10 best customer loyalty metrics and how experts measure them

Customer loyalty metrics

65% of people who purchase a brand are repeat customers. And a repeat customer spends 33% more with every purchase. These facts should convince any marketer of any business that measuring the impact of loyal customers is key to business success. Here are the 10 best customer loyalty metrics and how the experts measure them.

1. Customer Lifetime Value (CLV)

Customer lifetime value (CLV) is a measure of the total income from a customer for as long as that person or account remains a client. Look at the total average revenue generated by a customer and the total average profit. You may want to break down your company’s CLV by quartile or some other segmentation of customers. This can give greater insight into what’s working well with high-value customers. So, you can work to replicate that success across your entire customer base. – Austin Caldwell, Oracle

2. Net Promoter Score (NPS)

The Net Promoter Score is a tool that helps gauge customer satisfaction. It asks people how likely they are to recommend your company to someone they know. In an NPS survey, the customer chooses a score between 0 and 10. Detractors are people who select 0-6. Promoters choose 9-10. You can calculate the NPS by subtracting the percentage of detractors from the percentage of promoters. A higher number indicates a good NPS. A score above 50 is great, and one above 70 is excellent.Lionel Valdellon, CleverTap

3. Repeat Purchase Rate Customer Loyalty Metrics

Calculating the repeat purchase rate helps you understand customers’ relationships with your brand/product. Based on the RPR, you can measure your customer loyalty and understand if the customer will return. Calculating repeat purchase rate is RPR = Number of returning customers / Number of one-time customers. – Shivani Chaturvedi, smartkarrot

4. Upsell Ratio

Upselling is one of the best ways to make customers spend more on your products. By offering complementary products and services along with the base product, companies can increase the average purchase value of each customer and increase their net revenue, which also increases Customer Lifetime Value. It’s not hard to measure it. You divide the number of customers who purchased additional goods from you by the number of customers acquired. Merija Verpetiskaite, Verifacto

5. Customer Churn Rate

Example calculation: customer churn rate = (number of customers churned in a given time period / total customers at the start of that period) x 100. Customer churn rate is effectively the rate at which customers stop doing business with your brand. For long-term success, keeping churn low — and therefore retention high — is just as important as winning new ones. The average churn rate for B2C companies is 7%, and 5% for B2B brands. When tracked over time, it also is the Customer Dissatisfaction Rate. – Andy Tweddle, TRUELAYER

6. Participation Rate Customer Loyalty Programs

Loyalty programs are a strategy used by businesses to enhance their customer loyalty. Through these programs, brands recognize and reward their customers for being loyal and repeating their purchases. The participation rate grows whenever a customer takes part in the program. Calculating the participation rate, Participation rate = Number of loyalty program members / Total number of customers. By calculating this, you will be able to understand the reception towards your loyalty programs and come up with ways to improve them. – Louise O’Brien and Charles Jones, Harvard Business Review

7. Customer Retention Rate (CRR)

Customer retention rate is one of the most important metrics for your business. It includes your ability to attract new customers, as well as keep the existing ones. You need three data points to calculate the customer retention rate:

  • the number of customers at the start of a period (CS)
  • the number of customers at the end of a period (CE)
  • the amount of customers acquired during that period (CA)

To calculate, subtract CA from CE, divide that number by CS, then multiply that figure by 100 to convert it into a percentage. Jasmin Prisc, shoutem

8. Customer Satisfaction Score for Customer Loyalty

Calculate your Customer Satisfaction (CSAT) score by dividing the positive responses (satisfied customers) by the total number of responses and multiplying by 100, which is then expressed as a percentage. For example, if you have 50 responses total and 45 are positive, your CSAT would be 90%. Customer Satisfaction Scores are often determined through survey research. A good Customer Satisfaction Score is between 75% and 85%. Excellent is 85%+. – Rachel Wolff, MonkeyLearn

9. Cost Per Acquisition (CPA)

Cost Per Acquisition or CPA is the amount of money that is invested to produce a sale. It is one of the most important marketing metrics because it determines how much investment is required to produce revenue. And how profitable a business is. However, for CPA to be really telling, it is important to view it in the context of annual purchases and Customer Lifetime Value (CLV). For example, if your Cost Per Acquisition is low, but your Customer Lifetime Value is high, you may not be investing enough. To serve as a guide, here is what is a good CPA by industryRob Petersen, BarnRaisers

10. Online Reviews

For customers, online reviews and testimonials are all about building trust. Online reviews directly influence the buying decisions of your target market. According to one study, having as few as five reviews makes products 270% more likely to sell compared to products with no reviews. Consumers will pay 22% more for products if the company has a good reputation. – RJ Licata, Terakeet

Do these customer loyalty metrics help show you how your business could be more successful and profitable. How many would you measure?

Leave a Reply

Your email address will not be published. Required fields are marked *