Measuring brand loyalty is a critical aspect of brand management because it gives you insights into how strong your customer-brand relationship is.
Understanding and tracking brand loyalty will help you assess the effectiveness of your marketing and customer service efforts, and identify areas for improvement. But more than that, customer loyalty directly impacts your revenue - loyal customers are more likely to make larger purchases and drive sales for your business.
Read also: A short history of branding
5 Reasons Why Customer Loyalty Is Important
If the fact that loyalty customers drive more business your way didn't convince you of how important measuring customer loyalty is, here's 5 reasons why it's important to measure brand loyalty:
Higher Profit & Lower Customer Acquisition Costs
Brand loyalty drives repeat business and ultimately, long-term profitability. Repeat, existing customers are more valuable than new ones as they require less effort and cost to retain and are more likely to make larger purchases. A loyal customer is more likely to make repeat purchases and recommend your products or services to others. Measuring brand loyalty allows businesses to identify their most loyal customers and target them with tailored marketing efforts to drive continued engagement and sales.
Gaining A Competitive Advantage
Measuring brand loyalty helps businesses stay ahead of the competition. In today’s competitive market, retaining loyal customers is just as important as acquiring new ones. By tracking brand loyalty, businesses can monitor their customer retention rate and compare it to their competitors to identify areas where they may be losing potential customers and make necessary improvements.
Read also: Is B2B and B2C branding really that different?
Lower Your Marketing Costs By Increasing Consumer Satisfaction
Brand loyalty metrics provide insights into consumer satisfaction of your existing customers. Consumer satisfaction is a key driver of brand loyalty and a strong indicator of a positive customer experience. By measuring user satisfaction through metrics such as Net Promoter Score (NPS) or Customer Satisfaction Score (CSAT), businesses can gauge the level of happiness their customers have with their products and services and make changes to improve it.
Increase Brand Equity
Brand loyalty metrics provide insights that will help you measure your brand equity. Brand equity refers to the value a brand adds to a product beyond its functional attributes, the perceived value of your brand. We have previously published an article that dives deeper into what brand equity means and how to measure it. A strong brand with a loyal customer base can command a premium price and drive more sales, making brand loyalty an important metric to track for businesses looking to build and maintain a strong brand reputation.
Read more: How to gain brand equity?
Get In-Depth Insights About Your Target Audience
Measuring brand loyalty helps businesses understand their customer base. By tracking brand loyalty, businesses can gain a deeper understanding of consumer behavior, preferences, and attitudes. This information can then be used to inform product development, marketing strategies, and customer service initiatives.
How To Measure Customer Loyalty?
There are several metrics that can be used to measure brand loyalty. It's always important to track customer loyalty on multiple levels and to carefully choose the metrics to measure. In this article we're going to explore the most common and popular metrics to measure loyalty but keep in mind that you might want to keep track of other loyalty metrics as well, depending on your business model, target market etc.
Customer Lifetime Value (CLV)
Customer Lifetime Value (CLV) is a prediction of the net profit associated with a customer’s relationship with a brand over their lifetime. CLV is calculated by multiplying the average purchase value by the number of purchases per customer and the customer lifespan. CLV is a critical metric for measuring brand loyalty as it provides a comprehensive picture of the value a customer brings to a business. Even if you measure other metrics like the average sale value, without CLV you won't be able to predict future purchases and revenue from returning customers, which is crucial when it comes to long-term strategy, especially for online businesses.
Customer Loyalty Index (CLI)
The Customer Loyalty Index (CLI) is a measure of the strength of customers' relationships with a brand. It is calculated by measuring the frequency and size of customer purchases, the time between purchases, and customer loyalty to the brand compared to its competitors. CLI is a valuable metric for measuring brand loyalty as it provides insight into customer behavior and helps businesses predict future retention rates.
Number Of Repeat Customers & Purchases
Repeat purchases are a critical indicator of loyalty. Repeat customers are more valuable than new customers as they require less effort and cost to retain and are more likely to make larger purchases. Repeat purchase rate is the percentage of customers who have made multiple purchases from a brand. This rate will also help you estimate the average customer lifespan.
Customer Retention Rate
Customer Retention Rate is a measure of the percentage of customers who continue to do business with a brand over time. High customer retention rates are a sign of strong customer loyalty, while low retention rates indicate that customers are leaving the brand for competitors.
Customer Churn Rate
The customer churn rate is the rate that measures how many customers stop purchasing from your brand. This metric can help businesses understand the effectiveness of their retention strategies and can inform decisions about customer engagement and customer experience.
Net Promoter Score (NPS)
Net Promoter Score (NPS) is a measure of customer loyalty that asks customers to rate their likelihood of recommending a brand to others. Net promoter score is calculated by subtracting the percentage of detractors (customers who give a score of 0 to 6) from the percentage of promoters (customers who give a score of 9 to 10). NPS is a valuable metric but only if you use other metrics as well. On its own, the main insight NPS provides is how likely customers are to recommend your brand to others.
Customer Engagement Score
The customer engagement score is a measure of the level of engagement customers have with a brand. This metric can provide insight into the strength of customer relationships and can inform decisions about customer engagement and retention strategies.
Read more: Get a bigger marketshare with brand research
How To Increase Customer Loyalty?
Now, even if you measure your customers' loyalty, it's still not enough to increase the number of customers coming back to your business time and time again. It's crucial to include tactics that increase loyalty in your marketing strategy and work on improving them over time. And while there's many strategies for gaining more loyal customers, not all of them will work for you. It's important to consider your specific business model and objectives before implementing any new initiative.
However, we'd like to leave you with some actionable insights that you can evaluate and see if they are a good fit for your business. So here's some proven ways to increase loyalty:
Provide excellent customer service
By ensuring that customers receive high-quality support and help with their questions and concerns, businesses can foster a sense of trust and reliability that can encourage repeat purchases and increase customer loyalty. If customer service representatives are polite and helpful it will go a long way towards a positive reputation and more customers coming back to your brand.
Offer a loyalty program: A good loyalty program can reward customers and offer incentives for their repeat purchases, creating a sense of investment and encouraging continued brand loyalty. Loyalty programs can not only nurture an existing customer but they are also a great way to entice new customers to make a purchase.
Read also: What's the difference between service- and product branding?
Personalize the customer experience
Personalizing marketing and customer service to fit each individual customer's needs can increase feelings of engagement and lead to more frequent purchases and stronger brand loyalty. When something is tailored to our needs its perceived value is much higher and customers will be willing to pay more for the brand's services or products. This will also help to increase your upsell ratio.
Create a sense of community: Building a sense of community among customers, through social media, in-person events, or other forums, can help increase brand loyalty by making customers feel like they are part of a larger group with similar interests and goals.
Continuously improve the product or service: By staying up-to-date with customer needs and feedback, businesses can continuously improve their offerings and maintain a high level of customer satisfaction, leading to increased brand loyalty over time. It also helps your brand perception when you show that you ask your customers for feedback and want to improve.
It All Starts With Research
Turning someone into a repeat customer is not an easy task and certainly doesn't happen overnight. So we'd like to leave with this - it all starts with research. You can't improve your brand if you don't know and understand how it's perceived. That's why we created the brandr index. To provide in-depth analysis and insights into your target market, customers and their perception. If you'd like to learn more about this tool - visit our website or contact us to schedule a call.
