Would you like to unlock increased customer satisfaction, retention, and lifetime value? The secret lies in tracking and acting on insights earned through customer loyalty analytics.
For many businesses, it costs about five times more to acquire new customers than to keep existing customers. Selling to current customers is easier and less costly than acquiring new ones. That’s why customer loyalty can have such a profound impact on your business if you make it a priority.
If you’re not already measuring customer loyalty, you’re missing out on a massive opportunity for business growth. In today’s competitive landscape, your business depends on the loyalty of its customers to make repeat purchases (to increase your revenue) and to refer your company to others (to attract new customers).
In this guide, we’ll discuss the importance of customer loyalty analytics, share the top metrics you should be tracking, and show you how to use these metrics to increase customer loyalty.
- What is customer loyalty analytics?
- Understanding the importance of customer loyalty
- Why customer loyalty analytics matter
- Key metrics to measure and analyze customer loyalty
- Going further: Analyzing reviews and social media
- How do you analyze customer loyalty to unlock business growth?
- Turning loyalty insights into action
What is customer loyalty analytics?
Customer loyalty analytics are any metrics or key performance indicators (KPIs) that help you measure customer loyalty and satisfaction. These metrics help you:
- Understand how loyal your customers are today.
- Inform insights into where you can improve the customer experience and, by relation, customer loyalty.
- Track your progress through KPIs to see how effective your improvements have been.
In today’s world, where there are likely many other businesses with the same or similar offerings, increasing customer loyalty is pivotal to keeping your customers from switching to competitors.
Understanding the importance of customer loyalty
Customer loyalty happens when you create an ongoing positive relationship between your business and customers. These positive experiences make them less likely to stop using and buying your products, leave you for a competitor, or talk negatively about your brand to others.
Your business reputation is important to customer loyalty in our competitive business landscape. A positive reputation for creating a good customer experience could win you customers over your competition.
How do you know who your loyal customers are? Loyal customers will exhibit one or more of the following behaviours:
- Using your product or service regularly.
- Recommend you to others.
- Make repeat purchases.
- Likely to purchase up-sells or cross-sells.
- Have a higher customer lifetime value.
Why customer loyalty analytics matter
Customer loyalty isn’t something you earn once and remains forever unchanged. Changes you make in your business (products, features, messaging, values, etc.) and external influences (economic impacts, consumer spending) will impact customer loyalty.
Using customer loyalty analytics to track the changes in customer loyalty helps you:
- Recognize patterns in customer loyalty. You may notice you have seasonal increases or decreases in customer loyalty. Or, that customer loyalty changes when you make pricing changes or update your products. This information helps you predict when loyalty will be at its highest and lowest so you can take steps to mitigate any drastic drops or at least understand that it may drop for a time after these changes or “seasons.”
- Enhance overall customer experience. Customer loyalty is a direct result of the end-to-end customer experience from sales and marketing, to product and service experience. For example, if you notice fewer subscription renewals or higher churn after a feature launch, this would be a good indicator that you’re losing loyal customers because of a poor product experience.
- Amplify customer lifetime value. Once you’ve earned the trust and loyalty of your customers, they’re typically more likely to stay active customers longer. This means making repeat purchases or re-subscribing to your software or offerings. One way to improve customer lifetime value is with a well-structured loyalty program, offering points and to keep retention and repeat sales high.
Key metrics to measure and analyze customer loyalty
The key to successfully understanding customer loyalty can be found in the metrics you track and analyze. Here are the top six customer loyalty metrics that will help you better understand your customers and track business growth:
Customer retention rate
Your customer retention rate is the percentage of customers a company retains over a certain period. Most of your customers won’t be active customers for their whole life as they may eventually outgrow or no longer need your offerings. Understanding how long a typical customer stays active could lead to valuable insights.
Here’s how to calculate your Customer Retention Rate.
After calculating your retention rate, you may notice that your customer retention rates drop in the winter months. Based on this information and other data about their behavior during these times, you may discover the reason for this max exodus of customers in December. Then, you can take actionable steps to remove that roadblock so they’re more likely to stay customers through the winter, thus increasing your customer retention rate.
Repeat purchase rate
Your repeat purchase rate measures how often people purchase from you more than once. For service- or software-based companies, this can be measured by renewal rates. Generally, if customers renew their subscription or buy from you again, they’re satisfied with their initial purchase.
If you notice your repeat purchase rate is dropping, look into your customer feedback data to see what else happened around the same time. Common reasons for a low repeat purchase rate include:
- Dissatisfaction with their original purchase
- Increase in pricing (and they don’t see the value or have the budget)
- Poor customer service experiences with your brand since their last purchase
- Loyalty program rewards are no longer worth the effort
- External factors contributing to no longer needing your offering
Net Promoter Score (NPS)
Another measure of customer loyalty is your Net Promoter Score (NPS). This score tells you how likely your customers are to recommend your business to others. The idea is that only your happy, loyal customers will tell others about you.
A NPS survey asks one question: How likely are you to recommend this business to others?
High Net Promoter Scores usually indicate higher customer loyalty.
Customer Satisfaction Score (CSAT)
A step to get more granular insights than NPS scores alone is your Customer Satisfaction Score (CSAT). This metric is used to understand how happy customers are with your brand, offerings, and interactions. Surveys can ask about customer satisfaction with specific aspects, events, or experiences with your brand or be more general.
CSAT surveys can help uncover specific points of contention for your customers in their experience, which can help you remedy it and improve loyalty.
Customer Effort Score (CES)
Even your most loyal customers don’t want to work harder than necessary to use your products or services or interact with your customer service teams. Your Customer Effort Score (CES) tells you how much effort customers feel they must put in to meet their needs. Too much effort could lead to bad customer experiences and lower loyalty rates.
To calculate your CES, ask customers how easy it was to solve their query or complete the task on a ratings scale (10-, 7-, or 5-point scales work best). To calculate your CES score use the following formula:
CES = (Total sum of responses) / (Number of responses)
Based on what you learn from CES scores, you can look for ways to remove roadblocks or confusion during typical customer behavior or activities.
While not a directly measurable KPI or metric, what people say about your brand to others can provide valuable insights into customer loyalty. Customers are often more brutally honest in sharing their experience with your brand to others rather than telling you. As part of your customer loyalty analytics, you should monitor what customers say about you on review websites and social media and analyze their sentiment.
You can do this by using a customer feedback analysis tool like Idiomatic. Idiomatic gathers all customer feedback data from various channels (including social media and app reviews), then uses contextual machine learning to custom label the feedback per channel, per customer segment, accurately regardless of jokes, sarcasm, or customer tone. This gives you deep, actionable insights tailored to your business to help you understand exactly how your customers feel about your business and what to do about it to improve loyalty.
How do you analyze customer loyalty to unlock business growth?
Tracking customer loyalty metrics and qualitative data from your customers isn’t going to automatically unlock the business growth you crave unless you take action on what you learn. Just tracking your customer loyalty going up and down throughout the year won’t do anything other than help you predict when loyalty will be high or low in the future.
Instead, you need to listen to the data and act to improve the customer experience and loyalty. Based on what you learn, here are some ideas that you might try:
To increase customer retention rates:
- Offer discounts for subscription renewals.
- Add new features that would solve customers’ pain points in your offerings.
- Use customer retention rate insights (how and why users churn) to improve customer loyalty programs (a retention strategy that rewards repeat business from customers).
To increase repeat purchase rates:
- Start a customer loyalty program to reward repeat purchases (or review your current customer loyalty program for improvements).
- Offer incentives or value adds—like discounts on referrals, points on purchases toward perks, or customer tiers that unlock special offers.
- Use AI to create personalized and dynamic cross- and up-sells during the buying process.For example, in banks, algorithms can evaluate buyer behavior at the account level to push a product to a targeted group vs. a generic product that may not fit their needs.
To increase NPS scores:
- Analyze all customer feedback, positive and negative, to identify patterns and trends amongst responses. Then, derive insights to help you either double down on what’s working or make improvements based on real customer feedback.
- An AI-driven platform like Idiomatic will help you analyze all your feedback data, providing you with specific, actionable insights.
- Invest in quality training for customer-facing support agents to provide all customers with a five-star experience
- Follow up with detractors after making changes to ensure that issues have actually been fixed.
- Review the UX of your software and website to ensure it’s easy to use.
Learn more about what qualifies a good NPS score within your industry and how to improve it.
To reduce customer effort score:
- Look for ways to minimize steps in key processes like the checkout process and accessing support and resources.
- Check product or service features to ensure they work as expected.
- Review the customer journey to see where you can optimize processes or experiences.
- Comment on “bad” reviews with your perspective or with extra information.
- Set up keyword searches to be alerted anytime someone talks about your brand so you can respond promptly.
- Take all the negative comments and make changes to improve those experiences or features.
Turning loyalty insights into action
Turning these loyalty insights into action is the key to unlocking business growth. The tricky part for some businesses is understanding what action to take. Many have access to customer loyalty analytics but can’t effectively understand what they mean in the context of your business and what needs to be done to improve any negative customer experiences.
The best way to recognize specific customer needs and ones that impact a larger population or demographic of customers is to use an AI-powered customer experience management platform to analyze your data and bring these actionable insights to your attention.
With Idiomatic, you can analyze mountains of customer feedback to learn more about what your customers want and need. Idiomatic helps you turn raw feedback data, whether it’s structured or unstructured, into valuable insights, unlocking the “why” behind low customer loyalty.
Idiomatic’s data team custom-builds the models for each of our clients, trained to high precision with human QA. We then build custom labels per channel, per customer segment, using raw voice of customer interactions. Finally, all the data is analyzed to give you actionable insights you can work on immediately.
You can’t improve what you don’t measure, and it’s not worth measuring if you’re not going to act on that data to improve the customer experience. Idiomatic makes deriving your actionable insights fast and accurate.
Ask us about a demo of Idiomatic today to learn how to increase customer loyalty.