The CX Loyalty Metrics that Actually Matter

By Thomas Berthelsen | October 25, 2019

A key challenge of implementing a CX program is demonstrating its value up and down the organization. To do that, you have to show that it delivers results. There are no shortage of metrics available, but that’s part of the challenge: big data doesn’t always mean big insights. How do you identify the metrics that really matter?

While what matters will differ from company to company and even unit to unit, there are some basic principles that apply. You need to have a 360 degree view of the customer, one that includes both observed and stated loyalty as well as behavioral and emotional characteristics. You want to identify metrics that clearly deliver business value and, ultimately, drive an increase in revenues and a growing customer base.

As a first step, you have to define the most effective KPIs. To do this, you need to understand and define how loyalty drives your business and which types of loyalty are most important. There are stated and observed emotional metrics, and stated and observed behavioral metrics. Each has its value, depending on what you want to do and the audience, but it is generally agreed that from a customer point of view emotional loyalty is more enduring than behavioral loyalty and observed behavior more insightful than stated behavior. Still, each has something to add to the overall picture.

Keeping in mind that there is no real “magic bullet,” what tools are available to help you capture the metrics that actually matter? We have identified six.

The Net Promoter Score (NPS) has gained huge traction in the last ten years, with the consulting firm Bain and others claiming it’s the only data point needed to predict consumer behavior. This seems to us overly optimistic. The metric divides customers into three categories: detractors, passives, and promoters. The score is determined by subtracting the percentage of detractors from the percentage of promoters. It’s an important number and can be very effective in change management because its easy to understand.

Repurchase Intent is another good metric. This seeks to measure loyalty by tracking a customer’s intent to stay a customer. It’s especially powerful for subscription-based services as it implicitly incorporates barriers to switching. Cross Selling is a good number, too. It captures existing customers intent to buy more products or services from a company, an important indication of loyalty and a powerful tool for growing the business.

Price Tolerance is another way to measure just how loyal your customers are. Are they willing to pay more for your product? How much more? The preference for your products versus your competitors at various price points can reveal a lot about their loyalty. The Customer Loyalty Index (CLI) is a standardized measure designed to track loyalty over time. It incorporates the values of NPS, repurchase intent, and cross selling. While this would seem to be an interesting metric, in practice it’s often hard to understand and its value difficult to communicate. Most users will find its constituent metrics more valuable as standalone tools.

Finally, there is Share of Wallet, a metric that measures how consumers divide their spending among various brands in a specific category. This tool works best for fast moving consumer brands and can offer insights into relative strength and market share. It’s less helpful for modelling purposes and, like CLI, can be hard to communicate.

Why loyalty matters

Few businesses can survive for long without customer loyalty. No one can stay ahead of the competition all the time, and loyalty buys you breathing space, it allows you to experiment with new products and services and to make the occasional mistake. CX is designed to provide insight into how to develop and grow that kind of loyalty.

But simply implementing a program is not enough: you have to prove its value every day. To do that, you have to measure, and to make your measurements effective, you have to have the right metrics. Those metrics, in turn, must be selected for their ability to generate business value.

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