Consider your customer base the way a farmer might consider an orchard. Like you, the farmer wants the orchard to grow, thrive, and bear fruit year on year. An approach of ‘benign neglect’ will only get the farmer so far and if things go wrong, they tend to go wrong very quickly. And recovery is a costly and time-consuming exercise.
If you lose a customer, it is like a farmer losing a tree. It takes years to replace and recover, and research has consistently shown that attracting a new customer is far more expensive than retaining an existing one.
A well looked-after customer is a loyal customer. Loyal customers are not just repeat purchasers (retention); they are more likely to try additional products (upselling) and very likely to recommend you to others (promotion) – and thus grow your … orchard.
Just like the farmer, you need the right tools to produce the best results.
When measuring customer loyalty, a CLI typically provides insight into how likely your customers are to:
Respondents are asked to rank their responses from 0 (Not likely at all) to 10 (Absolutely). CLI is calculated as the average of these three scores.
These three questions should be presented to customers on an ongoing basis (online survey, courtesy calls, etc.).
Programs designed by Achievement Awards Group fully automate this feedback loop, simplifying matters by crunching the numbers on the back end and providing you with actionable insights upfront.
After a campaign ends, its effectiveness should always be evaluated for efficacy.
For instance, the campaign may have driven short term sales but has failed to foster repeat engagement. Or promotions may have attracted bargain-hunters and deal-seekers instead of genuinely loyal customers.
Monitoring the CLI post campaign will help to distinguish transactional boosts from long-term loyalty gains. If CLI remains static or drops, it’s an indicator that future campaigns need to focus more on emotional connection and long-term value.
Monitoring CLI will immediately reveal if there is a drop in customer retention metrics. Retention and loyalty are directly linked, and a falling retention rate often signifies decreased customer satisfaction and engagement.
This may be due to stronger competition, better perceived rival offers, lack of personalisation, or customer fatigue.
A CLI serves as an early warning system. A declining CLI may precede a drop in retention, allowing pre-emptive action. Enhancing personalisation or improving the customer experience can be more effectively targeted when CLI data points are available.
These reviews check that loyalty trends align with business goals, but sales metrics may hide declining loyalty or a misaligned program design.
In such instances, incorporating CLI into strategic reviews ensures decisions are not made on revenue alone. Trends in CLI provide a fuller picture of customer sentiment and brand attachment, enabling better-aligned strategic shifts.
A CLI analysis will help to establish a benchmark and assess the baseline sentiment – without which it will not be possible to measure improvement. Worse, new programs may inadvertently alienate existing loyal customers simply because you did not ‘read the room’.
Establishing a pre-launch CLI helps measure success more objectively. It can guide early interventions in programme design if pilot data suggests loyalty isn’t increasing as intended.
When disaster strikes, damage to brand trust may linger longer than sales metrics suggest and customer churn may not be immediate but instead reflect a long-term disillusionment.
Tracking CLI post-crisis can unearth hidden damage and help shape recovery strategies. If CLI fails to rebound, it may indicate a need for trust-building campaigns or compensation initiatives.
After a major rival launches or modifies their loyalty program customers may defect. become less engaged, and the perceived value of your program may drop,
CLI data can identify subtle shifts in loyalty sentiment that standard retention or sales figures miss. Prompt insights enable you to adapt offers or enhance customer experience in response.
When expanding or targeting new demographics, it’s key to know if current loyalty drivers apply, as these can vary widely by region or group. Misalignment leads to poor adoption.
Early monitoring allows for testing the loyalty proposition’s resonance with new customers. Adjustments can be made to align the emotional and practical benefits with the expectations of new segments.
A high CLI score correlates with improvements in retention, revenue, and performance. Low or declining scores indicate potentially flawed customer loyalty strategies.
Depending on the industry, a modest 5% increase in customer retention can boost profits by 25% to 95%. Loyal customers are also reported to spend 76% more on average than new customers, according to Bain & Company. Additionally, loyal customers tend to be less sensitive to price fluctuations.
Customers in loyalty programs often spend 12-18% more incremental revenue per year, with some programs yielding an 8.5x return on investment in just 90 days, according to Customer Loyalty Benchmarks: Key Metrics and Insights for 2024
Loyal customers cost less to service, complain less, generate favourable word of mouth and often ‘upgrade’ or expand their purchasing habits. According to Brand Keys, “a loyalty increase of 7% can boost lifetime profits per customer by as much as 85%, and a loyalty increase of 3% can correlate to a 10% cost reduction.”
And so we see that monitoring your customer loyalty measurements is like tending an orchard: without regular care, even the healthiest trees (your loyal customers) can wither, and yields (profits) can decline unnoticed.
Just as a farmer reads the seasons and soil to forecast harvests, businesses can use CLI or equivalent loyalty program analytics to anticipate customer needs, assess campaign efficacy, and maximise return on investment through smarter retention strategies.
Let’s talk about how Achievement Awards Group can help you design, implement, and measure effective loyalty programs.
Get in touch with a loyalty expert today.
