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What You Should Know About Customer Loyalty Metrics

jean pierre fumey



Customer Loyalty

Entrepreneurs are interested in customer loyalty because repeat customers spend up more than new ones. It’s also more expensive to attract a new customer, and so businesses are looking for ways to keep them coming back again.

Therefore the article will tell you how to measure and build customer loyalty.

What is Customer Loyalty?

Customer loyalty measures customers’ willingness to continue engaging with the brand and purchasing its offerings. Building customer loyalty is extremely important because it improves the lifetime value of the existing customers, which helps to consistently grow your revenue.

Further customer loyalty is what motivates your current customers to recommend your offerings to others.

Therefore, customer loyalty has two main elements: an ongoing relationship between a customer and a brand. It is also a happy or positive relationship. That is why customers choose you over your competitors, keep on coming, and refer others to your business to enjoy similar benefits.

People are loyal to brands that give them positive experiences, such as consistently providing them high product quality or having excellent customer service.

So customers trust grows over time due to multiple positive interactions with a brand and not its individual product and service. While customer loyalty can withstand a few negative experiences, it will break when they are many as well as weaken the strength of the connection.

That is why when people have a bad experience with a brand, but management immediately fix it, they become more loyal to it than those who have not had any problem with it.

Why is Customer Loyalty important to your Business?

As stated, the cost and effort of acquiring a new customer is substantially higher than retaining them. However, repeat customers spend more because they are fully aware of your business, and it takes less effort to convince them to buy again and again from you. That means you don’t have to spend a lot with repeat customers as you would do with a new customer.

The following are other reasons why brand loyalty is very important to your business.

Brand Ambassadors

Because loyal customers trust your brand, they are not shy to tell others about you. That is, they readily share positive feedback about your products and services with their friends and family members.

Word of mouth marketing is a cost-effective method of promoting your products and services to others which brings in more business. Happy customers can share their positive opinions about your brand and offerings on social media, and they may also opt to leave positive reviews on your website or social media platforms or simply tell others.

Repeat Business

Loyal customers repeatedly buy from the same brand than new ones. However, you have a big role to play to build customer loyalty.

Since “First impression in the last impression,” ensure everything is in proper shape when selling to a new customer. This includes how you greet them or conduct product demo. They are more likely to bring more business when they are confident and trust you.

Good customer service, communicating with them through their preferred communication channels and loyalty program, points and incentives can keep them coming and spend more in your business.

So giving your customers discounts on fresh-baked bread will motivate them to return to your bakery for the loaf of bread as well as purchase other items like rolls, cookies, and doughnuts.

More revenues

Repeat customers are more likely to spend more compared to first-time customers. This is because new customers come to your business to test the waters with their first purchase.

Further, you are able to predict your business growth more effectively with loyal customers than new ones. That means your marketing team can easily identify committed customers whom you can rely upon as you make anticipatory decisions based on expected revenues from them because they regularly shop from you.

Reduces Marketing cost

Word of mouth is a more effective and credible marketing strategy to increase your brand awareness, generate prospects and engage customers. You don’t spend anything with the word of mouth marketing because it’s your loyal customers who do the work because you have already won their trust, and now you can influence them more, unlike new customers.

Therefore, loyal customers talk about you with their friends and family as well as recommend you on social media without you incurring any marketing cost.

Gives You Honest and Quality Feedback

Loyal customers don’t shy off telling you about your business, products, or services because they want you to improve your offerings. This will help you when launching new products, forecasting, and making business decisions.

Important Metrics to Measure Customer Loyalty

Average Order Value (AOV)

The metric helps you study customers’ spending so that you can make tailored offers or identify opportunities to upsell. That means the AOV tracks your customers’ average spending when they place an order on a mobile app or website.

This customer behavior benchmark gives you information that helps you evaluate the effectiveness of your overall online marketing efforts as well as your pricing strategy.

Net Promoter Score (NPS)

This is a customer satisfaction benchmark that businesses use to measure the likelihood of customers recommending your brand, products, and services to their friends. Based on its numerical score, you can tell how contented your customers are. So with this feedback tool, you can tell the unhappy customers who are likely to damage your brand and immediately address their issues.

Purchase Frequency (PF)

The revenue metric considers the frequency of your average shopper. This is important because it’s cheaper to retain an existing customer than to acquire new ones, so ecommerce brands are concerned with customer retention because they are operating in a saturated market. So the more your customers buy from you, the higher the revenue.

Profitability per Order (PPO)

The metric tells you the profit you are making from each of your customers’ purchases. So a higher PPO score indicates that your business is making more profits, and your business is more likely to succeed.

Customer Churn Rate (CCR)

The metric measures the percentage of customers you have lost or that have stopped making purchases over a specific period. It’s an important metric because it can help you when developing a retention strategy. So the lower the CCR, the more effective is your retention strategy.

Repeat Purchase Probability (RPP)

This metric measures the likelihood of a customer buying from you again and again. The RPP and CCR metrics are closely related because the more likely your customer is to make another purchase, the less likely they are to churn. So tracking this metric will help you see customers who are stopped making purchases from you so that you can put preventative measures in place.

Repeat Purchase Rate (RPR)

The metric measures the percentage of repeat customers or those that have made more than one purchase from your business. It’s an important metrics because 40% of your annual revenue is from your repeat customers. Therefore the score shows how effective are your retention strategy.

Customer Retention Rate (CRR)

The metric evaluates the percentage of customers that have remained with you over time. A higher CRR shows that your retention strategy is working and you’re more likely to achieve or that you have already achieved your retention marketing goals.

Loyal Customer Rate (LCR)

The metrics separate repeat customers and the best customers. The main aim of your retention efforts is to acquire and retain customers. These loyal customers are the ones that will attract more new shoppers to your brand through word of mouth, and so you want to know who truly these loyal customers are.

Redemption Rate (RR)

The metrics give you the percentage of redeemed loyalty rewards. That means the indicator tells you how healthy is your loyalty program because customers will only redeem rewards that are valuable to them. So you can use this metric to improve your retention strategy and loyalty program.

How to Build Customer Loyalty

Now that you know different metrics that you can use to measure your customer loyalty, you also need to develop a strategy for building customer loyalty. Here is how you can get started.

Up Your Customer Service

Customer service is key. The majority of customers are ready to pay more for great customer service. For that reason, customers remember when you treated them well and when you didn’t. Based on how you treated them, they will tell others about you, come back repeatedly, and spend more, which translates to more business. However, it will be a lost business opportunity when you treat them poorly.

That means you should strive to go above and beyond for your customers, identify where you can improve, and pay attention to their feedback.

Reward Program

One of the cheapest ways to build loyalty is to reward your most dependable customers with extra bonuses based on what works best for your business. These programs encourage your loyal customers to stick around and strive to reach that status.

Some of the common rewards programs are:

Exclusive VIP Program

You can have exclusive VIP programs where customers pay a membership fee to join and enjoy special discounts and offers. These benefits are only accessible to those who have enrolled in it.

Tiered Program

This helps you to have different rewards and earnings levels based on your loyal customers’ spending habits. The program allows all your customers to participate based on their ability to spend with you or buy from you and receive rewards accordingly.

Spend Program

The reward program is founded on the amount each customer spends on each transaction. That means they accumulate more rewards when they spend more. This reward method is known for reducing churn rates and boosting customer loyalty.

Point Program

This is a simple method of rewarding customers that purchase from you with points. In the end, customers can transfer the accumulated points to some special offering or a reward.

Frequent Communication

Frequent communication helps your customers to keep you on top of their list and for you to pass information to them, such as new deals. However, you must communicate with your customers through their preferred channels. These includes:

Email: It remains one of the best modes of communication with customers because they are the ones that give you their email address when subscribing to your services or when they need an update on new products or services.

Social media: This is slowly becoming the go-to method because it allows you to communicate directly with your customers via direct messaging, reply to their comments, and more.

Phone Calls: While robots can help you save money, it’s your highly-trained customer service representatives that can build customer loyalty. This is because a phone call helps your team connect with your customers on a deeper level, ultimately improving their experience.

Webchat: It allows a chatbot to answer your customers’ FAQs as well as direct them to helpful resources. This saves your customer service team a lot of time that they would have used to answer common questions and allow them to respond to more in-depth ones.

Customer Feedback

You should seek feedback from customers because it will help you to improve and retain loyal ones. You can get this information by sending out surveys, calling them, and asking questions. Next, track your ratings as you improve your customer services in order you see whether you are making any progress.

Another source of feedback is online comments, reviews, and tags on social channels. These online forums allow you to respond to your customers’ positive and negative feedback. Your response confirms to your customers that you appreciate real criticism and are doing your best to serve them.

Talk to a customer who has left a negative comment through a private message or email to understand and address their needs in a better way. On the other hand, showcase customers’ positive feedback or messages, conduct a follow-up interview in order to generate more great reviews, and reward them for making their positive contribution.

Jean-Pierre is a polyglot communication specialist, freelance journalist, and writer for with over two decades of experience in media and public relations. He creates engaging content, manages communication campaigns, and attends conferences to stay up-to-date with the latest trends. He brings his wealth of experience and expertise to provide insightful analysis and engaging content for's audience.

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