This week we are sharing this comprehensive post by Pascal van Opzeeland who originally published it on Userlike’s blog.
The loyalty of your customers can be measured. It’s difficult, though, because loyalty is an intention. And one that people aren’t always honest about.
While they’re closely related, the measuring of customer loyalty works differently than that of customer satisfaction or service quality.
Defining Customer Loyalty
The dictionary defines “loyalty” as a “strong feeling of support or allegiance”. Customer loyalty basically represents your customer’s intention to keep buying from you.
It manifests itself in a variety of ways. A loyal customer…
- Refers you to her friends and contacts.
- Continues buying from you as long as the need is there.
- Is not actively looking for other suppliers.
- Is not open to sales pitches from competitors.
- Is open to other products and services that you offer.
- Tolerates emerging issues and gives you time and trust to fix them.
- Gives feedback about how you could improve.
The loyalty of a customer is closely related to her reasons for buying from you. There’s no such thing as “unconditional loyalty”.
If she’s a customer because of a good relation with one of your service reps, she’ll stay with you as long as that person is an employee.
If she’s a customer because you’re the cheapest provider, she’ll stay with you until a cheaper alternative comes by.
If she’s a customer because of an emotional connection with your corporate philosophy and greater purpose, she’ll likely stay with you as long as you stay true to that.
Anyone can sell products by dropping their prices, but it does not breed loyalty.
Of all the reasons to be loyal, the one based on you being the cheapest option is the weakest. When price is the only reason, the customer relationship is purely rational, and will be broken as soon as a cheaper competitor comes by. A loyal relationship, on the other hand, is based on emotion, and defies rationality.
Champion of Customer Loyalty
When you search for “customer loyalty”, you soon run into case studies about Apple Inc. Indeed, this company nailed it.
When Apple launches a fancy new device, its most fervent fans set up camp in front of the Apple store a few days in advance. If Samsung would bring out a phone that beats the iPhone in both functionality and price, people would still buy buy from Apple.
That’s not rationality; that’s loyalty. Apple is number one in its category in Brand Keys’ 19th Annual Customer Loyalty Engagement Index®, and its part of what turned it into one of the world’s most valuable companies.
Methods for Measuring Customer Loyalty
Measurement is the first step in customer loyalty management. Through measurement we can compare, aim, and improve. Here are the 5 most effective methods.
1. Net Promoter Score (NPS)
This metric indicates the likeliness of your customer referring you to her friends. She answers this simple question with a value between 1 – 10.
This is a powerful metric. Firstly because it’s simple, but also because of the fact that when you recommend a product, you put your own credibility on the line. And you only do that for companies you support 100%.
NPS divides your customers into three categories:
Detractors. Customers answering with a score of 6 or lower are segmented as “Detractors”. They won’t recommend you to anyone, will probably not buy from you again, and might even hurt you through negative word-of-mouth.
Passives. Those with a 7 or 8 are segmented as “Passives”. They are quite satisfied, but not ecstatic enough to recommend you. They won’t hurt you, they aren’t looking for alternatives, and they’ll likely stick around as long as they don’t run into a supplier with a better value proposition.
Promoters. Those with a 9 or 10 fall into the “Promoters” segment. They are your groupies, your equivalent of the people camping in front of the Apple store. They’re likely to recommend you and buy from you again.
Your total Net Promoter Score is calculated by subtracting your “Detractors” percentage from your “Promoters” percentage.
Most NPS tools work by importing a list of your customer contact data and sending the questionnaire per email. Trustfuel NPS (free), and Promoter.io (paid) are two popular tools. I personally like in-app tools like Wootric (freemium). Instead of targeting your customer’s inbox, it politely asks for feedback while she’s on your website or app. Through in-app questionnaires you can ask for feedback with minimal disruption.
Start building customer loyalty today.
Sign up for free in-app NPS with Wootric.