Feature
The Gist
- Evolving strategies. Marketers are focusing on personalization and engagement to achieve customer loyalty, rather than altering the metrics used.
- Data challenges. Good data is increasingly difficult to find, especially for brick-and-mortar retailers, due to privacy regulations and shifting consumer behavior.
- Brand meaning. A composite metric called "brand meaning" may be a better loyalty indicator, as it incorporates emotional connection and value enablement.
When it comes to measuring customer loyalty in 2023, how it’s done and metrics used aren’t going to be that much different than those used in 2022, 2021, or the many years that preceded those. What is changing are how marketers are achieving loyalty, not how it’s measured.
Marketing is awash in metrics: Net Promoter Score (NPS), customer lifetime value (CLTV), repeat purchase rate (RPR), retention rate, churn, customer satisfaction score (CSAT), customer acquisition cost (CAC) — all of these (and many, many more) are good indicators of customer behavior. But taking each in isolation only provides a snapshot of what makes your customer tick.
“There isn't just a simple answer,” said Leala Crawford, managing director in Deloitte’s digital customer & marketing practice. “Customer loyalty means something different for each and every brand. How you should measure it should be different based on your business objectives. It's certainly not one size fits all.”
Good Customer Data Getting Harder to Find
The challenges for many firms, particularly for bricks-and-mortar retailers, is good data is getting increasingly difficult to find, said Nick Mangiapane, CMO and head of partnerships at Commerce Signals, a customer engagement measurement company that uses credit card data to track and understand consumer behaviors.
Cookies are going away at the same time data privacy regulations are starting to bite into how personal information is used. The location data traditionally used by retailers to track the frequency of customer visits and where they go when they are in-store, is getting harder to come by ever since Apple users started turning off location tracking. And more shopping is continuing to move online since the Covid-19 pandemic. This is good news for ecommerce companies, but online sales only account for about 10% of a traditional retailer’s overall revenues.
“Unless they're part of a loyalty program, the brick-and-mortar retailers don't even know who their customers are in a lot of cases,” said Mangiapane.
Related Article: Building a Next-Level Customer Loyalty Program
Start Customer Loyalty With the End in Mind
Because defining loyalty is somewhat amorphous and subjective, what's more important is starting with your goal and working backward to uncover the metrics you need to figure out if what you are doing is working. This is why Crawford is particularly focused on personalization as the way to keep customers coming back.
“Imagine how much more impactful [your marketing] could be if your experience was personalized,” she said. “If the restaurant ... recognized your birthdays, anniversaries, other key milestones and solicited a special table and a special menu on those occasions. That's really where brands more broadly across industries start to see some of these quantifiable business results in retention, in span, and lifetime value; by personalizing that overall journey.”
Many companies think they already do this well, but the reality is they don't, said Crawford. According to Deloitte Digital’s study, Personalizing Growth, brands said they personalize an average of 56% of customer experiences, but only 38% of consumers agree. More than 50% of consumers said personalization tends to feel “off-target.” Even so, the rewards are worth pursuing considering that 69% of consumers said they would be more likely to purchase from brands that get personalization right.
If properly used with the right data the next generation of AI, generative AI, should allow companies to counter this negative trend by bringing together a diverse set of data as well as customers’ contact preferences to create an almost unlimited amount of customized content.
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“It's bringing it all together, which is often the hardest part,” said Crawford. “But also the rise of machine learning, data science, generative AI ... makes that so much more scalable, and sustainable. It’s not like you classify [customers] one-and-done ... but dynamically evaluating them based on behaviors. And that's just not sustainable when you're doing it in a manual fashion.”
Engagement Is the New Black
“Engagement isn’t a new loyalty measure, but it’s one that marketers should be putting at the forefront,” said Dani Mariano, president at Razorfish. “Not as a way to get a pulse on program health, but rather a measure of authentic loyalty.”
In the past, repurchase rate or ROI metrics have been the priorities, she said, but in 2023, engagement works better because it can predict future behavior which, in turn, helps with forecasting and setting strategy.
“Engagement also has a direct and proportionate correlation to revenue generated by a customer relationship; as engagement grows, revenue grows,” she said.
Brand Meaning vs. NPS
David Mayer, a senior partner at Lippincott, likes to use a composite metric made up of the degree to which a brand establishes an emotional connection with its customers and how well the brand enables customers to do something they otherwise couldn’t. Lippincott calls this hybrid metric “brand meaning.”
While NPS is often cited as the Holy Grail of loyalty metrics, in 2022 Lippincott set out to understand what was really driving brand loyalty. They evaluated more than 400 brands across 73 metrics and found that NPS was only one part of the loyalty equation.
“When we averaged these metrics together, it seemed to uncover the loyalty Holy Grail: A brand’s meaning score was 90% correlated with loyalty,” he said.
