaigns and offers. Plus, with 78% of customers saying that personalized content would convince them to shop again, it’s worth the investment.
As good as this all sounds, you can’t be in every place at one time. Incorporating automation via your customer loyalty or CRM software means that your customers can receive personalized, context-based messages without you having to monitor everything they do constantly. The more customer data you record and analyze, the more effective and efficient you can make your automation.
Determine their Worth
Not all customers have the same customer lifetime value - and as harsh as it sounds, this means they don’t all deserve the same level of attention and care. To maximize customer lifetime value and profit per customer (not revenue per customer) you need to define which customers have the most potential and which just aren’t worth the chase.
Encourage Reviews & Referrals
The customer lifecycle is a multi-stage journey and isn’t always linear. Many consumers bounce backward and forward during their purchase decision, and providing proof is something that can mitigate that. Encourage existing customers that are further in the customer lifecycle to leave reviews and testimonials in return for a reward. Rewarding and incentivizing referrals is also a great way to get customers on board without all the chasing. Plus, conversions are notably higher for companies that employ reviews or testimonials.
Take an Omnichannel Approach
Customers expect an omnichannel experience, so that’s one reason for providing one. Aside from that, however, taking an omnichannel approach also ensures that you’re covering all your channels and are remaining present in the mind of consumers. It makes your customer journey much smoother and more uniform, which enhances the overall customer experience.
Use CRM Tools
Using CRM tools isn’t lazy, it’s not cheating, and it won’t give your customers a feeling of impersonality - provided you use it correctly. Not only this, but it can save you precious time that you can subsequently put into marketing and personalization efforts. Customer retention and customer centricity have become more important than ever before, and employing and operationalizing data you collect on your customers is one of the most effective ways of tackling this. Not only does this give you a more centralized database for customer insights, but it also helps with customer segmentation and customization.
Still wondering about how you can take your customer experience to the next level? Customer loyalty software incorporates CRM tools, email automation, gift cards, and even your own custom loyalty app - all perfectly on-brand. Craft perfect customer journeys with automation, promote your best bits with marketing tools, and customize to your heart's content with triggers, segmentation & personalization tools. Reward customers to create repeat business, collect data to customize their respective experiences, and boost customer acquisition with drag-and-drop promotional tools.