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Is customer loyalty measurable?

I suppose that many of you have asked yourselves this question during your professional career and it is not a surprise, since according to a study carried out, by the consulting firm Forrester, “measurement”(Measuring the loyalty of our customers), is amongst the main challenges in the field of customer loyalty:

  1. Understanding customer interactions across all touchpoints (42%)
  2. Aligning our loyalty strategy with the overarching business strategy (32%) 
  3. Measuring the loyalty of our customers (29%)  
  4. Coordinating and collaborating with internal groups (24%)
  5. Personalization (23%)
  6. Measuring the ROI of our customer loyalty program (23%)
  7. Agreeing on a definition for customer loyalty (20%)
  8. Maintaining customer data quality (20%)

Base: 94 marketers (Not all responses shown) Source: Forrester/DMA Q3 2016 Global State Of Loyalty Online Survey

So, what are the best KPIs to track loyalty?

According to this same study by Forrester, there are two types of metrics, behavioral and emotional.

  1. Customer churn (23%)
  2. Customer engagement (18%) 
  3. Customer acquisition (17%)
  4. Loyalty program ROI (14%)
  5. Reward redemption rate (11%)
  6. Loyalty program enrollments (11%)
  7. Average order value (11%)
  8. Customer enrichment (6%)
  9. Cost (6%)
  10. Loyalty campaign performance (5%) 
  11. Earn/burn ratio of loyalty program (3%)
  12. Share of customer wallet (2%)
  1. Net Promoter Score® (NPS) (27%)
  2. Customer satisfaction (17%)
  3. Customer influence and advocacy (6%) 
  4. Brand affinity (6%)
  5. Customer sentiment (5%)
  6. CX index score (3%)

Base: 66 marketers (Not all responses shown) Source: Forrester/DMA Q3 2016 Global State Of Loyalty Online Survey)

While it appears that behavioral indicators are directly correlated with the economic performance of the company, emotional metrics, such as the NPS provide us context and are able to explain why customers continue to choose or stop choosing our products or services.

What are my favorites?

Amongst the “emotional” KPIs it is undoubtedly Bain & Company’s Net Promoter Score® (NPS) because it helps us to put things in context and because of its demonstrated correlation with long-term economic results; from the behavioral metrics, I would choose the percentage of sales or identified customers, the redemption rate and the variation in sales of constant customers increases or decreases in the sale of a group of customers compared to the previous year).

How do we know if we have good results in these KPIs?

Talking about NPS, it depends on the sector, the country and the competitive environment in general, in this report from Satmetrix you can find some references.

When we talk about a percentage of sales or the so-called identified customers and redemption rate, these have a lot to do with the maturity of the loyalty programs (the older the program, the higher percentages), on the % of offers that are made exclusively for program partners and how attractive or aggressive the offers are to members.

Finally, the variation of constant customer sales, any positive result is a clear sign that we are building loyalty.

So now tell us, which ones do you use or prefer?

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