How to measure customer loyalty

What value do you place on the loyalty of your customers? Just ask Apple. Ever seen those queues stretching around the block outside a store when a new model is released? That's loyalty in action. Loyal customers provide many benefits to a business such as:

  • Open to offers

  • Resistance to offers from competitors

  • Referrals to friends and family

  • Trust

  • Positive reviews

  • Likely to remain a long term customer

But can loyalty be measured? Yes...it can! The key to improving customer and brand loyalty is being able to measure how your customers view your company and the likelihood they will recommend it to others. While social media may give some insights into customer sentiments by facilitating word of mouth, more reliable tools are available to collect meaningful data and implement changes accordingly.

What are the advantages?

There is a clear link between measuring the loyalty of your customers and profitable growth. The data collected allows your organisation to strategise effectively and compile the key performance indicators which drive profits. Understanding what drives your customer's loyalty sets the foundation for improving their overall experience, a critical component in achieving better business results.

What is a Net Promoter Score (NPS)?

NPS is a tool which is relatively simple to understand and implement. Essentially it is a metric that reflects how companies and employees treat their customers. Once determined it can facilitate change and improved performance.

The method used is to ask customers one simple question; "How likely is it that you would recommend Company X to a friend or colleague?" and respond with a rating scale of 0-10 points.

Based on those results, Net Promoter then divides your customers into 3 categories:

Promoters (score 9-10): These are your most loyal customers. They keep returning, buy more and continually refer others.

Passives (score 7-8): These customers are satisfied but generally unenthusiastic and not particularly loyal to your brand. 

Detractors (score 0-6): Are unhappy, inhibit growth, and can damage your brand's reputation through bad reviews and negative word of mouth.

NPS calculation

The formula to calculate your Net Promoter Score is simple - subtract the percentage of detractors from the percentage of promoters, giving you an index ranging from -100 (every person surveyed was a detractor) to 100 (every person surveyed was a promoter). Generally a score below zero is considered poor, greater than zero is good, over 50 is above average while the top performers achieve exceptional results with a score over 70.

Implementing an NPS program

Here at The Realise Group we can help your organisation implement a program to measure customer loyalty using industry best practices. We have key team members available who are certified for Net Promoter Associate Customer Loyalty and can also calculate your NPS as part of our Voice of the Customer program. Contact us today and let us help your organisation implement strategies and tools to improve brand loyalty and customer retention. 

Net Promoter® and NPS® are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.®