# The problem with measuring customer loyalty; and how to overcome it
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-07-09
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: How to Build Customer Loyalty and Maximise Profits
Meta Description: Learn from Andrew Wilkins, CEO and Founder of Futr AI, about the importance of customer loyalty and how businesses can effectively build and measure it for
URL: https://financedigest.com/the-problem-with-measuring-customer-loyalty-and-how-to-overcome-ithtml

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_**Andrew Wilkins,** CEO and Founder, Futr AI_

Customer loyalty is the holy grail for businesses seeking to grow. There’s a well-used statistic from [Bain & Co](https://media.bain.com/Images/BB_Prescription_cutting_costs.pdf) that states a five per cent increase in customer retention produces a 25 per cent increase in profit.

That happens because repeat customers tend to buy more which means the cost of serving them comes down. So loyal customers deliver [higher margins](https://www.financedigest.com/maserati-aims-at-driving-margins-higher-before-any-spin-off-talk.html "Maserati aims at driving margins higher before any spin-off talk"), which in turn means more profit to be ploughed into growing the organisation. In addition, loyal [customers are more likely to refer the company](https://www.financedigest.com/disconnected-customers-are-one-of-the-biggest-problems-facing-financial-companies.html "Disconnected customers are one of the biggest problems facing financial companies") to their personal networks.

Plus, genuine feedback from loyal [customers can help hone and improve](https://www.financedigest.com/agent-retention-is-central-to-improving-the-customer-experience-across-financial-services.html "Agent Retention is Central to Improving the Customer Experience Across Financial Services   ") products, services and even the way the company operates as a whole.

**How businesses can build loyalty** That said, it is one thing to want to build customer loyalty, and another to actually do it. In an era when there is more competition than ever before, more noise to cut through, and customers with [increasingly high expectations](https://www.financedigest.com/polyimide-fibers-market-is-expected-to-increase-at-a-healthy-cagr-of-around-5-over-the-forecast-period-of-2021-2031.html "Polyimide Fibers Market is expected to increase at a healthy CAGR of around 5% over the forecast period of 2021-2031") of what good looks like, how do businesses incite loyalty?

First, they [need to understand how to  build](https://www.financedigest.com/why-smart-buildings-need-smart-cleaning.html "Why smart buildings need smart cleaning   ") it. It comes down to listening to what customers want, providing them with value and always working towards giving them [positive experiences](https://www.financedigest.com/allianz-benelux-taps-into-modern-data-management-to-combat-fraud-and-foster-a-positive-customer-experience.html "Allianz Benelux Taps into Modern Data Management to Combat Fraud and Foster a Positive Customer Experience").

Second, [businesses must](https://www.financedigest.com/private-equity-firms-hungry-for-investment-opportunities-but-business-owners-must-be-cautious-2.html "Private equity firms hungry for investment opportunities, but business owners must be cautious") be clear that achieving customer loyalty is not an end-goal in itself, but more a continual loop of feedback and action.

Third, [businesses must](https://www.financedigest.com/why-businesses-must-invest-in-cloud-technology-now.html "Why Businesses Must Invest in Cloud Technology Now") identify and deploy ways in which they can capture that authentic, in the moment representative truth from customers.

**The problem with measuring customer loyalty** Capturing authentic feedback is one of the greatest challenges with measuring customer loyalty. Currently, there are a number of tried and [tested ways](https://www.financedigest.com/in-shanghai-lockdown-blues-make-way-for-covid-testing-gripes.html "In Shanghai, lockdown blues make way for COVID testing gripes") of tracking that sentiment, the most famous of which is Net Promoter Score (NPS), which looks at the likelihood of the customer to refer a company to a friend. While this succinctly captures one of the [benefits of customer](https://www.financedigest.com/online-marketplaces-embracing-embedded-finance-to-benefit-both-customers-and-vendors.html "Online marketplaces: embracing embedded finance to benefit both customers and vendors     ") loyalty, it is quite narrow in focus as companies are striving for more than just referrals—important as they are.

More encompassing approaches include looking at repurchasing, up-selling, [customer advocacy and engagement](https://www.financedigest.com/chatbots-the-secret-weapon-to-customer-engagement.html "Chatbots: The secret weapon to customer engagement?") metrics. Usually gathered by surveys, in theory, these are solid [ways of calculating customer](https://www.financedigest.com/customer-engagement-whos-leading-the-way.html "Customer engagement – who’s leading the way?") loyalty. Yet if a [business pins all its efforts on these surveys](https://www.financedigest.com/netapp-survey-finds-strong-motivation-for-gdpr-compliance-as-confidence-soars-among-fsi-businesses.html "NetApp survey finds strong motivation for GDPR compliance as confidence soars among FSI businesses"), they are going to struggle to get a clear picture. Why? Because getting customers to complete surveys, and in doing so, generating sufficient data to [provide an accurate representation of a customer](https://www.financedigest.com/banks-can-provide-a-protective-shield-to-defend-customers-from-cyber-attack.html "Banks can provide a protective shield to defend customers from cyber attack") base, is hard. Too simple a survey and the data will be vague and lack useful insight; too complex or time-consuming, and completion [rates will fall](https://www.financedigest.com/oil-dips-as-potential-fed-rate-hike-overshadows-falling-stocks.html "Oil dips as potential Fed rate hike overshadows falling stocks") dramatically.

**Changing how businesses track loyalty** What, then, is the answer?

It’s [worth being absolutely clear on what businesses](https://www.financedigest.com/tough-times-and-risky-business-which-emerging-market-assets-are-a-bet-worth-taking.html "Tough times and risky business – which emerging market assets are a bet worth taking") want to get out of this feedback. Do they want product reviews, thoughts on [service issues](https://www.financedigest.com/how-the-financial-services-industry-can-solve-the-issue-of-vulnerable-code.html "How the financial services industry can solve the issue of vulnerable code"), how the company operates, its purpose, how it communicates, how it can add additional value? Once that is determined, businesses can define how they are going to capture that feedback, and at what point in the [process the customer](https://www.financedigest.com/sdl-helps-lifeplus-engage-with-customers-across-50-countries-and-gain-control-of-translation-costs-and-processes.html "SDL Helps Lifeplus Engage with Customers across 50 Countries and Gain Control of Translation Costs and Processes") is going to be asked for that data.

For most, that’s probably the easiest part – surely, it’s at the end? That’s typically when the majority of businesses try to gather feedback; the [customer hangs up or ends the communication](https://www.financedigest.com/talk-to-me-the-changing-face-of-customer-communications.html "TALK TO ME :THE CHANGING FACE OF CUSTOMER COMMUNICATIONS"), then receives a message asking if they’re willing to participate in a survey.

What if “when” feedback is  gathered is  part of the issue? If a [customer is only asked for their thoughts at the end of the engagement](https://www.financedigest.com/customer-engagement-trends-that-will-rule-banking-and-financial-services-in-2021.html "Customer Engagement Trends that Will Rule Banking and Financial Services in 2021"), the data is going to be skewed, with extremes of sentiment driving the need to respond. By waiting until the end of an engagement, [businesses are more likely to generate wholly negative or wholly positive data](https://www.financedigest.com/from-sec-edgar-to-business-applications-exploring-an-alternative-to-manual-data-extraction.html "From SEC EDGAR to Business Applications: Exploring an Alternative to Manual Data Extraction"), with little in the way of nuance.

**Why “when” feedback is captured is critical** Businesses should  be looking at capturing feedback, whether conscious or unconscious, throughout an engagement, however  This requires a more subtle, natural approach. It would be a jarring experience to be asked how the business is doing if, for example, feedback on [issues are  yet to be resolved](https://www.financedigest.com/apple-says-issues-with-imessage-facetime-resolved35792.html "Apple says issues with iMessage, FaceTime resolved"). Yet by incorporating such an approach into channels such as chatbots, social conversations and messaging apps (like WhatsApp), businesses could start to gather accurate, authentic feedback in real-time.

What’s more, it doesn’t need to be in the form of a survey. Particularly when using chatbots, algorithms can be trained to spot when customers use phrases that could be classed as feedback. For instance, if a customer has logged on to highlight a product fault, they might [share feedback on the process for registering the issue or their thoughts on the initial buying](https://www.financedigest.com/mercedes-benz-to-buy-back-up-to-4-billion-euros-in-shares-by-2025.html "Mercedes-Benz to buy back up to 4 billion euros in shares by 2025") process. If captured and stored appropriately, this provides real-time [insight into a potential area of improvement](https://www.financedigest.com/accountancy-firm-brookson-uses-artificial-intelligence-to-improve-customer-insight-and-prevent-churn.html "Accountancy firm Brookson uses artificial intelligence to improve customer insight and prevent churn").

What this approach does is [ensure that businesses](https://www.financedigest.com/how-to-ensure-your-new-business-doesnt-become-a-victim-of-covid-related-fraud.html "How to ensure your new business doesn’t become a victim of Covid-related fraud") are capturing all feedback, and using it to enhance their products, services and operations. It is the [company equivalent of active listening](https://www.financedigest.com/in-listening-mode-new-bayer-ceo-keeps-open-mind-on-company-split.html "In listening mode, new Bayer CEO keeps ‘open mind’ on company split"), and by incorporating it into how they gather feedback, not only can businesses get a better understanding of how they are viewed, the actions they take are more likely to meet customer expectations. In doing so, [customers will feel listened to and valued and will be more likely to stay loyal to such a business](https://www.financedigest.com/future-proofing-your-small-business-its-time-to-listen-to-your-customers-needs.html "Future proofing your small business – it’s time to listen to your customer’s needs").

**Listen, respond and act** For businesses looking to build customer loyalty, listening and responding is critical. They (customer feedback) offer significant opportunities for learning, understanding customer [challenges and seizing the opportunity](https://www.financedigest.com/molasses-market-a-study-combine-with-challenges-and-opportunities-forecast-by-2017-to-2025.html "Molasses Market: A Study Combine With Challenges And Opportunities, Forecast By 2017 To 2025") to provide value beyond a standard product- or service-based transaction. To do that requires accurate, meaningful and reliable data, captured at the right time and in the right manner. Those [businesses that can look beyond standard approaches](https://www.financedigest.com/driving-business-efficiencies-with-a-dedicated-credit-management-approach.html "Driving business efficiencies with a dedicated credit management approach") to measuring feedback will be the ones more likely to help customers achieve their goals and, in doing so, generate stronger customer loyalty.


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