What is Customer Loyalty?
Customer loyalty is a measure of the customer's willingness to repeat business with a company or brand. It results from customer satisfaction, positive customer experiences, and the services a customer receives.
Why is Customer Loyalty important?
Customers spend more time and money with the companies to which they're loyal. Loyal customers increase referral traffic and word-of-mouth marketing. Customer loyalty also fosters a strong sense of trust between your brand and customers — when customers choose to return to your company frequently instead of your competitors.
How to measure Customer Loyalty?
Net Promoter Score (NPS) One way to track customer loyalty is by looking at customer satisfaction levels. You can use an NPS survey to determine how likely customers recommend your products/services to others. NPS surveys use similar wording and an 11-point scale. Those who answer with a 9 or 10 are loyal and happy customers. Those who answer 7 or 8 are happy but less likely to recommend your business. Customers who respond with a 6 are people who won't refer your brand to anyone.
Customer Loyalty Index (CLI) It is used to track customer loyalty over time. It incorporates similar elements of an NPS survey but also collects information about repurchasing and upselling. A CLI survey uses a 6-point scale, with one is for "Definitely Yes" and six is for "Definitely No."
Customer lifetime value (CLV) Customer lifetime value is one of the leading indicators of customer loyalty for SaaS. It looks at the total revenue an average customer generates over their lifetime. A higher CLV means you have more loyal customers. Customer lifetime value = (Annual revenue per customer * Customer relationship in years) - Customer acquisition costs.