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How Loyal Are Your Customers?

How loyal are your customers? Let’s be honest – you have fans of what you do, but are they really going to recommend you to other people? Will they stand by through thick and thin, or will they run screaming out the door at the first thing that sets them off?

These are questions Jeff Sauro thinks about a lot. Sauro, a Six Sigma-trained statistical analyst and pioneer in quantifying the customer experience, says that just having customers that like you is not enough. The founding principal of quantitative research firm, MeasuringU, believes you must be able to measure your customers’ loyalty, so that you can use the data to predict the health of your company.

In his book, “Customer Analytics For Dummies,” Sauro uses real-world customer analytics from companies such as Wikipedia, PayPal and Wal-Mart to explain how to measure each stage of your customers’ journey, and then use the right analytics to understand their behavior and make key business decisions.

We sat down with him to get his insights on the true benefits of both the “promoters” and “haters” of your brand:

Why is customer loyalty such an important piece to the puzzle?

Too many companies spend a ton of time and effort getting a customer to make a purchase, and then just hope for the best. The problem with that approach is that operating blind in terms of loyalty makes it likely you’ll make ill-advised decisions that come back to bite you. When you measure customer loyalty, you’ll be able to not only make the most of that loyalty, but also make better strategic decisions.

What’s the best metric for determining customer loyalty?

While it depends on the industry, for most organizations, measuring their customers’ intent to repurchase a product or service, and their willingness to recommend their company to others provide a solid base. The first way to gauge this is to compute the percentage of customers repurchasing, reusing or returning to what you do. This data can be collected from past sales or by surveying customers about past or future intent. Collecting repurchase rates and building a repurchase matrix can take years, especially for products that aren’t purchased frequently. To speed up the process and gauge customer loyalty before they defect, survey your customers and ask their intent to repurchase. But keep the surveys short.

What is the key thing to look for?

Find out what your customers like most about what you do. A key driver analysis tells you which features or aspects of what you do have the largest statistical impact on customer loyalty. It can be conducted for all customers, but also for each of your different customer segments. In the end, you’ll be able to identify your company’s most popular or unpopular features, and then have your customers rate that experience.

What do you need to know about your company’s promoters?

Make sure you’re getting your money’s worth from them. Promoters are generally a positive asset. But before going all-out to attract as many as possible, take time to understand how valuable they are, both in terms of revenue and in how many new customers they bring you.

The best way to do this is to tie actual sales to survey responses. This allows you to see how  many promoters are actually recommending someone. You shouldn’t be reducing your prices to turn customers into promoters. That’s not financially sustainable.

What do you with the “haters”?

Too often, the ones least satisfied with their experience have the biggest impact on referrals.

Research shows that customers dissatisfied with a product or service experience are more likely to be vocal. They tell more people about bad experiences than satisfied customers do. Once you’ve identified your detractors, you’ll have some decisions to make. If you want to win them over, you’ll have to find out what makes them happy and loyal. You’ll have to decide whether it’s worth it to spend the resources to make those changes, or whether it’s more cost-efficient to go after new customers who will be happy with what you do.

Is it possible for everybody to like what you do?

Customer loyalty isn’t black and white. When you can use analytics to dig into why people buy from you, how often they do or don’t recommend you to others, and so on, it’s beneficial information. You can make better decisions, provide better service and make adjustments to create more loyal customers. If more than 10 percent of your company’s revenue comes from detractors, there are two things you can probably do. Stop selling to them or attempt to fix the problems that are making them unhappy. Making the adjustments to price, quality and features to meet their expectations can be a huge challenge, but that’s usually what separates the bestin-class companies from the rest.

 

 

 

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