Customer Loyalty Market Research

A loyal customer is a satisfied customer. But a satisfied customer may not be loyal.

Say your company has done a good job of producing a quality product that meets or exceeds a buyer’s expectation and backs it up with excellent service. Most of your customers will probably be satisfied, but they may not necessarily continue to buy from you, and you alone. But why? Engaging in Customer loyalty market research will help you to understand their thoughts and habits.

You know that there is always the chance that a competitor will take market share via a number of techniques such as free trials, discounts, reward programs, or even the introduction of a new product.

If this happens, the cost of replacing such a customer that defects to a competitor may range from five to as many as 20 times the cost of keeping a current one. Thus, customer loyalty is very important to the overall profitability of your company.

How Do You Create and Maintain Customer Loyalty?

One way to keep customers loyal is to find out what they most like and, more importantly, dislike about your company, its products and services, and then promote the positive aspects while trying to improve upon weaknesses.

To gather feedback from customers, any number of research approaches may be considered, but in this case, the most appropriate one is Customer Loyalty Research. Conceptually this is similar to, but not synonymous with Customer Satisfaction Research.

Customer Loyalty Research

Customer Loyalty Research can begin by simply obtaining a Net Promoter Score, or NPS (a rating is sought from 0 to 10 based on the single question “How likely is it that you would recommend (a company/product/service) to a friend or colleague?”). NPS is then calculated as the percent of people who rate 9 or 10 minus the percent who rate 0 to 6. A net positive number is good and can range from 1 to 100. This question can be asked on your website, via an email, or on the phone by your customer service department.

It should be obvious that any such rating may be based on totally different factors of importance to a customer, e.g. a car buyer might be loyal because of a great salesperson/excellent service, a lower price, safety features, or the type of entertainment system offered. Likewise, a customer might turn to an alternate company due to a low rating on one or more of the same factors. Clearly, a change in even one key factor by either you or a competitor could impact loyalty.

So it is imperative to probe deeper. Using Customer Loyalty Research, it is easy to branch out from the single NPS question and uncover more about what separates your most loyal from least loyal customers. For example, ask customers to rank a list of product features to determine if there are any gaps, i.e. ones responsible for a low rating. Or elicit which specific aspects of customer service contributed to a low rating. By focusing on areas in need of improvement, it will be easier to develop plans to focus on and positively impact those who are less loyal.

Word of Mouth

The importance of a loyal customer is evident when that person recommends your product. There is virtually no additional cost to acquire a new customer this way. On the other hand, a non-loyal customer might not just defect to a competitor, but also influence others to abandon your company. More and more people turn to the internet and social media to provide immediate reactions to both planned and actual purchases. Online photos are being used to further reinforce consumer feelings about both positive and negative product experiences, e.g. a hotel room, a food item.

Remember, loyal customers are not only important for repeat business, but through word of mouth referrals they can lower your cost of acquisition for new business.

Next Steps

Begin small. Do an initial project not only to identify those segments within your customer base that are most or least loyal – but also ask questions to find out why! Use results as a benchmark or baseline metric. Then periodically repeat and expand the process to obtain the maximum amount of feedback to inform your marketing and sales decisions.

One last thing. If you can earn both a high satisfaction and recommendation score (NPS), the odds are great that you will have loyal customers and create a barrier that competitors cannot breach.