How to measure customer loyalty - 3 key metrics | Fresh Nous
Customer Loyalty metrics (2)-min

How to measure customer loyalty - 3 key metrics

Fresh Nous have many tools in our armoury to create customer experience programmes to help businesses attract and retain customers.

The metrics we use to measure customer loyalty are:

Whilst Net Promoter Scores (NPS) are often used as the ‘go to’ for measuring customer loyalty it can be somewhat 1 dimensional this metric indicates the likeliness of your customer referring you to their friends and family. We believe that the 3 key measurements covered below can provide a more holistic metric with which to evaluate the long term loyalty of your customer base.

Calculate total sales and marketing costs –

Internal and external expenses related to the sales, promotion and marketing of a product, including market research and promotional literature;

Customer Acquisition Cost (CAC) – 

The cost associated in convincing a customer to buy a product/service, this important business metric plays a key role in calculating the value of the customer to the company and the resulting return on investment. CAC is usually expressed as a ratio – dividing the total of CAC by the number of additional customers gained;

Customer Lifetime Value (CLTV) –

This measures the total value to a business of a customer over the whole of the relationship. It’s important to combine CAC and CLTV to measure the CAC and profitability of your business over an extended time period as opposed to the first purchase only. It costs less to keep existing customers than it does to acquire new ones, so in order to grow your business you need to increase the value of your existing customers.

Why do we need to measure loyalty?

 Loyal customers repeatedly spend money with your business and measuring loyalty can give businesses insight into their most valued audience segment. The more information you know about your customers, the better your ability is to plan and implement marketing strategies to grow your customer base and boost profits.

How does customer loyalty benefit my business? 

  • Word of mouth recommendations – Acting as your secret sales force, they will typically convince their friends and family to choose one company over another based on their experience with a brand. Research shows that the majority of shoppers trust recommendations from friends and family more than any other source;
  • Better customer insights – Customers, particularly millennials, who are invested in a brand are more likely to communicate their needs and wants, providing you with a better understanding of what problems it must solve. With better customer knowledge, you don’t have to guess at what your customers need as they’ve already told you;
  • Repeat business – Customers who keep coming back and spending more money on your latest or updated products and services because they trust your brand and are confident that they are getting value for money, rather than opting for a different one;
  • Higher spending – Loyal customers are also likely to spend more money than new customers and once they’ve developed trust in the quality of your product, they are likely to continually return to buy from you;
  • Greater tolerance – Customers who have been giving you their business for a while are much more likely to be forgiving in the face of mistakes or technical difficulties.

Why are customer journey analytics important?  

Knowing the exact amount of time spent and resources invested in the process of improving your customers’ experience and measuring the benefits can be difficult, not least because there may be several solutions as to when and where investments in customer experience should be made.

Does a rise in customer satisfaction result in a direct increase in revenue and will it boost your competitive position? Customer journey analytics can give us the answer as they help to draw correlations between customer experience and improvements in financial returns by identifying the key drivers of customer satisfaction.

Many years of experience have taught the Fresh Nous team that providing excellent customer experience results in a significant return on investment (ROI).

Don’t just take our word for it. A 2014 study by Bain revealed that increasing customer retention rates by 5% increases profits anywhere between 25% and 95% while research by Oracle in 2011 found that 86% of consumers will pay more for a better customer experience.

ROI is intended to measure the benefits you gain as a result of the investment you make. The same applies to CX initiatives – the return on customer experience/loyalty can be likened to the benefits received from investing minus the cost of resources used.

How can Fresh Nous help?

 Our team have many years’ experience of developing ways to increase customer loyalty and build lasting relationships with your customers. To start a conversation, call Fresh Nous on 01905 780810 or get in touch.

Laura DuPont Fresh Nous Customer Sales Director

By Laura DuPont
Founding Director

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