Measuring & Growing Customer Loyalty
It’s a fact we’ve all heard so often that it’s become a cliche — it’s more expensive to acquire a customer than it is to keep one. In fact, depending on a few variables like the industry you’re in, the products you sell, and your customers, it can be between five and 25 times more expensive to acquire a new customer than to keep an existing customer.
Existing customers are more likely to buy from you again, more likely to be receptive to upsells, and more likely to be interested when you launch new products Moreover, your existing customers can be a powerful marketing tool — if you keep them happy. A happy customer will tell their friends and colleagues about you, helping to bring in new customers without the expense of marketing to them directly.
What this all means is that keeping customer loyalty up is vitally important to the long-term future of your business. So how do you keep your customers loyal? And how do you quantify that loyalty? We’ve got some ideas.
Make Customer Service and Success Top Priorities
If you want loyal customers, your job doesn’t stop when their payment clears. In fact, you’re just getting started. We talk about the buyer’s journey a lot, but think of the moment of purchase as the beginning of another journey. Your customers will have to learn how to use your product, integrate it into their daily lives, renew subscriptions, ask service questions, upgrade it, and eventually replace it, and you need to be there every step of the way.
That goes for social media, too — you absolutely can’t afford to ignore complaints about your company or your product on social media. Don’t think that you’re immune to these problems just because you don’t have an account on a given platform, either. People will complain about you whether you’re participating or not, so make accounts on the major platforms and keep an eye out for complaints.
When you do see negative mentions of your brand, make an effort to respond to them. Some will be frivolous or false allegations, but you still need to acknowledge that they exist. When you can genuinely help, do! Direct people to your customer service line or other resources to help them solve their problems.
Reward Customers For Their Loyalty
People love loyalty programs that give them something back for sticking around. According to Crowdtwist, up to 72 percent of customers would be persuaded to choose brand over another by the presence of a loyalty program.
Remember, keeping a customer on board is saving you a lot of money, so don’t be afraid to make it a high-quality gift. Deep discounts, free cross-sells, reduced-price upsells, and referral rewards are all good options to incentivize loyal customers to stick around.
Ask For Feedback
One way to keep customers happy is to make sure they know how valuable they are. Remember, without customers, you wouldn’t have a company, so their continued investment is important. To that end, ask them what they think and how they’d like to see improvements made to the company, the brand, the product, or anything else.
Once you’ve incorporated their feedback, let them know! Credit your customers at large for their valuable input, or even name the person who came up with a particularly good idea (with their permission, of course).
Finally, add their testimonials to your website and marketing materials. New customers will trust the testimonials of existing customers more than they trust your own copy, and existing customers will appreciate that their feedback is being heard.
Measuring Customer Loyalty
Customer loyalty is extremely valuable to your company. Loyal customers generate referrals, keep returning to purchase from you again, and are less likely to jump ship for a competitor. But how can you tell whether your customers are sticking with you? By keeping track of some key performance metrics:
- Retention and churn: simply take the number of customers at the end of a given time period and subtract the number that you acquired during that period, then divide by the number you had at the beginning of the period. The number you’re left with is the percentage of retention you experienced in that period. What’s left is churn. If you started the year with 1000 customers, gained 500, and lost 200, your retention rate would be 1300 minus 500 divided by 1000, for a retention rate of 80 percent and a churn rate of 20 percent. The higher your retention rate, the better.
- Customer Lifetime Value (CLV): this is the total amount of money that a customer will spend at your company — obviously, you want this number to be high, but it can be tricky to calculate, too. For a good approximation, multiply the average customer lifespan by the average amount spent per year.
- Repeat customer rate: the percentage of your customer base that has made more than one purchase or renewed their subscription
- Upselling ratio: the percent of customers who buy both the thing they wanted and another item from a different category
The exact metrics that you use to measure loyalty will depend on your company and your customers. If you’re running a subscription-based business, for example, then renewal rate might be more valuable to you than repeat customer rate.
You can also always simply ask your customers how they feel about your company and whether they’d be inclined to buy from you again. Send out a Net Promoter Score survey with one question — “how likely are you to recommend us?” — and repeat that email every month or quarter so you can keep track of the results over time.
In the end, loyalty is buying you time. No company can be the best and brightest all the time — you’ll have a failed new product of a down year here and there, and it’s important not to fall off the map. In difficult times, your customers’ loyalty might be what keeps you afloat.