Views: 4517Importance of Measuring Customer Loyalty
It’s one of the most important topics that companies should be interested in. However, there are a lot out there who don’t even know their rate of churn or retention. Not measuring the ROI of customer experience, upsells, cross-sales, or other metrics of customer loyalty could have detrimental results.
Measurement of important aspects is crucial. You should know why your customers like you, and why they are loyal to you. Loyal customers help you to achieve your business goals and help you to progress. There are several essential metrics that you could benefit from.
Customer Retention Rate
Customer retention is about the clients who remain loyal to you. They are very valuable and can help you to gain more customers. In order to determine more specifically what’s your customer retention rate, you can use a formula: [(E-N)/S] x 100 = CRR.
First of all, identify the specific time frame that you’d like to study. S is related to the number of customers that you had at the start of the specific time period. E is about the number of customers that you had at the end of that time period. N should be the number of customers that joined you during that time.
Using this formula will help you to determine what’s your customer retention rate, you can do it on weekly or monthly bases, or even daily depending on what kind of company you have and how frequently you go through changes.
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Customer Lifetime Value
You need to know what the average customer is worth to your business, and there is a formula that could actually give you more clear answers – Customer Lifetime Value = Customer Value X Average Customer Lifespan.
First of all, you need to know what’s the average purchase value and then multiply that number by the average number of purchases, this way you’ll determine the customer value. Then you can multiply customer value and average customer lifespan to discover what’s your customer lifetime value.
Net Promoter Score
Net promoter score is important in order to measure customer satisfaction levels and loyalty, and most of the majority of Fortune 1000 always pay great attention to it. The formula for Net Promoter score is – Net Promoter Score = (Number of Promoter Score/ Total Number of Respondents) – (Number of Detractor Scores/ Total Number of Respondents).
First of all, you need to do a survey. You can do it via social media polls, and emails as well. You have to ask your customers “On a scale of 0-10, how likely are you to recommend us to your friend?”.
Once you collect the answers, divide them into categories. Promoters will be people who scored 9 or 10, passives will be the ones who scored 7 or 8, and detractors are the ones who score between 0 and 6.
Customer Satisfaction
Understanding more about customer satisfaction (CSAT) is very important to have a better idea about customer retention as well. You’ll have a better understanding of the customers and the experiences that they had while interacting with your business, service, or product.
You can do the survey again and ask the customers simple questions. For example, ask them how would they rate their satisfaction with your company, your service, or your product. And then provide them with possible answers, like very satisfied, satisfied, neutral, unsatisfied, and very unsatisfied. Every response will have its own number value.
Customer Effort Score
With a customer effort score (CES) you’ll be able to determine how easily reachable you are for your customers, and how much time and effort they require to use your product and service or find the information that they need.
You can do the surveys again to understand more about this topic, but you’ll need to do it immediately after they purchase certain products from you or use your service to understand everything straight away. A high CES score is a good indication that your customers can reach you easily. It’s going to have a positive impact on your business.
Engagement Rates
When customers have high engagement levels they are most likely to stay loyal to your brand. You can monitor engagement rates by survey responses. Also, you have to know basically how frequently and well your products are used by your customers.
You can check your social media platforms as well to see the number of likes, comments, and shares. See who are more active users, some of them might be active on daily bases, but there are some customers who don’t appear on the radar frequently but are always following you.
Understand More About Your Customers’ Responses
Going through these metrics will help you to measure customer loyalty better. When you’ll ask questions during surveys, delve more deeply into the responses that you’ll be provided with.
If you’ll ask them if they are satisfied with your services and then they’ll answer yes/no, ask them why, or why they decided to give you a specific score. In this case, besides the statistics and actual facts, you’ll be able to get a better understanding of many important topics and will see once more, what your customers really think about you.
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