Loyalty: Goal or Objective

How do we treat the concept of loyalty?

Lately I've been reading a lot on customer experience, CRM maturity models, etc. in the context of analyzing the performance of customer marketing programs.   And while I read a lot about loyalty as part of the strategy I don't see the metric I can map to it.   Somewhere in the reams of stats, metrics, spreadsheets and data dumps there has to a number I can report as success or failure, doesn't there?

Without a quantifiable metric, the concept of loyalty remains a lofty goal- something we aspire to.  And without a link between the goal and the program we run the risk of getting off track and doing what we can measure and claiming it as a success.     Too many times I've heard "we can't measure loyalty so we'll report time on site, posts, opens as the collective measure of engagement." 

If we want loyal customers, then we have to define it in a way that we know we have one when we see one. 

Early in my career I did simulated test marketing where depth of repeat, or the odds of making additional purchases, drove the ultimate success or failure of product.  We could buy trial, but if the product didn't deliver sales eroded.   Is it that simple?

Loyalty, as an objective, is the probability of a consumer making the next purchase.   For a given brand, the odds of repeat increase as the number of transactions increases.   The more often I buy, the more likely I'll buy again.   This simple data can be plotted as a curve and when it starts to stabilize somewhere between 50% and 80% we put a stake in the ground and say 'there is loyalty' because the value of future transactions starts to increase.  

So, here's what I'm telling clients:  "a customer is loyal when the probability of repeat is greater than x%."   Now we simply need to focus on two questions.

1. How do we keep them?   Here reward strategies are more appropriate than encouragement ones; they've already decided to buy your brand.  Surprise, or intermittent reinforcement, is a very powerful motivator as is exclusivity and uniqueness.  
2. How do we get more of them?  It is not unusual to find less than 15% of a business where this condition is true.   The path to loyalty goes through "Thank You" - the acknowledgement of the first transaction based on the fact that first impressions are lasting.  

Now my presentations to the executive team align....