Customer loyalty
is an index used to quantify and evaluate trust and affection towards companies, brands, products, services, etc.
It is known that there is a direct correlation with profitability compared to historical customer satisfaction.
This time, we will introduce what customer loyalty is, the index NPS that quantify customer loyalty, the meaning of increasing customer loyalty, and marketing strategies to increase customer loyalty.
What is customer loyalty?
The original meaning of “Loyalty” is “loyalty.” Customer loyalty refers to the trust and affection that customers have for a company, brand, products, services, etc.
“Trust” in customer loyalty can be said to be an objective evaluation of the price and quality of products and services.
On the other hand, “love” is something like a fan mentality, such as “this brand is a better fit for me than other products or services” or “this brand understands me.”
Customer loyalty requires trust and love, not just one or the other, but both.
What is the difference between customer loyalty and customer satisfaction?
Customer loyalty is characterized by a higher correlation with profitability than the traditionally used customer satisfaction measure.
In the case of customer satisfaction, “customers with high customer satisfaction” do not necessarily mean “customers who frequently purchase products and services.”
Even if there is no major dissatisfaction with the product or service, customers may switch to another company. In some cases, even if customer satisfaction was improved, the number of cancellations did not decrease.
On the other hand, customer loyalty is evaluated not only by satisfaction with products and services, but also by taking into account trust and affection.
It has been empirically shown to have a direct correlation with profitability.
Customer loyalty indicator NPS
NPS (Net Promoter Score) is a well-known metric for quantifying customer loyalty.
Announced in the United States in 2003, NPS quickly became popular after companies such as GE, Apple, and Lego demonstrated its effectiveness, and it is said that Google, American Express, and P&G are also using it.
NPS is characterized by its simple and easy-to-understand measurement and calculation methods.
●NPS measurement method
To measure NPS, we ask customers about a certain product or service, “How likely would you be to recommend 〇〇 to a close friend or family member?” on an 11-point scale from 0 to 10. I’ll ask you to answer.
Depending on the answer, the customer will:
- Critic (0-6)
- Neutral (7-8)
- Recommender (9-10)
It is classified as
●How to calculate NPS
To calculate the NPS of a product or service, find the difference between the percentage of promoters and the percentage of detractors.
For example, if promoters account for 40% of the total and detractors account for 20%, the NPS will be 40% – 20%, or 20.
The higher the NPS value, the higher the customer loyalty.
●It is linked to profitability because future actions are scored.
As seen in the measurement and calculation methods above, NPS scores future actions such as “Will you recommend it to others in the future?”
Therefore, it is thought that it will be linked to future profitability.
The meaning of increasing customer loyalty
What does it mean to increase customer loyalty? By increasing customer loyalty, you can prevent customer abandonment and spread the word of mouth.
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●Prevention of customer turnover
By increasing customer loyalty, you can expect to prevent customer churn.
Preventing customer churn is so effective in increasing profitability that it is said that if you can improve it by 5%, your profit margin will improve by 25%.
In BtoB, where the unit price per contract is high, even a single cancellation can lead to large losses. Preventing customer turnover can be said to be a major challenge.
●Diffusion through word of mouth
By increasing customer loyalty, you can also expect word of mouth to spread the word. In the case of BtoB, there is no spread through SNS, but you can expect recommendations to other departments and group companies.
For BtoB, where there are limited means to develop new business, word of mouth can be a big help.
Marketing strategies to increase customer loyalty
We’ve seen that increasing customer loyalty is critical to increasing profitability.
So what kind of
marketing strategy
can you use to increase customer loyalty? Let’s take a look at two dimensions of customer loyalty: trust and affection.
●Strategies to increase trustworthiness
In order to increase trust as a company or brand, it is effective to actively disseminate information about corporate activities.
In particular, introducing the introduction of products and services allows you to see what kind of companies are using your products and services, which increases your credibility.
One way to disseminate information is to post it on your company’s website.
Additionally, if you publish information via email or SNS such as Facebook, you can expect to create two-way interaction with your customers.
●Strategies to increase attachment
In BtoB, there is also a high need for support programs. Support can be provided not only after the product or service is introduced, but also before it is introduced.
When it comes to BtoB purchasing, internal decision-making inevitably takes time. In doing so, you can deepen your connection with your customers by providing materials that will help them make decisions.
In fact, an increasing number of companies are holding seminars and the like for customers with ongoing contracts.
summary
- Customer loyalty is a measure of trust and affection toward a company, products, and services.
- NPS is a well-known metric for evaluating customer loyalty.
- By increasing customer loyalty, you can expect to prevent customer defection and spread the word of mouth.
- In order to increase customer loyalty, it is important to develop strategies for both trust and affection.