Business is besieged with metrics. Return on Investment (ROI), website visits, website return visits, shopping cart abandonment rates, and average customer spend are all important and well used metrics to evaluate the success of a business.
As with all business problems, everyone agrees that metrics are vitally important. What no one can agree on is which metrics are the most important.
In today's hyper competitive retail market, the most important marketing metric is increasingly customer loyalty.
Most retailers feel they've checked box on customer retension by offering a standard "rewards" program based on customer spending.
Is that sufficient when consumers have an increasing number of shopping options?
Acquiring new customers keeps getting more expensive and more difficult. So investing in retaining those customers who already like you makes good business sense.
For retailers, on an individual customer basis, the one customer that buys one item a month is practically invisible. Yet these loyal customers are what sustains a business, allows it to grow, allows it to outlast competitors, and allows it to innovate and create new products and services.
Amazon, for example, does this through its Prime membership program. It's not just the free two-day shipping. Members get access to an entire host of services (complimentary access to movies, e-books, music and more) that keep them engaged with Amazon - and coming back to the platform.
Interestingly, and noteworthy, Amazon lures customers by adding value (all those services) rather through discounting. Providing additional services that customers want or need is one of the most successful ways to drive loyalty. There are other tactics as well with proven track records.
Customer loyalty is your number one success metric to maintain and to grow.
How Many Loyal Customers Do You Have
The first step in growing customer loyalty is to determine what percentage of your customers and what percentage of your revenue comes from loyal customers. You may be able to use data from existing loyalty programs, credit card information, or other data sources to determine the number of loyal customers.
Most importantly, your organization, from a small coffee shop to a multi-billion international enterprise, must agree on a definition of a loyal customer.
Loyalty could be weekly for a restaurant or gas station or it could be every two months for a fashion retailer. The central issue is to have a proven definition of what loyalty is for every employee.
Use A Net Promoter Survey (NPS) Of Your Customers
What keeps the loyal customers loyal? The Net Promoter Process (NPS) is one of the simplest and most telling tools of evaluating customer loyalty and helping a business grow loyal customers.
The NPS is based upon the question, “Would you recommend this product or service?” The customer can then respond based on a low score (number = 0) or a high score (number = 10) scale. Only a score of a 9 or a 10 makes a customer a Promoter. Customers that have scores from 0 to 6 are Detractors, most likely un-loyal customers. When you subtract the Detractors from the Promoters, you have a Net Promoter Score.
NPS surveys should also tell you what Promoters like and what Detractors want to see improved.
Innovate & Test to Meet Emerging Loyal Customer Needs
Business results, survey results, industry trends, customer focus groups, and employee ideas are the dataset for creating and innovating ideas to grow more loyal customers and to maintain existing loyal customers.
Once you have ideas then start performing small tests to see how your ideas grow loyal customers. Vital to these tests are to have a separate group for evaluation that are not involved in the pilot.
These “control groups” are essential to ensure that your test results are directly attributable to your new ideas and not the result of another unintended consequences.
Forget long and in-depth product development cycles. Instead, innovate, test, and implement fast.
Be Aware of Your Competitors, but Focus on Your Customers
As you grow loyal customers, your competitors will be watching, innovating, and acting themselves. The first tool of desperate and motivated competitor is often price decreases, a danger in any business or industry.
Think about how to use loyalty programs, special events, unique products, and meaningful rewards to maintain and grow loyalty in the face of competitor activity.
Be aware of what competitors are doing, but put your efforts into really analyzing what your customer wants and develop a competitive offering instead of simplying duplicating what they are doing.
Businesses that care about customer loyalty respect their competitors, but develop products and services that meet the needs of their specific customers.