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Internet Marketing Tips » Be a Loyalty Meter Reader!
Loyalty Meter Reader

Be a Loyalty Meter Reader!

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What’s a loyalty meter?  It’s an established process for measuring your customer or client loyalty and then taking action to improve the measurement.  There’s an old management saying that, “you can only manage what you measure,” so if your don’t measure loyalty, your business practices might not be helping you to improve it or to increase customer retention and referrals.

Loyalty Meter

Most businesses have customers who are intensely loyal.  These customers will refer their friends and colleagues to their favorite businesses and they’ll return to repurchase and purchase in larger amounts.  However, very few businesses actually measure the numbers of their loyal customers or identify them.

Is this the same as measuring customer satisfaction?  No it’s not — it’s a much higher level of support for your business.  A satisfied customer will switch to a competitor for price or convenience, and a merely satisfied customer won’t act as a referral source for your business.  Most businesses recognize this, but they still do surveys and provide feedback cards measuring “satisfaction” or asking about “exceeding expectations,” whatever standard that is.  If your goal is only “customer satisfaction,” it’s too low.

How can you read the Loyalty Meter for your business?  One way to start is to change your surveys to ask the “loyalty” question.  In 2003, Harvard Business Review published a study titled, “The One Number You Need to Grow,” written by Fred Reichheld.  Reichheld demonstrated that customer retention and referral behavior can be measured by asking customers, “how likely are you to recommend this business to your friend and colleagues.”  After surveying businesses in a variety of sectors, Reichheld found that responses to this question are the metric most closely correlated with business growth.  You can use the same question to assess the loyalty of your customers.

Reichheld used the loyalty question responses to determine a single loyalty metric for each business.  Loyalty question responses are scaled from 0 to 10 with 10 being most likely to recommend.  Scores of 9 and 10 are considered as Promoters and loyal customers.  Customers choosing 7 or 8 are viewed to be neutral or Passives.  Responses of 6 and below are deemed to be Detractors.  Subtract the percentage of Detractors from the percentage of Promoters to calculate a Net Promoter® loyalty score.  (Net Promoter® is a registered trademark owned by Fred Reichheld, Bain & Co., and Satmetrix.)

Use the same loyalty survey question and calculate a loyalty score for your own business.  If you do, you’ll do a much better job of identifying your most loyal customers and the customers most likely to spread negative word of mouth about your business.  You’ll also identify the neutral customers who might be changed to Promoters with a little effort from you and your employees.  Get started and track your progress in growing more loyal customers.

If you need help getting started or you’re interested in evaluating how a loyalty measurement might work for your business, please call your Loyalty Meter Reader — Rust Reviews!

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Written by:
Paul Sherland
Published on:
June 6, 2010

Categories: Reputation Management Tips

About Paul Sherland

Most small business marketing fails because it ignores what makes your business unique. IX Brand SEO Services helps you reach new customers in your own voice to demonstrate the unique value of your products and services. Call 281-343-3284 to learn more!

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