How Do I Perform a Customer Loyalty Analysis?

M. Kayo

You can perform an effective customer loyalty analysis by looking at a company's long-term vision and business goals. These goals should be identified as should the manner in which an organization conducts business and how it generates profits. Once this basic information is determined, customer data is collected, analyzed, and used to make needed changes. Analyzing the balance sheet at the end of every month may show the current condition of a business, but it will not provide the information to help you meet the needs of your most loyal customers. Only a comprehensive customer loyalty analysis can provide the information to maintain current loyal customers and develop future loyal customers.

Organizing a customer loyalty analysis team can be useful in determining the causes of customer dissatisfaction.
Organizing a customer loyalty analysis team can be useful in determining the causes of customer dissatisfaction.

There is a difference between customer loyalty and customer satisfaction. A satisfied customer spends money, but a loyal customer adds long-term value by providing a consistent cash flow, generating referrals, having a willingness to pay a premium price, and reducing the company's selling and servicing costs. Loyal customers bring profitable and sustainable growth over time and that means long-term profits for the business, sometimes for many years.

Marketers know the long-term benefits of repeat customers and long, strong customer relationships that are enhanced by an effective customer loyalty program. Gauging the overall effectiveness or ineffectiveness of a loyalty program is critical. Customer loyalty analysis should help you know your customers intimately and find out what makes them buy from and stay with your company over the long term.

Assuming that a customer loyalty program is already in place and that it has been managed properly, analyze the current customer loyalty situation. Consider the methods used to gather data and the type of data being collected. Market conditions, the economy, brand positioning, and brand recognition will have an effect on customer loyalty. Gather all of this information before proceeding to perform any type of customer loyalty analysis.

When the background work is complete, perform a comprehensive customer loyalty analysis. Start by determining the best way to measure customer loyalty — what the criteria will be. Look at defection rates, sales frequency, if customers are referring others, and the reasons customers leave your company. Conduct interviews with key loyal customers to find out what patterns are common to them all. Gather this data and convene the customer loyalty analysis team to identify the causes of customer dissatisfaction as well as what causes customers to remain loyal.

After the data has been analyzed, identify each positive and negative aspect of loyal customers. Prioritize tasks needed to retain current loyal customers and encourage defected loyal customers to return. For example, credit terms may need to be relaxed, more variety added to the current inventory, or better premiums may all be needed. Finally, come up with strategies to fix the most serious problems that cause complaints and defections. Specific challenges are identified, addressed and eliminated while other activities promoting customer loyalty are implemented.

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