Your Most Important Business Success Metric? Customer Loyalty!

Marketers are besieged with metrics. ROI, website visits, website return visits, shopping cart abandonment rates, and average customer spend are all important and well-used metrics to evaluate the success of a business. Everyone agrees metrics are vitally important. What no one can agree on is which metrics are the most important. Until now.

The most important marketing metric is customer loyalty. Customer loyalty is the ongoing instance of a customer who continues to repurchase from a business when they have competitor and substitute offers available.

For example, every morning you go to the same coffee shop, which is slightly out of your way when there are several other coffee shops closer to your route. En route, you bypass a tea shop and a doughnut shop, so you can get your same small coffee day after day. On most Fridays, you treat yourself to a scone.

On an individual customer basis, the one customer who buys one item a day is practically invisible. Yet, this collection of loyal customers who visit a business every day and make a purchase every time, are the most valuable to a business. Loyal customers are what sustains a business, allows it to grow, to outlast competitors, and to innovate and create new products and services. Customer loyalty works well in B2C, B2B, and in every industry. Customer loyalty is your number-one success metric to maintain and grow.

How many loyal customers do you have?

The first step in growing customer loyalty is to determine what percentage of your customers and what percentage of your revenue come from loyal customers. You may be able to use data from existing loyalty programs, credit card information, or other data sources to determine the number of loyal customers. Most important, your organization must agree on a definition of a loyal customer. Loyalty could be weekly for a restaurant or gas station, or once every three months for an auto dealer's service department. The central issue is to have a proven definition of what loyalty is and have every employee know it.

Use a Net Promoter Score

What keeps your loyal customers loyal? When it comes to evaluating customer loyalty and helping a business grow loyal customers, the Net Promoter Score (NPS) is one of the simplest and most telling tools. The NPS is based on the question, "Would you recommend this product or service?" The customer can then respond based on a low score (number = 0) or a high score (number = 10) scale. Only a 9 or a 10 makes a customer a Promoter. Customers who have scores from 0 to 6 are Detractors, most likely un-loyal customers. When you subtract the Detractors from the Promoters, you have a Net Promoter Score. NPS surveys should also tell you what Promoters like and what Detractors want to see improved.

Innovate and test to meet emerging loyal customer needs

Business results, survey results, industry trends, customer focus groups, and employee ideas are the data set for creating and innovating ideas to add loyal customers and to maintain existing ones. Once you have ideas, start performing small tests to see how your ideas grow loyal customers. Vital to these tests is to have a separate group for evaluation who are not involved in the pilot. These "control groups" are essential to ensure that your test results are directly attributable to your new ideas, and not the result of other, unintended consequences. Forget long and in-depth product development cycles. Instead, innovate, test, and implement quickly.

Watch and respect your competitors

As you grow loyal customers, your competitors will be watching, innovating, and acting themselves. The first tool of a desperate and motivated competitor often is price decreases, a danger in any business or industry. Think about how to use loyalty programs, special events, unique products, and meaningful rewards to maintain and grow loyalty in the face of competitor activity. When you respect a competitor, you analyze, anticipate, and design around their offering, instead of dismissing them with a wave of the hand. Businesses that care about customer loyalty respect their competitors.

Adopt a leadership style of humility and a passion for customer experience

This is the most important aspect of growing customer loyalty. A leadership style of humility shows that you never take customer loyalty for granted. A passion for customer experience recognizes that customer loyalty is, and always will be, an ongoing initiative and never completed. When leadership humility and a passion for customer experience come together, you get a team that is driven, motivated, and passionate about meeting customer and business needs together.

In conclusion

Customer loyalty is how businesses succeed over the long term. A business and customer relationship based on humility, respect, innovation, great customer experience, and solid products and services is great for both the business and the customer. Finally, and most important to remember, growing customer loyalty is a journey and never a destination, so your business's passion to perform and to improve must be nonstop.

 Chad Storlie is an adjunct professor of marketing at the University of Minnesota Carlson School of Management and a mid-level marketing executive. He is a retired Lieutenant Colonel in the U.S. Army Special Forces (Green Berets), an Iraq combat veteran, and a widely published author. Contact him at chad.storlie@combattocorporate.com or 402-960-1350.