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customer loyalty metrics

How to Measure Customer Loyalty: 10 Key Metrics

Rhys Williams
By Rhys Williams — May 17, 2024 -

Read time: 4 minutes

Customer loyalty is the lifeblood of sustainable business growth, driving repeat purchases and nurturing customer advocacy. But how do you measure customer loyalty and how can you truly understand and enhance this loyalty and the key lies in accurately measuring it through a variety of metrics. By tracking these metrics and thus measuring customer loyalty, you can gain valuable insights into your customers' behaviours, preferences, and overall satisfaction with your brand.

If you don’t know what the state of play is with your loyalty, you can’t hope to increase it and do the work necessary to bake value and sustainable growth into your customer base. 

 

The big two

To properly orient yourself, you need to know how much your customers are worth overall, and how regularly and reliably they spend with you.

 

Customer Lifetime Value (CLTV)

CLTV is an essential tool for measuring loyalty. CLTV reflects the total revenue you can anticipate from a single customer over your entire relationship. This insight is crucial for guiding your loyalty initiatives.

Measuring customer value over time allows you to make informed decisions about how much to invest in acquiring and retaining customers. Plus, it's a powerful tool for refining customer segmentation and personalization. When you know how much each customer is worth to you over a certain period, you can tailor your marketing strategies to better meet the needs of your most valuable customers.

 

Repeat Purchase Rate (RPR)

Repeat Purchase Rate (RPR) is a critical customer loyalty metric used to measure the percentage of customers who return to purchase from a brand again after their initial purchase. 

It’s calculated by dividing the number of customers who have made more than one purchase by the total number of customers within a specific period. 

Repeat purchases are important because they tell you how all your loyalty marketing efforts are translating into cold, hard purchases. But on its own, RPR is not enough to tell you how to build loyalty, for that you need to study other measures. 

 

Engagement metrics

Beyond the basics of retention, you need to know how appealing and enjoyable it is to engage with your brand. If your customer service is a breeze to deal with, your site and app are intuitive and exciting, and your marketing seems relevant and timely, customers will want to spend more time hanging out with you.

Getting to grips with the nuts and bolts of customer engagement is crucial for building long-term loyalty. Measure engagement across time, customer groups and touchpoints.

 

Customer Loyalty Index (CLI)

CLI gives you a holistic view of how your customers feel about their relationship with your brand.

CLI combines several measurements, including:

  • Customer satisfaction: How happy are your customers?
  • Likelihood to repurchase: Will they buy again?
  • Likelihood to recommend the brand to others: Would they suggest your brand to friends? (This is often gauged through customer surveys).

By measuring things like repurchase intentions and recommendations, CLI can help predict the long-term viability of your customer base. Loyal customers are more likely to continue using your brand and to advocate for it: strong indicators of future revenue and growth.

 

Customer Satisfaction Score (CSAT)

To get your Customer satisfaction score (CSAT) send out surveys. Ask respondents to rate their satisfaction on a scale from "very unsatisfied" to "very satisfied." 

It’s up to you what scale you use: 1-5 or 1-10 is the norm. The important thing is that you decide on what score constitutes a positive response (7 and above out of 10, for example). 

Once you have the results, add up all the positive scores and divide by the total number of responses. Then multiply that number by 100 to give you your CSAT, or percentage of satisfied customers. 

CSAT provides immediate feedback about customer sentiment and satisfaction, a direct indicator of their likelihood to remain loyal to a brand.

 

Customer Engagement Score (CES)

Customer Engagement Scores (CES) take several loyalty metrics into account to measure the level of engagement and interaction a customer has with your brand over time, giving you an insight into how actively involved your customers are outside of purchases.

It looks at: 

  • Purchase frequency 
  • Website visits 
  • Social media interactions
  • Engagement with emails or other marketing initiatives.

By analysing engagement patterns, you can tailor your marketing, targeting the specific interests and needs of your highly engaged customers. 

With CES, you can also identify the most engaging parts of your experience and adjust CX accordingly, amplifying what works and cutting loose what doesn’t.

 

Participation Rate

The Participation Rate measures the percentage of customers who engage with your marketing initiatives. It is calculated by dividing the number of customers who participate in a specific activity by the total number of customers targeted or eligible to participate.

Your participation rates can be a leading indicator of customer loyalty. What’s more, by tracking which types of interactions or activities have higher participation rates, you can get a better understanding of what customers value most. 

 

Other measures

Aside from engagement metrics, there are some other metrics for customer loyalty that you can keep track of to better understand how well you’re building trust and affinity with your customers.

 

Customer Effort Score (CES)

The Customer Effort Score (CES) assesses the ease with which customers can interact with a company. Calculate CES by asking customers to rate their experience based on the amount of effort they had to put in to get a request handled or problem solved, on a scale from "very easy" to "very difficult". 

By measuring and understanding CES, you can identify pain points in the customer journey and gain the insights you need to improve your CX. 

 

Upsell Ratio

The Upsell Ratio measures the proportion of customers who purchase additional or upgraded products. 

The ratio is calculated by dividing the number of customers who have made an upsell purchase by the total number of transactions over a given period. It Indicates customer trust and satisfaction and measures how effectively your sales pitches are landing.

 

Redemption Rate

The Redemption Rate measures the percentage takeup of promotional offers, such as coupons, discounts, or loyalty points. You can calculate it by dividing the number of redeemed offers by the number of offers distributed to customers. 

The Redemption Rate provides a clear measure of how compelling your promotional strategies are in engaging customers and building loyalty. You can use it to make marketing decisions, focusing promotional efforts on those programmes, channels and customer segments that have the highest take-up.

 

Customer advocacy tools

Ok, so this last one isn’t strictly speaking a metric, but to truly unlock the loyalty-boosting secrets of your customer base, you need to go a step further and take advantage of customer advocacy tools. 

Tracking metrics and insights like Net Promoter Scores (NPS), customer feedback, and sentiment analysis, gives you a full picture of what’s going on in your customer base, beneath the surface of purchasing behaviour.

Even after you’ve understood your engagement metrics, and how to calculate customer loyalty, an advocacy marketing strategy compliments and enhances your customer knowledge. This gives you the tools you need to nurture them with exceptional CX, fostering deep loyalty and transforming your customers into passionate brand advocates. 

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