Customer loyalty refers to the recurrence of the customer's interaction with the company's brand, as a consequence of the experience accumulated over time and at different points of contact.
Level of customer engagement with our organization
It is required to build a loyalty KPI that measures the strength of a customer's relationship with an organization, through their perception and overall experience across their touch points in their different communication channels.
Companies that measure “customer engagement” are interested in creating a loyal customer base that delivers superior financial performance. So, the need to measure engagement is important, however, there are studies that show that a significant percentage of customers leave for a competitor even if they are satisfied with a specific supplier's products and services.
Gallup loyalty metrics
Among the different metrics on customer loyalty and engagement, the research firm Gallup has created a customer satisfaction metric based on 11 questions, which it calls CE11, where it classifies customer engagement into four levels:
Fully engaged customers: they are emotionally attached and rationally loyal. They are an organization's most valuable customers.
Engaged customers: They are beginning to feel the impulses of emotional commitment.
Disengaged customers: They are emotionally and rationally neutral.
Actively disengaged customers: Are emotionally distant and actively antagonistic.
How is this metric operationalized?
Method of data capture
Data is captured from customer engagement surveys using quantitative tools. Customers can be asked to rate their experience with the supplier's service or product on a Likert scale (e.g., from 1: very dissatisfied to 5: very satisfied) or by a simple yes or no response.
Formula
Gallup's customer engagement index is a macro-level indicator of an organization's health that allows executives to track the ratio of fully engaged to actively disengaged customers.
Out of a total of eleven questions, eight address emotional attachment and three address loyalty, consistently showing business performance linkages.
The 11 questions posed by Gallup's customer engagement survey (CE11) are as follows:
LOYALTY
1. Overall, how satisfied are you with [Brand]?
2. How likely are you to continue to choose/purchase/repeat (if necessary) [Brand]?
3. How likely are you to recommend [Brand] to a friend/associate?
ATTITUDE TRUST
4. [Brand] is a name I can always trust.
5. [Brand] always delivers what it promises.
INTEGRITY
6. [Brand], always treats me fairly.
7. If a problem arises, I can always count on [Brand] to reach a fair and satisfactory solution.
PRIDE
8. I am proud to be a [customer/buyer/user/owner] of [Brand].
9. Brand]. always treats me with respect.
PASSION
10. [Brand]. is the perfect [company/product/brand/store] for people like me.
11. I can't imagine a world without [Brand].
The CE11 measurement survey measures the customer's rational evaluation of a brand (questions 1-3) as well as their emotional attachment (questions 4-11), which encompass trust, integrity, pride and passion, considering that every purchase decision is, in fact, emotional.
Loyalty questions establish a customer's rational disposition toward a brand. Next, attachment questions capture what happens in that customer's psyche when a product earns their trust and matches something so useful or so enjoyable in their experience that it becomes the touchstone of their day.
When loyalty and attachment scores are high, the customer seeks out the brand even when they don't necessarily need to replenish their stock. The statistical science behind the attachment questions captured the sequence in which that type of emotional attachment develops.
Gallup developed the eight attachment questions as paired indicators of four emotional states: trust in a brand, belief in its integrity, pride in the brand and passion for it. An analysis of responses to the questions revealed that customers develop emotional attachment to a brand cumulatively: customers who strongly agreed with the first two statements in the attachment questions were more likely to agree with the next two, and so on.
The Gallup metric is the ratio of fully engaged customers to actively disengaged customers. Thus, a ratio of 5 to 1 means 5 actively engaged customers for every 1 actively disengaged.
Goal setting and benchmarking
A customer engagement survey administered by a company such as Gallup typically has extensive databases of best practice benchmarks from which the client organization can compare its own targets against industry levels and the Gallup database as a whole.
According to Gallup, in average organizations, the ratio of fully engaged customers, versus actively disengaged customers is 0.8:1, while in world-class organizations the engagement ratio is 8:1.
Observations on measurement frequency
Although customer engagement is typically measured and reported annually, organizations should consider surveying customers more frequently (e.g., 10% of customers 4 times a year) to get a sense of how engaged they are.
The power of customer engagement
Customer engagement or loyalty can be measured as recommended by Gallup and Reicheld's Net Promoter Score (NPS). Customer engagement and loyalty are better predictors of profitability. Customer engagement is a wonderful tool for developing long-term brand measurement strategies, showing where and how to differentiate your offering to your most profitable customers, inspire your target customers and connect in a way that builds relationships with them.
Bibliography
Taylor Ivana. (2013). Measuring customer engagement as a predictor of profitability. https://www.questionpro.com/blog/measuring-customer-engagement-as-a-predictor-of-profitability/
Appelbaum Alec. (2001). The Constant Customer. https://news.gallup.com/businessjournal/745/constant-customer.aspx
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