5 formulas for customer loyalty

4. Introduction
Is your customer loyal to you or feel
connected with you?
 Do you want to know formulas to
calculate customer’s loyalty?
 Do you want to know how to build
customer loyalty?

5. Satisfied customers are the biggest proof that your
products work. However, during the course of the
average customer journey, the customer satisfaction
graph rarely remains constant. The reasons are
many: complicated checkout processes, extra
shipping charges, problems in rerouting packages to
other addresses, etc. Tracking customer satisfaction
is key to keeping your revenues growing. In fact,
there is a direct correlation between the two.

6. Getting a customer is easy, but getting their loyalty is the
difficult part. To make your customer loyal, you first need
to do his purchase analysis.
Whenever a customer comes to your store, you need to
observe which kind of products he is purchasing and in
which kind of products he is interested.
If you incentivize the products in which he is interested, he
will buy your products and become your loyal customer.To
know how to build customer loyalty, you need to
understand the customer loyalty formula.

7. Following are the 5 important loyalty
formulas on how to gain customer loyalty
1. Repurchase Rate
If you managed to make a good first
impression on the customers, they are likely
to return. The repeat purchase rate is the
percentage of customers that have made
more than one purchase. It can be calculated
using the following formula:

9. The repurchase rate is calculated by No. of Repurchase upon
No. of Unique purchase X 100
No. of Repurchase
_____________________ X 100 = Repurchase Rate
No. of Unique Purchase
For Example, 1000 people purchased a product from you, and
from which 100 were the existing customers then the
repurchase rate will be
100
______ X 100 = 10%
1000

11. The repurchase rate of the product
is 10%, which means that 10% of
customers are loyal customers. Now
when you get the benchmark you
can use some strategies to improve
the repurchase rate which will
automatically improve the profit.

12. NPS (Net Promoter Score) is one of the most
popular ones to measure customer satisfaction
because of its simplicity and applicability across
industries. It can help you make better business
decisions in terms of growing customer lifetime
value and reducing attrition. It helps brands
identify customers with a neutral and/negative
perception about them and take timely measures
to address their concerns.
2. Net Promoter Score

15. What is Net Promoter Score (NPS)
NPS is widely used by many Fortune 500
companies around the world to measure customer
loyalty.
NPS measures customer satisfaction based on a
customer’s response to the following question:
How likely are you to recommend us (brand) to
others? It allows business leaders to better
correlate customer satisfaction with how long they
are likely to stay with a brand.

16. How It Works
In an NPS survey, customers rate brands on a scale
of 0 to 10. Respondents are then categorized into
three classes- promoters, detractors, and
passives. Customers who rate you a 9 or 10 are
called Promoters. These are the most loyal
customers you have and are almost guaranteed to
keep buying from you and tell others about your
brand. That means easy word of mouth publicity
for you..

18. Those with scores between 7 and 8 are the
Passives.
These customers are likely to leave if they found a
product, comparable or better than yours. They are
easily swayed by low prices and are generally not
responsive to the retention efforts made by brands.
This category of customers is not included in the
NPS calculation.

19. Any rating below 6 is considered negative and
these customers are categorized as
Detractors. These are the most dissatisfied
customers with a high probability of attrition. They
need to be kept engaged in order to avoid negative
reviews and potential brand damage. Needless to
say, these customers are likely to be the least happy
with your product or service.

20. Now that we have a good understanding of the NPS
scale and what each category represents, let’s take a
look at the formula for arriving at an NPS score.
NPS = % Promoters – % Detractors

21. Why You Should Measure NPS
The biggest advantage of NPS is its simplicity for
both businesses and customers. If you have a better
NPS score than that of your competitors, you have
the edge in your product niche. NPS can help you set
progressive customer satisfaction goals so that you
can improve your product or workflows consistently
over a period of time. This can be critical in the
pandemic stricken market of today where new
customers are harder to come by and the focus has
clearly shifted to customer retention.

23. NPS can help you with developing new products
based on direct customer feedback. Regularly
assessing NPS is a great way to get insights into
what customers really want, especially early in the
customer lifecycle.
Your NPS score can help you predict and manage
customer churn proactively. Rather than
scrambling at the last minute to retain an unhappy
customer, NPS can give you a heads-up on the
customers that are most likely to leave in the
foreseeable future.

25. 3. Up-Selling and Cross-Selling ratio
Up-selling and Cross-selling seem to be technical but are
simple.
If a customer bought a product and you offered a related to
it and he buys that product as well is known as up-selling
and cross-selling.
For Example, You are an insurance agent and a customer
bought life insurance from you in a year. Did you offer any
other product to him as you have plenty of products
available with you such as Home insurance, car insurance,
etc

26. Cross selling and Upselling is one of the most
widely discussed concept in marketing analytics. Every
other day when you visit a supermarket, restaurant to
purchase something, this concept comes into live action.
This concept is being taught in every marketing class across
the world, thereby students are expected to know of it.
Definition – Cross-Sell and Up-Sell
Cross-sell involves the sale of multiple products offered by
a single product/service provider to a new or existing
customer. Up-sell is selling higher value products/services
to an existing customer.

27. For example:
You plan to purchase a mobile phone within a price range
of Rs. 30,000(~$500). However, you eventually end up
purchasing a mobile phone of Rs.42,000 ($650) because
the salesman presented various other phones with fantastic
features and you got swayed away with them. (This is Up-
Selling).
You plan to purchase a mobile phone worth Rs.
30,000(~$500), but the salesman offered you a charming
deal of buying mobile phone with exclusive JBL
headphones for Rs.40,000 (~$634) only and you again got
swayed away. (This is Cross-Selling).

28. Cross-selling is a core component of a customer centric
relationship strategy and requires an integrated view of the
customer. The success of a cross-sell program depends on
enablers such as organizational commitment; well-defined
business strategy; effective execution; regular monitoring;
and effective targeting strategy. Cross-selling has proved
to be a defining strategy for profitable growth across
multiple sectors.

29. Benefits of Cross Selling
Cross Selling offers benefit to both the ends of marketing cycle i.e.
customer and firm.
For the Firm
1) Builds customer equity
2) Differentiates from competition, enhances market position
3) Promotes diversification and innovation
4) Stimulates universe expansion and entry into new markets
5) Balances growth between new and existing customers, low and
high margin products and segments
6) Enhance customer profitability
7) Discourages customer attrition, improves customer loyalty

30. For the Customer
Patronizes the brand
1) Broadens choices of product and services
2) Offers convenience through one-stop shopping, flexibility,
consolidated bill and others
3) Increases customer satisfaction
4) Lowers price
5) Encourages better customer service from relationship marketing

32. Up-Selling and Cross-Selling Ratio
1000 (Number of customers buying more than 1 product)
= _____________________________________________ X 100 = 20%
5000 (Number of customers buying a single product)
20% of people are your loyal customers.

34. 4. Frequency and
Recency
Frequency means how many times your customer is coming and
recency means at what interval your customer is coming.
Both frequency and recency are important in a business.
For example, there are 2 vendors Ram and Shyam. People generally
buy products from Ram's store but he closes his shop for a week and
all customers shifted to Shyam's store. But after a week Ram's store
again opened and the customers again shifted to Ram's store. Here
customers are loyal to Ram and come to him in frequency and
recency.

38. 5. Redemption
Rate
Check the redemption rate.
Give your customer a coupon code or loyalty bonus or point
coupon, give coupons for the next purchase. You may see many
companies like big bazaar give coupons so that the customers come
back for the next purchase.
Redemption rate
5000 (Number of coupons redeemed)
= ___________________________________X 100
10000 (Number of coupons issued)
= 50%

40. If the redemption rate is good it means that
your idea is brilliant and on the other hand if
the redemption rate is not good it means that
your idea is not good or the scheme that you
are running is not attractive.