How to Measure Customer Loyalty?
1. Net Promoter Score (NPS): NPS evaluates the likelihood that clients will recommend a business’s products. Customers use a 0–10 scale to indicate how likely they are to recommend. The percentage of promoters and detractors is subtracted to get the Net Promoter Score (NPS).
NPS = % Pomoters – % Detractors
2. Customer Satisfaction (CSAT) Score: The CSAT score evaluates how satisfied customers are with particular exchanges, deals, or experiences. Usually, customers use a scale to indicate how satisfied they are (e.g., 1-5 or 1-10). The mean (average) of these ratings is the CSAT score.
[Tex]CSAT~Score=\frac{Number~of~Satisfied~Customer(those~who~rate~you~4~to~5)}{Total~Number~of~Responses}\times{100}[/Tex]
3. Customer Retention Rate: Customer Retention Rate indicates the proportion of clients that a company maintains over a pre-determined period. The formula to calculate Customer Retention Rate is as follows:
[Tex]Customer~Retention~Rate=\frac{CE-CN}{CS}\times{100}[/Tex]
where,
CE = Number of Customers at the End of the Period
CN = Number of New Customers Acquired during the Period
CS = Number of Customers at the Start of the Period
4. Repeat Purchase Rate: Repeat Purchase Rate indicates the proportion of clients who, over time, make multiple purchases from a company. To calculate it, divide the total number of repeat buyers by the total number of customers, and then multiply the result by 100.
[Tex]Repeat~Purchase~Rate=\frac{Number~of~Repeat~Purchase~Customers}{Total~Number~of~Customers}\times{100}[/Tex]
5. Churn Rate: Churn Rate indicates the percentage of clients that leave a company within a predetermined period. It is calculated by dividing the number of customers lost during the period by the total number of customers at the beginning of the period.
[Tex]Churn~Rate=\frac{Customers~at~the~Beginning~of~the~Month-Customers~at~the~end~of~the~month}{Customers~at~the~Beginning~of~the~Month}[/Tex]
6. Customer Lifetime Value (CLV): CLV is an estimate of the possible earnings throughout a relationship with a customer. It takes into account factors including the frequency of a customer’s transactions, the amount of money they typically spend, and the length of time they expect to be a customer.
Customer Lifetime Value (CLV) = Customer Value x Average Customer Lifespan
7. Referral Rate: Referral Rate indicates the proportion of clients who tell others about your company. Divide the total number of customers acquired through referrals by the total number of customers.
[Tex]Refferal~Rate=\frac{Number~of~Customers~Acquired~through~Refferal}{Total~Number~of~Customers}[/Tex]
8. Customer Reviews and Feedback: Companies may learn a lot about themselves from reading what customers have to say about it, including how they feel, how devoted they are, and what needs improvement.
9. Engagement Tracking: Keep an eye on metrics such as website visits, app usage, email correspondence, and social media activity that demonstrate how clients engage with your company.
10. Gathering Customer Feedback: Use surveys to regularly get feedback from customers. Their loyalty, overall level of satisfaction, and any areas where the customer experience could be enhanced should all be covered in this feedback.