Customer loyalty is the leading indicator of business growth. As such, companies track objective measures of customer loyalty to help them monitor the health of the customer relationship. Some objective customer loyalty metrics are:
- Customer retention/defection rates
- New customer growth
- Average revenue per user (ARPU)
Despite the existence of these (and other) objective metrics of customer loyalty, customer relationship surveys remain a frequently used way to assess customer loyalty. Measures of customer loyalty typically take the form of questions that ask the customer to indicate his or her likelihood of engaging in specific types of behaviors, those deemed important to the company/brand. For each objective loyalty metric above, we have a corresponding customer loyalty question:
- How likely are you to switch providers in the next 12 months?
- How likely are you to recommend <Company> to your friends/colleagues?
- How likely are you to buy different/additional products from <Company>?
Here are three reasons why companies use customer surveys to measure customer loyalty rather than solely relying on objective metrics of customer loyalty:
- Customer surveys allow companies to quickly and easily gauge levels of customer loyalty. Companies may not have easy access to objective customer loyalty data or may simply not even gather such data.
- Results from customer surveys can be more easily used to change organizational business process. Customer surveys commonly include questions about customer loyalty as well as the customer experience (e.g., product, service, support). Used jointly, these questions can be used (e.g., driver analysis, segmentation analysis) to identify reasons why customers are loyal or disloyal.
- Customer surveys provide a foward look into customer loyalty. Because objective loyalty metrics are tracked after the loyalty behavior has occurred (typically at the end of each quarter), objective customer loyalty metrics provide a backwards look into customer loyalty levels (e.g., defection rates, repurchase rates). Customer surveys, however, allow companies to examine customer loyalty in real-time. Surveys solicit questions regarding expected levels of loyalty-related behavior and provide opportunities for companies to “look into the future” regarding customer loyalty.
Customer loyalty survey questions have been shown to be predictive of their corresponding business metric. I found that customers' intentions to engage in particular behaviors are predictive of corresponding business metrics (Read The True Test of Loyalty and Lessons in Loyalty for details). Selecting the right customer loyalty questions for your survey requires careful thought about your business and customers; use loyalty questions that address your specific business growth strategy (through new or existing customers) that address different ways your customers are able to show their loyalty toward your company/brand.