Customers have an innate desire to connect with brands that align with their values and meet their needs. With so many choices available, building customer loyalty is critical if brands want to stay relevant.
But how can you tell if your loyalty program is fostering that loyalty?
While a lot of businesses focus on transactional metrics such as retention, purchase behavior and incremental sales, there’s monumental benefit in looking at the emotional components that affect customer loyalty.
How to track customer loyalty program effectiveness
To get the most out of your customer loyalty measurement strategy, look at a combination of customers who act loyal (behavioral) and customers who feel loyal (emotional). The ideal overlap is customers who both act and feel loyal, but there isn't always a direct correlation between emotional and behavioral loyalty.
Here are five areas to measure a program’s success that incorporate both the behavioral and emotional components of customer loyalty. (Note that each metric might have many other metrics that roll up into it for one overarching KPI.)
1. Customer engagement
Engagement is tracked by every interaction (across any channel) that customers make with a brand.
- Understand how often your customer thinks about you. How long is the purchase cycle for your products? Is it something they buy weekly? Monthly? Yearly? Once every 5 years?
- Stay top of mind. If you sell a once-every-5-years product, customers likely start the search with you. If it’s a more frequent product, you need to work harder on customer retention.
- Implement trackable ways for people to interact outside the purchase cycle and tie it back to your customer lifetime value (CLV) measurements.
Related: Improve customer engagement with breakthrough touchpoints
2. Customer loyalty
Loyalty can be tracked in several ways. Repeat purchase rates are a great place to start.
This rate tracks the percentage of customers who place another order. Think of it like this: “The first time is chance. The second is coincidence. The third is a pattern.” When a customer chooses you several times, you can analyze why.
- Is this customer choosing you because of price?
- Are they having a positive customer experience? (This is especially important for premium brands because price isn’t their customers’ top priority.)
- What’s your brand’s purchase cycle and the time between purchases? Are customers always choosing your product or are they buying a mix of different brands’ products?
3. Customer lifetime value (CLV)
CLV represents the total amount of money a customer will spend on your products or services during their lifetime.
It’s tricky to calculate correctly, but even if you can’t calculate CLV, tracking value increases (and decreases) will help you decide when and where to insert promotions and offers.
- Identify value you can track (purchases, repeat purchases, etc.)
- Track fluctuations in value
- Incorporate test-and-learns into your communications and promotions, such as subject headers and messaging, to influence value across your customer base
4. Influencer impact
Customers are most likely to listen to their friends, family and trusted experts. Tracking influence—and metrics that identify influence—can grow your customer base.
- Track referrals to put a dollar value on influence
- Follow social media activity, order insight (purchases, combination of purchases, etc.) and campaign interactions to identify the likelihood of a customer promoting your brand
- Use tracking information to create opportunities for customers to share their personal experiences about your brand on social media
5. Customer sentiment
In the past, people measured customer loyalty solely by behavior. Current customer loyalty strategy, backed by better data, includes emotional connections as well. Even though emotional loyalty is harder to measure, it’s necessary to truly measure loyalty.
- Uncover specific areas for improvement, track gaps in service and product offerings, and identify where you are outperforming the competition
- Improve your industry with data that explores how customers are feeling and what they’re looking for
- Provide customers with an experience that promotes satisfaction and encourages loyalty, before inviting them to make referrals
- Survey customers about their interaction or purchase with your brand by asking sliding scale (quantitative) or open-text (qualitative) questions
- Put measures in place for recovery and retention
Related: Empower customer loyalty throughout the entire journey with industry-leading technology
Better customer loyalty metrics lead to stronger loyalty programs
The buyer’s journey is changing rapidly. If brands can offer customers something of high perceived value, they will create loyal brand advocates. By tracking and measuring behavioral and emotional metrics, you can tap into customers’ motivations and emotions easier. This results in reduced marketing costs, increased profits and a more predictable revenue stream. It’s tough to beat that!
If you’ve been tracking your customer loyalty program’s performance and found it has gaps, now’s the time to transform it into one that gets results. Leverage ITA Group’s latest research on what customers look for in a loyalty program.