How can one quantifiably measure customer loyalty? Is there a number you can attach to how likely they'd recommend us?

But first, what is loyalty exactly?

Loyalty is the willingness of someone – a customer, an employee, or friend – to make an investment or personal sacrifice in order to strengthen a relationship. For a customer, that can mean sticking with a vendor who provides excellent service and value over the long term, even if that means they’re not the best possible price.

True loyalty supersedes customer satisfaction, or even repeat purchases. It’s a true affecter and indicator for future growth. After all, loyal customers talk up a company to their friends, family, and colleagues.
Author and founder of the Net Promoter Score^®, Frederick F. Reichheld, set out nearly 20 years ago to prove that if it’s growth you’re after, you won’t learn much from overly-complicated surveys. You simply need to know what your customers tell their friends about you.

One simple question can serve as a useful predictor of growth: how willing are customers to recommend a product or service to someone else?

What is the Net Promoter Score?

Net Promoter Score^®, or NPS^®, measures customer experience and predicts business growth. This proven metric transformed the business world and now provides the core measurement for customer experience management programs the world round.

Calculate your NPS^® using the answer to a key question, using a 0-10 scale: How likely is it that you would recommend [brand] to a friend or colleague? Respondents are grouped as follows:

• Promoters (score 9-10) are loyal enthusiasts (potential Raving Fans) who will keep buying and refer others, fueling growth.
• Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
• Detractors (score 0-6) are unhappy customers who can damage your brand and impede growth through negative word-of-mouth.

HOW TO CALCULATE YOUR SCORE: Subtracting the percentage of Detractors from the percentage of Promoters yields the Net Promoter Score^®, which can range from a low of -100 (if every customer is a Detractor) to a high of 100 (if every customer is a Promoter). 

Why is the Net Promoter Score different?

Typical customer surveys are relatively useless for two key reasons:

• They’re often complex, ambiguous, and difficult for companies to quickly take action on. They also don’t necessarily correlate to profits or growth.
• Because they’re long or convoluted, they’re cumbersome for customers and yield low response rates.

Roughly 25 years ago, Enterprise Rent a Car CEO Andy Taylor and his team were onto something. They were able to measure and manage customer loyalty by asking two simple questions: One about the quality of their rental experience, and the other about the likelihood that they would rent from the company again.

The process was simple … and fast. Results were published to its 5,000 US branches in days, giving offices real time feed back on how they were doing and where they could improve. They also only counted the customers who gave the experience the highest possible rating. Why? Because by focusing on only the most enthusiastic, they could focus on a key driver of profitable growth: Customers willing to recommend Enterprise.

Reichheld took note, and began wondering.

“Could you get similar results in other industries by focusing only on a customer who provided the most enthusiastic responses to a short list of questions designed to assess their loyalty to a company? Could the list be reduced to a single question? If so, what would that question be?” he writes.

After two years of research, which included matching survey responses from individual customers to their actual behavior over time, the team concluded that the one question that had the strongest statistical correlation with repeat purchases or referrals was a simple one ... you guessed it: “How likely is it that you would recommend (Company X) to a friend or colleague?”

Why is NPS^® Such an Important Number to Know?

That simple question, that is included on every Datamax customer support survey, is powerful because it allows us to swiftly identify both promoters and detractors, and then take action. We obviously need more promoters and fewer detractors. The goal is “clear-cut, actionable, and motivating.”

“Such a recommendation (via survey) is one of the best indicators of loyalty because of the customer’s sacrifice, if you will, in making the recommendation,” Reichheld writes. “When customers act as a reference, they do more than indicate that they’ve received good economic value from a company. They will put their own reputations on the line. And they will risk their reputations only if they feel intense loyalty.”