In the globalized world of today, competition is cut-throat. Businesses are popping up everywhere, and customers have a variety of options available. In such a world, the experience becomes a huge differentiator. A good experience makes for long-term happy customers. A good understanding of your customers is the key to delivering such an experience. That’s where customer loyalty analytics can be very useful. With the help of big data, you can learn about your buyers and tailor an experience that matches their expectations. Customer loyalty analytics can also be useful in developing customer-centric marketing strategies that give a higher return on investment.
What is Customer Loyalty?
When a customer is loyal to a company, they are more likely to repeat their business. They are also more likely to recommend products and services to others. Unfortunately, loyalty isn’t always easy to measure. Customer loyalty is a combination of factors that may show how loyal a customer is. This is different from a customer loyalty program. A customer loyalty program presents customers with a set of actions they can carry-out to obtain incentives. Customers do not need to be part of a loyalty program to be loyal to a brand.
The reason any individual customer is loyal to a company may differ from business to business. It will likely differ between customers as well. Customers feel connected to brands that make them feel good and fulfill their needs. They may also feel seen by a brand that recognizes their personal identity. Creating a good picture of why customers are loyal lies in collecting the right data.
Customer loyalty is about much more than the numbers. Quantitative data can be useful so businesses can learn what their customers are doing. If the focus is only on the numbers, you are missing data on why customers are doing things. Qualitative information may hint towards the reason a customer does something, but they are risky for response bias. This is because customers share data on their ideals, rather than their true behavior. The best approach is a combination of both. A good analysis of customer loyalty will collect data from a variety of sources. The good news is that your business likely already has some of these analytics to work with.
How to Measure Customer Loyalty
Customer Loyalty Analytics seek to answer key questions about customer behavior that may reveal how loyal they are to a brand. The data may come from different sources, but the driving goal is to learn why customers are loyal. Here are some good questions for data collection that relate to loyalty behaviors:
- Do customers continue to buy a product or service from the same brand?
- Do customers buy other products or services from the brand?
- Does the customer have any other brand options to choose from?
- Do customers accept errors more willingly? (Also, What errors do customers regularly encounter?)
- Are customers leaving positive reviews? (And, what do the reviews say?)
- If customers are leaving negative feedback, what can be improved?
The answers to these questions exist in a variety of places. Finding the data will depend on how your company conducts business. Many companies already have some form of quantitative data. It is also likely you have qualitative information from surveys and user testing. This data can be informative alone but can also present bias. Thus, companies should focus on data that are directly related to loyalty analytics. Some of the most common sources businesses use to measure customer loyalty are customer retention rate, qualitative surveys, online reviews and social media, customer segmentation data, and engagement rate.
Customer Retention Rate
Customer retention rate is how long a customer stays with a company. This can be calculated by comparing how many customers you have gained or lost over a period of time. The length of time to analyze will differ from business to business. Most businesses will assess their customer retention monthly, or even weekly. Analyzing customer retention is important to creating the image of customer loyalty.
It is important to remember that a good rate of retention does not always mean that those customers are loyal. There could be many other reasons why they have not made other choices. Sometimes, customers are loyal to a brand because it reflects their current situation. For example, your product may be the only affordable option to some customers. These customers are at risk for attrition, or churn, which means they will no longer choose to be your customer when they can afford other options.
Surveys are a great way to get customer feedback on your products and services. With surveys, you can ask customers the exact questions you want answers to. It is important to remember that customers who respond to surveys are usually already motivated to give feedback. This can influence the results into the extreme positive or negative. For this reason, it is always a good idea to use survey data along with other data points. This will allow for a clearer image of true customer behavior and needs.
Online Reviews and Social Media
Online reviews and social media posts are great resources. They allow business to gather feedback from their customers. Customers may leave feedback on why they chose a different option, or what it is that they love about a brand. You can also choose to use targeted advertisements. Often, paid advertisements provide you with some sort of analytic feedback. This is to show how well your advertisement is doing. This data is also useful to learn more about who your customers are.
Customer Segmentation Data
Segmenting customers into sub-groups can be useful. This is especially true when you have many different types of customers. Deciding how to segment your customers can be tricky, but this is where data from social media can come in handy. Once you have decided on how you are going to segment your customer pools, you can assess their needs better.
Engagement refers to how often your customers are using what you are providing. If you have a current customer loyalty program, how often are customer taking advantage of it? Which pages do customers use most on your website? If you have a low engagement rate, it could mean that your resources are not what customers want. It may also be that that the actions to receive any loyalty incentives are too difficult.
Loyal Customers are Good for Business
Loyal customers are good for business because they want your business to succeed. They are more likely to make repeat purchases. They will do this without the need of any extra marketing. Loyal customers will buy more from a business over time, which can grow your bottom-line. Loyal customers are also more likely to try new products from brands they already trust. Loyal customers also help you to save money on the cost of finding and keeping new customers.
Loyal customers are likely to increase your Return on Investment (ROI), especially when it comes to marketing. A return on investment refers to how much profit comes back when money is spent. For customer loyalty, money is spent on prospecting new customers and keeping current customers. When customers are loyal, they happily do the word of mouth marketing for you. This means you are not spending money to find new customers.
This is also important because this type of marketing is organic and can only come from customers. A recommendation from a customer is often more meaningful than marketing that comes from a brand. With many options available, people like to know that a product or service will be worth the money. Friends and family do not have appear to have a money-making agenda like the brand may have.
There is so much technology and data available that relates to customers. It is now very cost-efficient to learn about your customers and doing so will be beneficial for everyone. Many businesses already have access to the type of information they need to reassess their business from their customers’ perspective. This is the goal of a customer-centric approach.
Customer-centric marketing is when a company shifts their focus to fulfilling customer needs. The goal is to give the customer the best experience possible at all points of the interaction. Often, companies have an idea of how they want their business to run, but their customers have a different expectation. Brands can use customer loyalty analytics to develop customer-centric marketing. This approach can help businesses to learn what their customers desire. Knowing what your customers want makes it easy for you to provide it. Marketing for customer needs does take some extra time for research. Even if you have the information available, you may not be asking the right questions. Customer-centric marketing and customer loyalty are similar concepts, because they both focus on the customer first. The key is to learn about the customer from their perspective, as well as observing their behavior.
Improving customer loyalty is essential to building successful customer relationships. Loyal customers are motivated to repeat their business and advocate for your brand. Understanding how to measure and analyze people is essential to improving customer relationships. Customers appreciate when companies take the time to learn about their needs. Learning about your customers will in turn make them loyal advocates for your brand.
If you need help mining and analyzing your business data to create customer loyalty analytics, contact ironFocus to see how we might help.