Know-How Exchange : Customer Behavior

Matthew,

There is no "universal" definition of customer loyalty. let alone a measure. We can all describe what it means to have a loyal customer. There are characteristics: They pay a little more for your product or service than the competition offers, their price to switch suppliers is high, they value the product/service, they are advocates for your company/product/service, etc. We can describe the results: stable customer base, high share per customer, less than industry average marketing and sales costs, etc. However, all of these characteristics are "relative," not absolute. What this means is that you can measure improvement in customer loyalty. If you can get industry data, you could make comparisons. However, precision is not possible.

This doesn't mean that you can't do anything. If you hired me to be your consultant to set up a system to determine your firm's customer loyalty, I'd FIRST figure out what data you had history on. Then, I'd put together a formula for customer loyalty using the parameters on which you would have data. The formula would be more of a "relationship" than an absolute formula: Customer loyalty is proportion to the market share at a customer times the length of time the customer has used your products and services divided by the cost of sales and marketing for a customer...etc. The result would be a measure for your firm only but would not be an "industry standard." This measure would be a "good" measure if you could get all the data for both you and your customers as well.

This is more of an approach than a "standard." But it would work in the real world.

I hope this helps.

Wayde

Dear mktmaned,

I've no idea why my previous post showed up with nothing in it, but anyway. Customer loyalty is a subject dear to my heart. A formula I came up with not long ago (it's not terribly scientific, but it has a smattering of merit and a tad of potential) is:

Mv x RrA = Pi x V/Ba = Rp

"Mv" is Message value. "RrA" is Repetition to a receptive Audience. "Pi" is Prospect interest multiplied by "V/Ba", which is Value and Benefits acquired.

These equal "Rp", which is the relationship.

This is the first time this formula has seen the light of day outside my sketchpad, and no doubt wiser minds than mine will find all kinds of holes in its mechanics.

I wish to make it crystal clear that I am NOT a mathematician, nor do I pretend to be, I never studied marketing theory at college for my degree, I do NOT have an MBA (or any other kind of advanced degree), and I've always LOATHED algebra.

That said, until one forms a solid relationship with one's clients or customers, the notion of brand loyalty is non existent. There can BE no loyalty without first establishing a relationship, and there can be no relationship until needs have been met through repeated, relevant messages that speak to the prospect's emotional need or problem.

I don't know if this helps you or not. I suspect it's the latter. But again, the formula above is mine and mine alone.

Gary Bloomer
Wilmington, DE, USA