Customer loyalty can be defined as the propensity of a customer to repeat the purchase of a good or service from the same brand. Hence the importance of having customer loyalty KPIs that help us recognize if customers will return.
A loyal customer base gives you greater visibility into future revenue and maximizing the lifetime value of each customer.
However, measuring the level of fidelity can be a complicated task.
Let’s learn more about what loyalty KPIs are and some examples so that we can start tracking them now!
What are customer loyalty KPIs?
Do you know what a KPI is ? In this case, loyalty KPIs are what help us take the pulse of your loyalty programs and provide you with information for your future optimization efforts.
While it is important to note that the correct measurement of these KPIs varies by industry and buying cycle, the key areas of focus remain the same.
These key performance indicators help us measure and track customer loyalty.
Through these KPIs we can know if:
- Loyal customers are more likely to recommend our services to others
- If you are looking to go to the competition
- They are willing to try other products and services other than those previously purchased.
- If they are more understanding when problems arise
- Etc.
Examples of customer loyalty KPIs
By having the customer loyalty KPIs, which we share here, in a dashboard, you will have a better idea of the ability to retain customers and where improvements can be made.
1. NPS: Net Promoter Score
The Net Promoter Score (NPS) corresponds to the proportion of customers likely to recommend or, on the contrary, advise against a product, service or brand.
Through a questionnaire, the survey places on a scale of 1 to 10 the probability of promoting a brand to your environment.
The most satisfied and loyal customers who answer 9 or 10 are potential “promoters,” while those who score less than or equal to 6 may become detractors and require special proactive attention to resolve their problems before they have an effect. negative.
Between these two categories are the passive ones, which correspond to neutral clients. Satisfaction is present, but the enthusiasm of the promoters is not yet present.
Passives are the most vulnerable to competition and are also difficult to convert.
How is NPS calculated?
Using a very simple formula: the final score, out of 100, is obtained by subtracting the percentage of promoters from that of detractors.
NPS = % of promoters – % of detractors
A score close to +100 (all customers are promoters) will always be better than -100 (all customers are detractors).
2. Customer acquisition rate
The customer acquisition rate determines the effectiveness of a marketing and sales policy and its impact on acquiring new potential customers.
To calculate it, simply divide the total spending made by the brand for its promotion and marketing during a given period by the total number of new customers during the same period.
Customer acquisition rate = promotion and marketing expenses from period X to Y / total new customers during period X to Y
The capture rate can be improved by multiplying low-cost, high-impact promotional initiatives, such as a mailing campaign or SEO optimization of the brand’s website.
3. Customer churn rate
The churn rate is one of the most well-known and used customer loyalty KPIs.
Unlike the acquisition rate, the churn rate is used to determine the proportion of customers lost in a given period.
The definition of “lost customer” is specific to each brand, but generally implies a certain period of inactivity and non-purchase (one year, two years, etc.).
To measure this index, the number of lost customers is divided by the total number of customers during the period, multiplied by 100.
Churn rate = (lost customers from period X to Y / total customers from period X to Y) x 100
Some brands consider that not losing customers is a more important and interesting objective than acquiring new ones.
4. Repurchase rate
The repurchase rate is a valuable tool for measuring customer satisfaction and provides an overview of consumers, which is why it is considered one of the most important customer loyalty KPIs.
It corresponds to the percentage of customers known to the brand who have made at least one new purchase (“repurchase”) in a given period.
Repurchase rate = (customer who has repurchased at least once from period X to Y / total customers from period X to Y) x 100
This indicator is useful, for example, to measure the impact of an advertising campaign in greater detail.
5. Retention/loyalty rate
The retention or loyalty rate is calculated in parallel to the churn rate. It simply consists of evaluating the number of clients successfully retained during a given period.
How is the retention rate calculated?
Retention rate = 100 – Churn rate = (loyal customers from period X to Y / total customers from period X to Y) x 100.
Alternatively, the number of customers retained can be divided by the total number of customers during the period, multiplied by 100.
Investing in techniques such as email retargeting and generally making sure to stay in touch with customers and regularly request specific messages from them are possible solutions.
6. Sales rate of superior quality products
In principle, the upsell rate is similar to other customer loyalty KPIs, such as the repurchase rate.
This indicator calculates the percentage of customers who have made a new purchase, but for a product or products different from their previous basket.
The calculation of this index is obtained by dividing the number of customers who have purchased at least two different products by the total number of customers who have purchased a single product.
Upselling rate = customers who bought several different products / customers who bought one type of product.
For a customer to open up to a brand’s entire range of products, it is necessary to carry out intelligent promotion and create a more emotional bond.
7. Customer Engagement Rate
The participation rate refers to the proportion of customers who actively participate in the brand loyalty program.
This indicator allows you to fine-tune the calculation of the brand loyalty index and also offers valuable indications about the average customer’s real level of commitment to the company.
One of the ways to improve engagement rate is to establish a strong, personalized loyalty program and periodically survey customers about it.
8. Lifetime of a customer
Customer lifetime value is simply the average lifetime of a customer for a brand.
This measurement is obtained by dividing the integer 1 by the rotation index. Example: 1 / 0.25 = 4. On average, a customer stays with this brand for 4 years.
9. The middle basket
What percentage of turnover do loyal customers really represent? It is estimated that the average basket of loyal customers is up to 10 times higher than that of their first purchase.
The calculation of loyal customer purchases measures the proportion of turnover generated by loyal customers and, therefore, measures their importance in your business model.
Increasing sales from loyal customers means maximizing their satisfaction and level of commitment: multiplying personalized initiatives in their favor, especially with exclusive discount offers.
10. Conversion funnel
The term conversion funnel refers to all the steps and processes necessary for a customer to complete a purchase.
On an e-commerce site, this involves viewing and validating the shopping cart, identification, payment information and, finally, order confirmation.
It is important to measure the number of customers who abandon their basket or abort their order before completing it.
This problem is generated in part by the lack of information, so it is necessary to personalize the information based on the customer’s journey, making it more fluid.
Conclusion
By accumulating good customer satisfaction KPIs and rigorously monitoring loyalty KPIs, you will have a greater opportunity to generate an active and enthusiastic community with your audience.
The ideal is to monitor these and other KPIs that are essential for meeting your objectives, and what better way to do it than with dashboard software that gives you the opportunity to monitor your performance in real time and be able to make decisions quickly thanks to the analysis of the information that you generate every day.