7 Proven Metrics for Measuring Customer Loyalty

A good and loyal customer base is a great asset for any business. However, developing or finding loyal customers isn't always easy for business owners. Research states that more than 90% of brands use customer retention strategies to build a loyal customer base.

Further, in this digitally evolving era, referral marketing is still an essential strategy that helps businesses develop more revenue. While marketers are looking for ways to enhance their customer base, repeated customers can grow your business by suggesting your brand to people they know, such as their family members, friends, or colleagues.

A study found that more than 75% of customers are more inclined toward brands that provide regular rewards and offers for customers.

Besides offering rewards to your customers, other strategies can also help you enhance customer loyalty. Several metrics and techniques exist to measure and quantify the loyalty of a business.

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What is Customer Loyalty?

Customer loyalty refers to the relationship between a brand and its customers. Businesses use upselling techniques, so customers buy from their brand occasionally, even when cost-effective options are accessible.

In this era of high marketing costs, losing one customer can be disastrous for businesses. Several eCommerce optimization strategies can help brands enhance customer loyalty or attract more customers.

Customer loyalty develops gradually and results from consistent positive customer experiences, which ultimately build a sense of trust. Customer loyalty allows few flaws, but continuous bad customer experience can shut down businesses.

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Importance of Customer Loyalty

Repeated customers are the secret ingredient for a business's success. Customers do not want to wander here and there for more options. Rather, they prefer a one-stop brand for all their requirements.

Further, more than 82% of brands agree that client acquisition is costlier than customer retention.

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7 Proven Metrics For Measuring Customer Loyalty

One single metric cannot provide you with all the information you need. We have thus listed the top 7 metrics to help you determine customer loyalty:

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1. Repurchase Ratio

The repurchase ratio refers to the number of customers repeatedly purchasing from a single brand rather than one-time buyers.

Most brands think acquiring new visitors or leads is enough for an eCommerce growth strategy. However, the repurchase ratio allows businesses to change their marketing strategies for more cost-effective rates.

The goal is to reduce the Cost Per Acquisition (CPA) and increase your revenue. Your business determines the repurchase ratio calculation.

For instance, if you run a subscription-based company, your repurchase ratio is the number of customers who renew their subscriptions divided by customers who don't.

Transaction-based brands should calculate the number of customers who make repeated purchases. They can do this by measuring the average time between the first and second purchases of the retained customers along with the standard deviation.

Brands can learn about their business profit by determining the number of customers returning and making purchases. Customers who have bought your products or services once are not worth your time. Rather, your returning customers are the ones who can help maintain your business' finances and good health.

Making changes to the eCommerce customer experience can help your marketing reach the appropriate target audience and offer them omnichannel solutions. Several tools and analytic reports can help you analyze customers' preferences and behaviour to devise strategies that work.

It is good to strategically capture and offer your customers rewards with a loyalty program. Additionally, using post-transaction emails to suggest other products or services you offer can cause your customers to stick with your brand.

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2. Net Promoter Score

Traditional customer satisfaction surveys are no longer relevant and serve no benefits to your brand. Rather, switch to customer loyalty via gauging the Net Promoter Score (NPS).

For this survey, you can ask your customers essential questions, such as "Are You Satisfied With Our Service?" or "Will You Suggest Us To Others?"

The answers will offer you deep insights into your customers' satisfaction levels and help you predict whether they will return or not.

The answers of your customers or clients are likely to be between 1-10, putting them in the following categories:

• Passives: Customers with scores of 7-8 are satisfied with your brand, but they may not refer you to other people.
• Promoters: Promoters are customers with a score of 9 or 10. They loved your services, will buy from you again and refer your brand to others.
• Detractors: Detractors are customers with a score of 6 and below. They didn't like your brand and can potentially damage your brand reputation by sharing bad reviews with others.

The best option is to contact detractors and find out why they were dissatisfied with your brand. It may lead brands to devise actionable insights and potentially convert them into promoters.

You can calculate the NPS by subtracting the detractors from promoters. Complement the score with metrics such as the customer's demographics to find your ideal customers.

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3. Lifetime Value of Customers

CLV, or Customer Lifetime Value, is the total revenue attributed to the entire relationship with your customers. Not only does it help identify valuable consumer segments that companies should prioritize, but it also motivates brands to focus on long-term relationships with their customers.

The marketing team responsible for personalization eCommerce should consider this as it enables them to figure out their upper limit costs for attracting new consumers. You can also understand the time needed for turnover from the customer acquisition investments.

You can calculate the CLV by considering the average purchase value and multiplying the number by the average buying frequency. Multiply this value by the average customer lifespan to get the final CLV.

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4. Upsell Ratio

Customer loyalty is also demonstrated when they buy new products, indicating that they trust your brand.

This is why most brands calculate the upsell ratio. It is the ratio of customers who have made several purchases from your brand. Basically, it tracks existing consumers who have bought more than one product from your brand.

Good upselling techniques can benefit your brand, and you can increase the costs of your products without any concerns regarding the bottom line's negative impact. For example, you can improve your upsell ratio by providing your customers complimentary products with base products.

Customers are likely to purchase expensive products of good quality, which is why by considering the upsell ratio, you can determine whether you want to increase the product's costs or not.

To calculate the upsell ratio, divide the number of consumers who bought more than one product by the acquired customers.

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5. Customer Engagement Score

The customer engagement score is a crucial metric to consider. It indicates how your products have impacted customers' lives. Following are the considerations for customer engagement scores:

• Conversion Rate: The conversion rate is the most critical score. You can calculate it by dividing the conversion amount by the number of new customers and multiplying it by 100.
• Pages Per Session: It shows the number of pages visitors have clicked during their browsing session. It is wise to use Google Analytics to measure this.
• Duration of Average Session: Average duration is the time your customers have spent on your site; you can calculate the minutes. The more the minutes, the better the impact.

Measuring inputs such as the usage level, frequency, customer actions, performance indicators, etc., are crucial. These numbers serve and represent successful customer engagement.

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6. Customer Loyalty Index

CLI or Customer Loyalty Index is a vital tool that businesses can use to track loyal customers. CLI considers factors such as upselling, NPS, and repurchases through a questionnaire that addresses the following points:

• What is the likelihood of you buying from us again?
• Would you refer us to people you know?
• What is the likelihood of you trying our other products?

This method offers an overall understanding of customer loyalty. Other than this, it also predicts future retention, and you can build loyalty profiles for customers.

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7. Customer Acquisition Costs

Customer Acquisition Cost (CAC) objectively measures the investment for acquiring new customers.

Businesses can calculate it by adding the money spent on eCommerce growth strategies such as sales, campaigns, promotions, etc., and then divide the amount by the number of customers your business has acquired.

Consider your marketing strategy if the costs are severely high. CAC and CLV work hand in hand to determine the ROI (Return on Investment) in customer acquisition. Following are the tips top businesses follow to reduce CAC:

• Marketing Automation: It is used for creating customized campaigns for both current and new customers. To maintain your customer level, recommend products or provide offers to consumers.
• Improve Website Conversion: Conversion rates can be increased through high-quality content customized according to Search Engine Optimization (SEO) principles.
• Implement Buyer Personas: It resonates with the target audience and guides businesses through the shopping experience.
• Reduce Churn: You can do this by learning about customer satisfaction.
• Investment In Customer Retention: You can opt for retention strategies.

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Amplify Customer Loyalty With Glood.ai

Developing the most efficient loyalty program can be complex. However, if done right, it can take your business to greater heights. An efficient loyalty program will allow customers to build a deeper connection with your brand and provide them with more value.

If you are unsure how to achieve robust customer loyalty, you can start by having the most streamlined and seamless online store! Glood.ai can be a dependable partner in your journey to enhance customer loyalty.