How to measure brand loyalty

In February 2020, the forecasted growth for ecommerce was 2.8%, and by June, the ecommerce market is expected to grow by 14% to reach $4.184 trillion. With so many brands fighting for their time in the spotlight, brand loyalty is crucial to shine and secure long-term growth.

With it being so important, it’s not surprising that you’re probably wondering, “Well, how can I make sure the effort I put into brand loyalty is working?”. You could then be thinking, “how is brand loyalty measured?” and “what are solutions to increase brand loyalty?”. 

There’s a common misconception that loyalty can be only tracked by a loyalty program. But there are many other ways to track customer loyalty, whether you have a rewards program or not.

In this blog, we’ll show you how to analyze customer loyalty with and without a loyalty program.

👉 Customer lifetime value

Customer lifetime value shows the value of a customer during the entirety of their business relationship with you – from their very first purchase, right up until their last sale. 

The simplest measurement based on existing data for CLV is:

Through analyzing and tracking your customers’ lifetime value, you can allocate your marketing and sales budget more effectively. Instead of investing in customers who rarely engage with you. Invest in customers who will convert to loyal members that will bring in more revenue.

👉 Repeat purchase rate

Repeat purchase rate indicates the percentage of customers that have shopped more than once at your store.

You may think that a customer who ordered from you only three times might not be considered a loyal customer. But, keep in mind that after the first purchase, the likelihood of a customer making a second purchase is 30%. And, after the second purchase, their likelihood of a third purchase jumps to 50%. By investing in your customers who have higher repeat purchase rates, you will generate more revenue. And, through analyzing your customers’ repeat purchase rate, you can also easily understand which customers to invest in.

Hint: Try retargeting the customers who have higher repeat purchase to motivate them to return to your site and make a purchase.

If you have a loyalty program, you can also implement a tiered loyalty program structure or create promotional campaigns to encourage repeat purchases further.

👉 Net promoter score

Net promoter score is a survey that asks your customers how likely they are to recommend your store to others on a scale of zero to ten. Keep in mind that people are four times more likely to buy when referred by a friend. In other words, referrals help you increase the number of new shoppers whilst keeping your acquisition costs low. 

Here’s a bit more on how an NPS survey works.

Customers who indicate:

• 6 and below are the detractors, which means that they are less likely to recommend your store
• 7 or 8 are the passive ones, which means that they are willing to recommend your store
• 9 or 10 are your promoters meaning they’re your loyal advocates and they will actively recommend your store to their friends or family members

Then you just need to apply the formula below to see your overall net promoter score.

Through the data you gather from your NPS survey, you can easily identify your at-risk customers and brand advocates. After segmenting your customers, you can then deliver more targeted communications to boost brand loyalty.

👉 Average order value

Average order value is the average total value of every order placed with a retail business over a defined period of time.

AOV defines your most valuable customers, and helps you spot when customer spend is decreasing.

Since acquiring a new customer costs five times more than retaining an existing one, putting your efforts into existing customers with higher AOV will improve your bottom line.

A loyalty program can play a key role in increasing your AOV. With one, you can encourage members to spend more by enabling them to unlock exclusive rewards or by creating limited-time campaigns. Our research also showed that the average basket size of a loyalty program member that uses a loyalty reward in a purchase is 39% higher than the basket size of a customer that doesn’t.

How to leverage your data to access a comprehensive analysis of brand loyalty?

A loyalty program gives you access to the spend, AOV, and repeat purchase rates of both your program members and guest shoppers. Through having a snapshot of your customers’ value, you can evaluate your loyalty program’s performance and better understand at what point each group is dropping off and failing to return to your store.

Your loyalty program data will also help you to segment your loyal, at-risk, and churned customers. By unlocking insights about your customer segments, you can deliver more personalized experiences and communications for each segment.

• For your loyal customers, offer exclusive rewards or benefits to show how much you value them. For instance, Lively provides early access to sales and new product releases to their loyal customers. This approach has helped them increase customer lifetime value by 39%. 

• For your at-risk customers, send available rewards or points expiry emails to re-engage with them and urge them to return to your site. For example, oVertone sends available reward emails to their customers frequently. Thanks to their dynamic approach, within a month they saw a 20% increase in member spend.

• For your churned customers, surprise and delight them by offering them points on their birthday or by creating a promotional campaign. Keep in mind that your churned customers might need a little bit more encouragement than your at-risk customers. Therefore, surprise is the key element in this approach.

Key takeaways

As you can see, your future success depends on your existing customers. Through analyzing your customer data more effectively, you can easily increase your customer spend, repeat purchase rates, AOV, and referrals which will directly boost your revenue.

To grow your business further and secure long-term sustainability, you need to frequently revisit those formulas, and see where you can make improvements to keep your current customers.

Whether you already have a loyalty program or you’re looking for cost-effective ways to drive revenue, you can visit the LoyaltyLion Academy to become the go-to expert in ecommerce loyalty.