How Does E-Commerce Measure Customer Loyalty?


Published: | By POWR

E-commerce marketers are always looking to win loyal customers, as it costs less to keep loyal customers, and they spend more than one-and-done customers.

Plus, a loyal customer for your business means one less customer for your competitors. However, despite all this digital marketing battle to win loyal customers, measuring customer loyalty can also be daunting. By definition, loyalty is a feeling of support--so how do you measure how your customers feel about your e-commerce business?

Unfortunately, e-commerce hasn’t grown enough to get a feel of bad or good vibes. Hence, marketers must understand customers' devotion towards their business by measuring metrics they can count on.

No one golden customer loyalty metric can tell everything you want to know. So instead, we’ll look at four metrics you should measure to get in-depth insights into customer loyalty. To find out more about marketing strategies, including the nurturing strategy, click this link.

4 Metrics That Can Help You Measure Customer Loyalty

Customer loyalty is a positive relationship between customers and businesses. This drives customers to purchase repeatedly from the same company, even when more up-to-date or less expensive options are available. Here are four customer loyalty metrics to help you win and retain more existing customers. Click here to read our latest article on the loyalty program for e-commerce

1. Net Promoter Score (NPS)

This customer loyalty metric measures customers’ willingness to recommend Product A or Service B to those they know. NPS ranges between -100 to +100. A positive score is excellent. For instance, +60 is a perfect score, and a Net Promoter Score above 70 is impressive; it’s a sign that most of your customers trust your brand.

To calculate your NPS:

  • Get your existing customers to respond to a one-question survey. For example, “On a scale of 1 to 10, how are you likely to recommend our services to a colleague or friend?”  
  • Then gather survey data as follows; the number of customers that give you a score between 9 to 10 are promoters, between 0 and 6 are called detractors, and between 7 and 8 are passives.
  • Subtract the percentage of detractors from the percentage of promoters, giving you your NPS score.

If you’re looking for a contact form template, click here.

2. Repurchase Rate or Repeat Purchase Rate

This metric shows the percentage of online shopping customers who have made more than one purchase in a specific period.  It aims to establish when and if a current customer will reorder.

Besides customer loyalty, the repurchase rate also predicts your future customer retention rates. Knowing how many customers are coming back to purchase more of your offerings can determine your brand's profitability. If your company can retain clients over the years, you can keep your finances in good shape.

The repurchase rate = The number of customers who made more than one purchase/Total number of customers.

3. Customer Churn Rate

Often, to win new customers, you may ignore current customers. The customer churn rate tracks how many customers abandoned your brand. This metric is a good indicator of customer loyalty. Customer loyalty and churn rate are inversely related.

For instance, if you have a low churn rate, your customer loyalty will be relatively high and vice versa. Consequently, if your customer churn rate is constantly high, you must revamp your retention strategies.

Customer churn rate = The number of customers lost in a given time/ Number of customers at the beginning.

4. Average Order Value

This metric measures the average spend per client on your store over a time period. A higher average order value means more profits, while a lower average order value implies declining profitability. It offers crucial clues to customer behavior. Identifying cross-selling and upselling opportunities is an effective way to generate better profits per sale.

If your AOV is stable or increasing, your brand will attract more loyal customers.

Average order value = total revenue/ No. of orders made.

Final Thoughts

The good thing about customer loyalty is that there are many ways to measure and analyze it. As you test out each of the four loyalty metrics mentioned above, remember the human element, non-rational and emotional reasons that drive customers to one business. Be open-minded and ready to revise assumptions about buyer behavior as new data comes in, and you’ll witness customer loyalty improve every day.

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