What the heck IS loyalty, anyway?

Is it your Net Promoter Score (NPS)? Customers who say they’re likely to purchase again? Some other survey metric?

Or is it something else.

If you spend as much time reading customer experience (CX) reports as I do, you might pick up on a theme. Many of us actually believe that if a customer says they’ll purchase more from us, then they actually will. So we call that loyalty.

I’m writing this on a flight to Anchorage, so I have plenty of time to catch up on my reading, including two reports from big-name firms that you definitely know. Each of these firms is trying to prove the effectiveness of their proprietary measurements by showing how they predict loyalty. And that’s critical – effective measurements should predict who purchases more. But proving that link it takes a lot of work.

I’ve worked with brands where Net Promoter Score is the best predictor of future sales. And others where it has no relationship. I’ve seen likelihood to repurchase tie to future sales, and seen no link. So I’m definitely interested in measurements that tie to loyalty – especially if they can do that across industries.

But the devil’s in the details.

Let’s look at one example of a big firm that purports to show how their measurement links to loyalty. When you review the details, it turns out that they define “loyalty” by the answer to three survey questions:

* Willingness to consider the company for another purchase
* Likelihood to switch business to a competitor
* Likelihood to recommend to a friend or colleague

This raises two primary questions:

First, if these are the true definition of loyalty, why would I EVER want to use three different questions to predict it? Especially if I have to pay this company a bunch of money to measure it. Wouldn’t I just ask these three questions and be done with it?

Sure, I need to ask driver questions about the relationship, website, product and other questions to determine why people are or are not loyal. But why would I want to use this vendor’s index of questions, when they themselves say that these other three questions equal loyalty?

But the second question is just as provocative: What the heck IS loyalty, anyway?

Here’s a radical perspective:

Loyalty is a behavior, defined as when a customer purchases from us again in the future.

Okay, I said it. Loyalty is what we do, not what we say. That’s what I want to measure. And, more importantly, it’s also what your CFO wants you to measure.

Yes, it’s harder to measure behavior than it is to just ask three questions. You have to track which customers said what, and then track that back to their future buying. You have to wait long enough for them to repurchase or leave you.  You have to factor in refunds and purchase through distribution.  And that takes analysis.

But it’s the best way to prove that your CX program is truly effective.

And isn’t that what we’re really trying to discover, anyway?

2 replies
  1. Avatar
    Laura says:

    Jim – I had this exact same conversation yesterday and absolutely agree that behavior is the key. My quesiton is, when you are in an B2B environment where the purchase cylcles are long, the market is changing rapidly, and the C-Suite is not convinced that CX is the answer. How do you measure behavior quickly (quarter over quarter)?

    Reply
    • Jim Tincher
      Jim Tincher says:

      Laura, great question! The trick is to analyze ove the long term, then measure in the short term.

      The first question – are there historical surveys? Most companies have something. Then look at your attrition rate – what customers have left you over the last (say) two years. Then compare the two. If your survey does any kind of a job of predicting performance, you should see that prior to leaving you, that company’s members had a drop in responses.

      For one B2B firm we looked at, the gap was about a year. It takes time for the impact of a poor CX to be felt.

      If you don’t have any surveys, start with a win/loss study, which is less expensive and directly actionable for executives. An effective win/loss study will get executives wanting to make change. Use that desire by showing them that in addition to fixing these issues, you can also monitor for future attrition before it happens. Then turn the themes into the framework for your measurement program. This will address their desire to take action.

      Hope that helps – best of luck!

      Reply

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