How to track and improve your customer loyalty

Loyal customers are the cornerstone of business success. Discover the metrics to help you build customer loyalty for higher revenues and long-term growth.

By Leighton Jacobs

Last updated May 15, 2023

Businesses need loyal customers. But gaining and maintaining customer loyalty is hard work. Zendesk’s CX Trends Report 2020 revealed that half of customers will leave after just one bad customer experience and 80 per cent will leave after multiple bad experiences.

These scary numbers highlight just how important it is to stay on top of customer loyalty. But with so many metrics and so much data, it can be tricky to know where to start. If that sounds familiar, this article will help.

Loyal customers are invaluable

Put simply, customer loyalty pays dividends. Loyal customers increase both your revenue and customer lifetime value. For example, according to the White House Office of Consumer Affairs, loyal customers are worth up to 10 times as much as their first purchase.

So retaining your customer base should be a priority, regardless of your business. A Bain & Company study also found that repeat customers spend 67 per cent more than new customers. And happy customers don’t just buy more products—they also recommend you to their family and friends, helping grow your customer base.

Measuring customer loyalty

Measuring customer loyalty helps you understand customer behaviour and work out where you need to improve. But customer loyalty can be tricky to quantify. After all, you can’t sum it up in a single number.

Customer satisfaction surveys, complaints, service metrics, interactions, retention values, and sentiment analysis can all provide insight into how you’re performing on the customer loyalty front. But let’s get more specific.

Here are five KPIs you can use to gauge customer loyalty:

1. Customer Satisfaction Score (CSAT)

Customer satisfaction score is one of the most popular metrics for measuring customer loyalty regardless of industry. It involves asking customers to rate how satisfied they are with your company on a scale of 1-5, before averaging the scores to find your CSAT.

Determining your CSAT helps you understand where you’re doing well (and where you’re not). It also gives buyers the chance to voice their opinions and provides insight into how they feel about the .

2. Net Promoter Score (NPS)

Net Promoter Score (NPS) measures customer loyalty by asking customers how likely they are to recommend your company on a scale of 0 to 10. Responses are then separated into three groups: promoters, passives, and detractors.

NPS is widely used to monitor both customer service and customer satisfaction. It provides insight into word-of-mouth marketing and is a good indicator of customer loyalty. But don’t forget: it reflects how customers feel about your brand rather than the quality of your products or services. Nevertheless, it’s great at identifying customers at risk of churning.

3. Customer Retention Rate (CRR)

Customer retention rate (CRR) measures the percentage of customers who stick with your company over time. It’s the perfect metric to help you understand what keeps customers with your company and can highlight opportunities to improve customer service.

CRR is a powerful indicator of customer loyalty and the revenue it provides. A Bain & Company study showed that just a 5 per cent increase in customer retention can lead to a 25 per cent increase in profit.

4. Customer Churn Rate

Customer churn rate measures the percentage of customers who stop buying products or services from your company over a given period. It’s one of the best metrics to gauge how well you’re doing at retaining customers.

When a customer churns, you not only lose all the current revenue they were providing but all future revenue expansion they could have provided. Even the best companies can’t grow if they’re consistently losing customers. So if your churn rate is high, it’s time to act.

5. Customer Lifetime Value (CLV)

Customer lifetime value (CLV) helps you understand how much each customer has spent and will spend with your company. It’s a little harder to calculate than some of the other metrics but it’s a great way to assess the quality of your customer service.

Knowing your CLV can help you identify highly valuable customer segments and make better business decisions. For example, CLV helps marketing teams estimate how much they should spend when trying to acquire new customers.

6. Customer Loyalty Index (CLI)

Customer loyalty index (CLI) uses customer surveys to gauge how committed customers are to your brand. It’s a standardised tool that considers multiple factors like NPS and repeat purchases.

CLI measures customer intentions rather than their actual behaviour, so it’s important to combine CLI with cold, hard data. Nevertheless, CLI provides a wider understanding of customer loyalty than other single metrics and can even help predict future retention rates.

These are just six of the main KPIs but there are many more customer retention metrics that can provide real insight into customer loyalty, including time between purchases, product return rate, active users, repeat purchase rate, and social media sentiment analysis.

Building customer loyalty

Metrics help you understand what you need to do to gain more loyal customers. But remember: Rome wasn’t built in a day, and neither is customer loyalty. It’s a process that takes time and effort. Here are three things to keep in mind.

1. Provide excellent service

This is a no-brainer. Great customer service is the lifeblood of customer loyalty. If your customers are happy with your service and support, they’re likely to not only come back but also recommend you to others. Make sure your employees are trained and have the tools they need to provide outstanding support and a seamless omnichannel experience.

2. Offer discounts and rewards

Customers want to feel like they’re getting a good deal. Discounts and rewards for loyal customers can help show them how much you appreciate their business and encourage them to stick around.

3. Keep your promises

If you make a promise to a customer, make sure you keep it. Whether it’s delivering on time, resolving an issue, or anything else. Keeping your word builds both trust and loyalty.

Zendesk helps you become loyalty royalty

Customer loyalty is all about making sure customers want to continue buying your products and using your services. Zendesk helps you better understand your customers so you can show them how much they mean to you.

Our flexible and easy-to-use solution allows you to track key metrics like customer satisfaction, engagement, and retention with ease. Plus, dashboards provide customer insights and data-driven recommendations to help you reach your customer loyalty goals.