How to Measure Customer Loyalty: An Actionable Guide

Customer loyalty is crucial for long-term success. In the hospitality, food service, and retail industries, it’s not just about bringing in new customers, but mainly about keeping the ones you have. As needs and preferences shift constantly, maintaining loyalty often feels like a never-ending challenge. 

A 2022 survey found that seven out of ten Americans consider loyalty programs to be a major factor in their decision to stay loyal to their favorite brands. This highlights just how important these programs are—but it also raises the question: how do you know if your efforts are actually working? 

The key to measuring loyalty programs is tracking the right customer loyalty metrics, including customer effort score and customer satisfaction score. By doing so, you can evaluate the success of your strategies, improve what’s not working, and refine your overall approach to customer retention and engagement. In this article, we’ll explore the essential ways to measure loyalty, helping you assess your program’s effectiveness.

How to Measure Customer Loyalty 

Customer loyalty is key to business growth and brand stability. It's not just about understanding why customers stick around but also recognizing their value as they keep coming back and spending more. Understanding the average customer’s lifespan, or lifetime value (LTV), reveals the maximum monetary value your business can expect from its average loyalty program member, which equips you to continuously refine your strategies. 

The most common methodologies used in retail and hospitality to measure loyalty are Customer Retention Rate, Net Promoter Score (NPS), Customer Lifetime Value (CLV), Repeat Purchase Rate (RPR), and customer satisfaction surveys.  We’ll take a closer look at these in the following sections. 

Customer Loyalty Analytics 

Several tools help businesses track customer loyalty and analyze the customer loyalty index effectively. Here are two of the most common:  

• CRM systems: Platforms like Salesforce, HubSpot, and Zoho provide a comprehensive view of the entire customer journey, from initial contact to repeat transactions, allowing businesses to communicate more personally and implement targeted loyalty strategies. 
• Data analytics platforms: Tools like Google Analytics and Tableau let your business gather deeper customer data, offering insights into trends, behavior patterns, and areas for improvement. 

4 Actionable Insights from Customer Loyalty Data 

Data is key for restaurants and c-stores to take the right actions. Here are four useful real-life examples:

1. Segmentation of Loyal Customers: A quick-service restaurant (QSR) finds that families with children visit most on weekends. Tailored promotions like discounted kids’ meals boost these visits.  
2. Personalized Loyalty Programs: Your restaurant could use its customer purchase history to offer personalized discounts or special promotions, encouraging your customers to visit more often. 
3. Predicting Retention Decline: Early identification allows your business to take proactive steps to re-engage customers before they leave through targeted offers and personalized outreach. 
4. Improving Customer Experience: By reviewing its data, a fast-food service may notice frequent complaints about long drive-thru wait times. This insight would lead to that business streamlining order processing and improving overall customer experience.

Customer Loyalty Analysis 

Understanding customer loyalty on a deep level involves both qualitative and quantitative aspects, giving your business a clearer picture of what drives loyalty and how to improve retention and satisfaction. It's about understanding both macro and micro trends – like the most popular ordering times and whether or not a new product launch is profitable – down to the reasons a customer did or didn’t buy. 

1. Qualitative Analysis

This type of analysis focuses on understanding the "why" behind customer actions. It involves gathering insights through customer feedback, surveys, reviews, and social media interactions.  

2. Quantitative Analysis

Quantitative analysis relies on hard data—such as purchase frequency, CLV, retention rates, and NPS. These metrics give businesses measurable insights into customer behavior.  

Analysis Methods 

Businesses can use several analysis methods, such as customer segmentation, which divides customers based on behaviors or demographics to tailor a loyalty program. Sentiment analysis uses NLP to assess customer feelings through reviews, social media, and feedback. Behavior modeling analyzes past behaviors, like purchase patterns, to predict future actions. 

5 Customer Loyalty Metrics 

Measuring customer loyalty is a must and smart businesses often rely on a combination of approaches and methodologies to do so. Here are five key metrics to analyze loyalty effectively: 

1. Customer Retention Rate

This metric tracks the percentage of customers who continue to buy from you over a given period.  

Formula:  

(Customers at the end of the period - New customers acquired during the period​) / Customers at the start of the period) x 100 

Example:  

• Customers at the start of the period: 200 
• New customers acquired during the period: 50 
• Customers at the end of the period: 180 
• Result: 65% of the customers who were with the business at the start of the period have returned. There’s room for improvement.  

2. Net Promoter Score (NPS)

NPS measures customer satisfaction by asking how likely customers are to recommend your product/service to a friend or colleague. Customers answer on a scale from 0 to 10.  

• Promoters (score 9–10): Loyal customers who are likely to recommend your product or service. 
• Passives (score 7–8): Satisfied but not enthusiastic customers. 
• Detractors (score 0–6): Customers who are unlikely to recommend. 

Formula:  

NPS = % of promoters - % of detractors

Example:  

Out of 100 respondents: 

• 60 are promoters (score 9-10) 
• 30 are passives (score 7-8) 
• 10 are detractors (score 0-6) 
• Result: 50, which shows that most customers are promoters who would recommend the business.

3. Customer Lifetime Value (CLV) 

CLV considers factors like purchase frequency, average order value (AOV), and retention rate to estimate how much you should invest in retaining loyal customers. 

• Average purchase value is the average amount a customer spends in each transaction. 
• Purchase frequency is how often the customer makes a purchase (e.g., annually). 
• Customer lifespan is the average number of years a customer stays with your business. 

Formula: 

CLV = Average Purchase Value x Purchase Frequency x Customer Lifespan 

Example: 

• Average purchase value: $50 
• Purchase frequency: 10 times a year 
• Customer lifespan: 5 years 
• Result: $2,500 expected to be spent by the customer over the course of 5 years. 

4. Customer Surveys

Satisfied customers are more likely to become loyal, so surveys track customer engagement scores, which have a high likelihood of predicting future loyalty.  

Formula:  

Average Satisfaction Score = (Satisfaction Scores of all respondents / Total number of respondents) 

Example:  

• Survey of 5 customers: 5, 4, 5, 3, 4. 
• Result: 4.2 out of 5, which is strong; however, there’s still potential to improve the customer experience.

5. Repeat Purchase Rate (RPR)

This metric measures how often customers return to make additional purchases.  

Formula: 

Repeat Purchase Rate = (Number of customers who made more than one purchase / Total number of customers) x 100

Example:  

• 50 customers made repeat purchases out of 200 total customers. 
• Result: 25%, which suggests that 1 in 4 customers return for additional purchases.  

How to Measure Brand Loyalty 

In simple terms, brand loyalty is more emotional than customer loyalty, which is primarily about behaviors. It’s when customers develop a strong preference for a brand, going beyond the transaction to associate themselves with the brand’s identity and values. 

Metrics and Methods 

Several metrics help you measure brand loyalty and understand the emotional connection your customers have and how to improve it: 

• Brand Equity: This is the value a brand adds to its products or services based on customer perceptions, experiences, and reputation. It’s often measured through customer awareness, brand associations, perceived quality, and brand loyalty. 
• Common Methods: Surveys and sentiment analysis measure brand attachment, prompting your customers to share how strongly they feel connected to your brand or how much they trust it.  
• Share of Voice (SOV): SOV is a metric that measures how often your brand is discussed relative to competitors. It can be measured through social media mentions, online reviews, or advertising spend. 
• Customer Advocacy: Tracking referrals, online reviews, and the frequency of customers recommending your brand to friends and family is an effective way to measure brand loyalty.

Brand Loyalty In Marketing Strategies 

Once you’ve measured your brand loyalty, it’s essential to integrate your findings into your marketing strategies to align objectives:  

• Emotional Connections: Share stories, experiences, and values that align with your audience’s beliefs, building stronger brand affinity. 
• Loyalty Programs: Design loyalty programs that reward your customers for repeat engagement, advocacy, and emotional investment. 
• Monitor Competitors: If one of your competitors is gaining share of voice or brand loyalty, analyze their strategies and adjust yours accordingly to maintain or increase your own brand’s loyalty. 
• Consistent Brand Experience: Ensure your customers have a consistent, positive experience across all touchpoints (online, in-store, customer service) to reinforce brand loyalty.  

3 Loyalty Program Measurement Case Studies 

Companies that have successfully measured and improved both customer loyalty and brand loyalty using the discussed methods and metrics include: 

1. Chick-fil-A: Leveraging Customer Data for Loyalty

The popular fast-food chain uses customer retention rates and CLV to track loyalty. Its loyalty app collects data on customer preferences and behaviors, enabling personalized promotions and a rewards system that encourages repeat visits with free food and discounts. 

2. Starbucks: Personalized Loyalty through Rewards

With over 20 million U.S. members, Starbucks uses NPS and repeat purchase rate (RPR) to measure customer happiness and loyalty. The Starbucks Rewards program provides personalized rewards, mobile features, and exclusive offers, driving both repeat visits and emotional brand attachment. 

3. 7-Eleven: Using Data to Drive Convenience Store Loyalty

The leading convenience store retailer tracks NPS and repeat purchase rates through its 7Rewards program. Customers earn points for purchases, which they can redeem for discounts or free products. This has driven increased app usage and customer retention, with more repeat customers engaging through the loyalty program. 

Frequently Asked Questions About How to Measure Customer Loyalty  

What are the main customer loyalty metrics? 

• Customer Retention Rate: Indicates the proportion of customers who maintain their relationship with your business over a given period. 
• Net Promoter Score (NPS): Evaluates customer loyalty by gauging how inclined customers are to suggest your brand to others. 
• Repeat Purchase Rate (RPR): Measures how often customers return to make additional purchases. 

What is customer loyalty analytics? 

• CRM Systems: Tools that track customer data and interactions to help personalize loyalty marketing strategies. 
• Data Analytics Platforms: Platforms that analyze customer data to identify trends and improve loyalty programs.

How do you measure brand loyalty? 

• Brand Equity: Measures the value a brand adds based on customer perceptions and reputation. 
• Brand Attachment: Assesses the emotional connection customers have with a brand. 
• Share of Voice (SOV): Measures a brand’s visibility relative to competitors. 
• Customer Advocacy: Tracks how often customers recommend the brand to others. 

How many customers should you survey to measure loyalty? 

The number of customers to survey depends on your business size, but ensuring a representative sample is critical for accurate insights. The larger your sample size, the more likely your results are to be accurate. 

The Bottom Line 

Beyond the metrics and methods to measure restaurant customer loyalty and improve loyalty programs, the real key is the importance of regularly tracking both customer and brand loyalty. Your business can adjust its strategies, identify areas for improvement, and align efforts to meet your customers’ evolving expectations long-term.  

Truly understanding customer needs and behavior provides powerful insights that enable businesses to create personalized, effective strategies that not only retain existing customers but also attract new ones. Loyalty programs help businesses optimize profitability by fostering loyalty, increasing customer retention, and encouraging higher spending and repeat visits. 

Ready to apply these methods and metrics to measure the effectiveness of your customer loyalty programs? Book your demo now and download our Annual Loyalty Report, which offers exclusive insights and actionable data for restaurants and c-stores to elevate your program.