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Measuring Customer Loyalty
 
  Customer loyalty has been proclaimed by some to be the ultimate goal of marketing. In marketing, customer loyalty consists of a consumer's commitment to repurchase the brand and can be demonstrated by repeated buying of a product or service or other positive behaviors such as word of mouth advocacy. True customer loyalty implies that the consumer is willing, at least on occasion, to put aside their own desires in the interest of the brand.

Customer loyalty is more than simple repurchasing, however. Customers may repurchase a brand due to situational constraints, a lack of viable alternatives, or out of convenience. Such loyalty is referred to as "spurious loyalty". True customer loyalty exists when customers have a high relative attitude toward the brand which is then exhibited through repurchase behavior. This type of loyalty can be a great asset to the firm: customers are willing to pay higher prices, they may cost less to serve, and can bring new customers to the firm. For example, if Joe has customer loyalty to Company A he will purchase Company A's products even if Company B's are cheaper and/or of a higher quality.

A most significant contemporary example of customer loyalty is the fervent devotion of many Mac users to the Apple Company and its products.

Now the first question that always arises is "How do I effectively measure my customerís satisfaction and loyalty?"

There is one question that provides the best predictor of customer loyalty and for the vast majority of business: 

How likely is it that you would recommend (Product X or Company X) to a friend or colleague?

Ask this question and have your customers rate the answer on a 0-to-10 point rating scale with "0" representing the extreme negative and "10" representing the extreme positive end.

Then divided the customers into three categories based on their answer to the Question.

  • Promoters (those who answer 9 or 10) are loyal enthusiasts who keep buying from a company and urge their friends to do the same.

  • Passives (those who answer 7 or 8) are satisfied but unenthusiastic customers who can be easily wooed by the competition.

  • Detractors (those who answer 0 through 6) are unhappy customers trapped in a bad relationship.

Now the analysis is pretty simple. If you have 70% to 80% of Promoters then your company's has an  active extended "WOM" (Word-of-Mouth) marketing team working for you, providing enthusiastic referrals.

 
     
   
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