Measuring Customer Loyalty
In the digital age, customers get to be louder than ever about their experiences with brands. Comments, reviews, and user-generated content abound, all of which can define a business's online footprint. This, alongside rampant competition, has made customer loyalty one of the most valuable aspects of building a business.
It's the backbone on which brands build their credibility, online perception, and revenue. But how do you go about measuring it? And how can you make sure the results are accurate?
We'll be answering all those questions and more right here. Keep reading for everything from a basic introduction to what customer loyalty is to the various methods you can use to measure it and the best ways to avoid common hurdles when doing so.
Understanding customer loyalty
Like so many marketing terms, “customer loyalty” is a phrase used loudly and often, but rarely with accuracy. To measure it properly, let's take a closer look at what it covers and how it impacts a business:
Different types of customer loyalty
Customer loyalty is generally discussed within these two frameworks:
Attitudinal customer loyalty
This looks at customer loyalty in terms of customers' perceptions of a business and its offerings. It covers aspects such as a customer's intention to repurchase, their overall satisfaction with their experience, how likely they are to recommend the business, and whether they feel an emotional attachment toward it too.
Behavioural customer loyalty
Loyalty from a behavioural angle is usually defined by how much and how frequently a customer has purchased, the total amount they've spent, and how long they've been a customer. It's the more quantitative side of things and tends to be far more tangible than attitudinal customer loyalty.
Unfortunately, peoples' actions don't always match their feelings and vice versa. That's why a comprehensive look at customer loyalty will always try to encompass both attitudinal and behavioural data.
How customer loyalty impacts business success
One of the best ways to contextualise customer loyalty is by looking at the positive impact it can have on a business:
Reduced churn rates
Instead of constantly losing customers to competitors and having to find replacements, those with strong customer loyalty tend to hang on to their patrons.
More cost-effective marketing
The ripple effect of the above is then far more cost-effective marketing. Losing fewer customers means less money being spent trying to grab the attention of new ones. Happy customers are also more likely to advocate for a brand in their social circles which helps boost visibility and credibility well beyond the initial marketing spend.
Increased revenue
Loyal customers not only make repeat purchases, but they tend to spend more than those new to the brand. It's why they're such an important component for growing a steady revenue.
Competitive advantage
Strong customer loyalty plays a significant role in helping businesses to build and maintain a competitive advantage, which in turn means that they can withstand market fluctuations.
4 key metrics for measuring customer loyalty
These four metrics are crucial for any business learning how to measure customer loyalty:
Net Promoter Score (NPS)
NPS measures how likely a customer is to recommend a brand, service, or product to others. It usually involves asking customers in a survey to rate this likelihood on a scale of 1 to 10 and then using those answers to determine customers that are promoters, passive buyers, etc. To make things easy, we have a pre-built NPS question ready t build into surveys.
The value of measuring your NPS isn't just in showing whether customers will recommend your brand, it also indicates how satisfied they are with their experience. One of the great benefits of customer loyalty metrics is that you tend to get more than one insight from the results.
Customer Satisfaction Score (CSAT)
Where NPS provides a look at the general satisfaction of a customer, CSAT is far more focused. It asks customers to rate their satisfaction based on a specific interaction with a brand. For example, we offer a survey template on product satisfaction which asks customers to rate their experience with a specific product. We also have other templates that relate to help desk interactions, etc.
CSAT is a highly valuable metric for measuring customer loyalty, especially because it exposes exact areas that might need improving. If you're struggling with high churn rates, a CSAT-focused survey is often the best way to get insight into what's causing the issue.
Customer Retention Rate (CRR)
Unlike the previous two discussed, CRR is a straight quantitative metric. It measures customer loyalty by looking at the percentage of customers a brand has retained within a specific period. A high retention rate indicates a strong sense of loyalty while a low one is a sign that something is amiss.
The one limitation of CRR is that you just get a percentage result. To figure out what's behind the number then requires something like a customer satisfaction survey.
Customer Lifetime Value (CLV)
CLV is a predictive metric for customer loyalty that calculates the total revenue a business can expect from a customer using their average purchase value, how often they shop with a brand and their expected lifespan as a customer.
It shows the long-term value of a customer, and which ones are most likely to give a good return on investment. Businesses can use CLV to shape who they target in the future and which aspects of customer support perhaps need to be finessed to suit.
Garnering the necessary information, however, to perform a CLV usually involves some kind of customer survey. It's also not an air-tight metric for customer loyalty as things can change over time.
How to collect data on customer loyalty
No matter what metric a brand uses to measure customer loyalty, nothing can happen without data. Here's how to gather it:
Surveys
Customer surveys are one of the most common, and most effective ways to gather actionable insight into what people think and feel about your business. They can be done over the phone, but the best results usually come from those performed online: via email, a business website, or even social media.
We offer a wide variety of customer survey templates to use, including one specifically focused on gauging customer loyalty. We also have a fully GDPR-compliant platform that allows you to create unique surveys and track their results with ease.
Whether you use our platform or another, here are four quick tips on designing a survey that gets you all the data you need for measuring customer loyalty:
- Have a clear goal for your survey that you then build your questions around; for example, a survey meant to gather customer sentiment about a product could include a question that asks them to rank their favourite features of it
- Ask clear, direct questions that don't leave room for interpretation; for example, “How would you rate the customer support you received?” is far better than “Did you like the customer support experience?”
- Start with quick, simple questions and work up to the lengthier ones
- Don't forget to ask for basic demographics as this will help contextualise the data
Feedback forms and comment cards
Feedback forms and comment cards are generally used to follow up after a specific purchase or interaction with a brand. How a person feels after they've engaged with customer service for example, or just had their parcel delivered, is a crucial indicator of whether or not a sense of loyalty is being developed. It's also a prime opportunity to gather actionable insight into where experiences can be improved so that customer loyalty is strengthened going forward.
For the most accurate results, however, feedback forms need to be timed correctly. In the case of online interactions, we'd recommend sending them immediately after whereas purchases sometimes need a delivery window built in.
Online reviews and social media
Online review sites such as Trustpilot are an important source of data when measuring customer loyalty, but so are social media comments and content. They can provide finite details of customers' experiences, as well as the general sentiment being given to a brand. Both are highly valuable as they affect brand perception and in turn, purchase rates.
Customer interviews and focus groups
This form of measuring customer loyalty allows a level of depth few others will. Interviews, however, need to be run in a comfortable, respectful environment where participants feel at ease about sharing their true opinions. In a focus group setting, a sense of discussion also needs to be encouraged that still allows everyone in the room a chance to speak.
Gleaning customer loyalty insights from these is all about asking clear questions on the subject, and paying attention to any patterns that arise in the answers.
Tools and technologies for measuring customer loyalty
Knowing how to measure customer loyalty is one thing, but knowing which tools to use can make or break the accuracy of your data and in turn, the results.
Survey software platforms
Your choice of survey software should ideally allow you to not only create and share your surveys easily, be it via email, social media, etc, but also provide access to real-time results.
The benefit of using software platforms for your surveys instead of making and distributing your own separately is that it ensures that:
- Results are easier to monitor and measure
- Important customer data is stored correctly
- You can manage multiple surveys at once
Customer relations management systems (CRM)
These systems are designed to analyse and manage customers' interactions throughout their time with a brand. How often someone purchases, how long they've spent on your site, etc., can all be centralised with a CRM and then used alongside the qualitative data from something like a survey report for a well-rounded view of customer loyalty.
Analytics and reporting tools
Analytics and reporting tools are key for measuring customer loyalty, especially when managing large collections of data. Tools can be used to produce an NPS, CSAT, or CLV report and give a helpful overview of a brand's scores in all these areas.
Common challenges of measuring customer loyalty and how to overcome them
Don't let these challenges stop your business from measuring customer loyalty:
Survey fatigue
Without care being taken, it's easy for survey fatigue to kick in, where participants to get disinterested or impatient when completing your questionaire and either rush or abandon their answers altogether. Here's how this can be avoided:
- Keep questions to the essential; the shorter the better
- Stick to clear, short sentences
- Make sure there's a logical flow to the survey
- Provide incentives such as discounts, etc. for those who complete the survey
- Don't send out surveys too frequently
- Show customers how prior surveys have helped improve products
It's also worth considering changing how you gather data you would have ordinarily used a survey for. For example, text messages or feedback forms can be used instead.
Ensuring data accuracy and reliability
There are some key strategies that can help ensure the data you collect when measuring customer loyalty is as accurate and reliable as possible:
- Use multiple data sources with a mix of both attitudinal and behavioural data
- Standardise surveys and other data formats
- Segment customers into demographics, purchasing behaviours, etc.
- Encourage honest feedback
- Protect anonymity and data privacy in compliance with regulations such as the GDPR
- Verify which customers answering a survey, for example, have in fact purchased from the business before
- Have a policy in place on discarding incomplete data and discarding unverified or inaccurate data so that it doesn't skew final results
Interpreting and acting on data
Making sense of customer feedback is as much about the details as it is about the patterns. Segmenting feedback helps make it more manageable and makes it easier to see common issues that crop up across the data. This will point to areas that need improving and often, can even reveal solutions too.
Key takeaways
- Customer loyalty definition: Customer loyalty is more than repeat purchases; it includes trust, overall satisfaction, and emotional attachment to a brand
- Types of loyalty: There are two main types: attitudinal loyalty, based on customer perceptions and emotional attachment, and behavioural loyalty, measured by purchase frequency and spending
- Business impact: High customer loyalty reduces churn rates, cuts marketing costs, increases revenue, and builds a competitive advantage
- Key metrics: Four critical metrics for measuring loyalty are Net Promoter Score (NPS), Customer Satisfaction Score (CSAT), Customer Retention Rate (CRR), and Customer Lifetime Value (CLV)
- Data collection methods: Effective ways to gather loyalty data include surveys, feedback forms, comment cards, online reviews, social media, customer interviews, and focus groups
- Tools for measurement: Using survey software platforms, customer relations management systems (CRM), and analytics tools helps in creating, distributing, and analysing customer loyalty data
- Common challenges: Addressing survey fatigue, ensuring data accuracy, and interpreting data are essential for reliable loyalty measurement
- Actionable insights: Collecting and analysing loyalty data can help improve customer experiences, leading to stronger loyalty and business success
Author's note: this blog was originally published July 2021 and updated July 2024
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