The Metrics to Measure Customer Loyalty Online

There are a couple of retention metrics that will give you the perfect starting point for measuring customer loyalty. 

1. Customer Lifetime Value (CLV)

CLV measures the value each customer will bring to your store over their entire life. Therefore, CLV is a great way to assess your store’s overall health and project future success.

The equation of Customer Lifetime Value

Customer Lifetime Value (CLV) = Customer Value (CV) x Store's Average Lifespan (T)

As you can see from the equation above, customer lifetime value is impacted heavily by how often a customer shops with your store and how long they remain a customer. This makes it a great measure of customer loyalty because it can show you if your customers are becoming more loyal over time. With this metric in hand, you’ll have a benchmark to measure if your loyalty program will ultimately increase customer loyalty and engagement. 

Remember: if a customer is purchasing often and for a long time, they can be classified as loyal!

Read more: How to Calculate Customer Lifetime Value ?

2. Repeat Purchase Rate (RPR)

Your repeat customer rate is the percentage of your customer base that has made a repeat purchase from you.

The equation of Repeat Purchase Rate

Repeat Purchase Rate (RPR) = Number of Customers Who Bought More Than One (365 Days) / Total Number of Customers (365 Days)

Someone who makes repeat purchases doesn’t mean they’re a loyal customer. While that may be true, however, you need to remember that if you can get a shopper to purchase three times, they are 54% more likely to make another purchase. After all, it is much easier to create loyalty in a repeat customer!

Knowing your repeat purchase rate is extremely valuable because repeat customers are extremely profitable. Having an idea of your RPR allows you to understand what turns certain customers into repeat purchasers and apply that knowledge to future campaigns for new customers.

3. Net Promoter Score

A simple way to measure customer loyalty is with an NPS (net promoter score) survey.

Net Promoter Score (NPS) = Percentage of Promoters - Percentage of Detractors 

NPS survey will ask your customers how likely they are to recommend your brand to their friends on a scale from 1-10. Anyone answering with a 9 or 10 are considered promoters, while those responding with 7 or 8 are passive. Customers who indicate 6 and under are known as detractors.

You can calculate your final NPS score by subtracting the number of detractors from the number of promoters, giving you an idea of how many customers would be willing to positively recommend your store. Since a loyal customer is more likely to refer you to their friends, this type of survey is a really good indicator of how loyal your customer base is.

How to Measure Customer Loyalty When You Have a Loyalty Program ?

The three metrics we’ve already talked about will work regardless of whether you have a loyalty program or not. However, if you do have a loyalty program, you can have even more metrics used to measure customer loyalty!

1. Redemption Rate 

Your redemption rate is the percentage of points that you issue that are actually redeemed for rewards.

The equation of Redemption Rate

Redemption Rate (RR) = Number of Coupons Redeemed / Number of Coupons Issued

An effective rewards program drives customer loyalty by establishing a strong relationship between the positive emotions customers feels when receiving a reward and the points they used to get that reward. Therefore, a high redemption rate can reveal just how loyal your program members are.

A redemption rate under 20% is usually an indicator that your rewards program isn’t performing well, so keeping an eye on it is key to your program’s long-term success.

2. Active Engagement Rate

Active engagement rate goes hand-in-hand with your redemption rate, as it gives you a better idea of which percentage of your customers are engaging with your program on a regular basis. In this case, engagement is measured by any customer who earns or spends points in a determined time period.

The equation of Active Engagement Rate

Active Engagement Rate (AER) = Number of Customers Who Engaged / Total Number of Customers

By looking at how many customers are actually engaging with your program (through points earned and redeemed) you can more critically assess what you can do to increase those numbers.

3. Participation Rate

You can calculate this metric by dividing your total number of customers by the number of program members you currently have.

The equation of Participation Rate

Participation Rate (PR) = Number of Program Members / Total Number of Customers

It gives you a better sense of how willing your customers are to buy in and participate in what your program is offering, giving you more actionable numbers to track your program’s growth and inform its direction in the future.

Read more: How Often Should You Calculate Your Metrics ?

Edited by: 浪子

Bibliography

Alex Mceachern. (2018). The Metrics You Need to Measure Customer Loyalty Online. Retrieved from 
https://blog.smile.io/measure-customer-loyalty-online