We are all missing a simple metric for standardised measuring of customer loyalty. It’s so important to track the evolvement before and after the introduction of new or improved loyalty scheme. Firms also need to benchmark themselves among peers. Net Loyalty Score is the indicator.
We have struggled to measure customer loyalty in retail for many years. Of course we know how to measure it precisely with analysis of transactional behaviour of long term target versus control groups combined with statistically significant surveys. That’s the right approach but quite demanding thus useless for a simple benchmark score.
Do we need another benchmark?
Inspired by wide adoption of NPS we created Net Loyalty Score. The goal is straightforward – set an widely adopted industry standard. Having a chance to deeply measure customer loyalty in various companies we’ve come up with a conclusion, people are able to recommend a brand but never repeat the purchase. So we need to ask them in a different way.
Anybody can measure Net Loyalty Score today
The key is to ask active customers 3 questions, make the average and deduct all Cold from the Loyal ones. NLS works like a thermometer, it’s absolutely simple to present and easy to understand. Every healthy company needs more engaged customers than those of indifferent.
We’ve tested NLS in a number of companies and we’ve come to the knowledge that pure loyalty starts at 50 points. These customers are not only verbally loyal but also their Share of Wallet is outstanding. Everything between 20 and 50 points is quite a good result. All figures below 0 signaling defunct loyalty, and should wake you up!
How to measure customer loyalty?
Methodology of NLS is plain and we are sharing it with anybody interested. Send your active customers these 3 questions:
- Do you feel our COMPANY appreciates your loyalty?
- Will our COMPANY be your first choice at the next purchase?
- I am a loyal customer of the COMPANY.
Every question should be offered with a scale of 10 stars, where 10 stands for “Very likely”. Count an average of these 3 questions at each respondent. Then just add the percentage of Loyal and Cold customers by average rating. Loyal are customers with average rating ≧8, Cold with rating <8. NLS equals the difference between Loyal and Cold.
Let’s create industry-wide loyalty benchmark
Successfully done the measurement of NLS? Send us the result, we will create a benchmark of every industry and share it with you, so you can compare with peers.
You can reach me at email@example.com
„Only those who give back, can get hearts and loyalty of their customers.“