IIMT COLLEGE OF MANAGEMENT

GREATER NOIDA
PRESENTATI ON TOPI C
ON
CUSTOMER LOYALTY &
MEASUREMENT
PREPARATION BY:
SAURABH MISHRA
MBA,3
rd
sem.
SEC-B
ROLL.NO. 1371270097
What is Customer Loyalty?
Attracting the right customer
Encouraging customers to buy, buy often, buy in higher
quantities and bring you even more customers
Providing excellent customer service

It appears that definitions fall into two broad categories of loyalty: emotional and behavioral.
Emotional loyalty is about how customers generally feel about a company/brand (e.g., when
somebody loves, trusts, willing to forgive the company/brand).
Behavioral loyalty, on the other hand, is about the actions customers engage in when dealing
with the brand (e.g., when somebody recommends, continues to buy, buys different products
from the company/brand). Generally speaking, then, we might think of customer loyalty in
the following way:
Customer loyalty is the degree to which customers experience positive feelings for and
engage in positive behaviors toward a company/brand.

Measurement Approaches
There are two general approaches to measuring customer loyalty:
1) Objective approach
2) Subjective (self-reported) approach.
1. Objective measurement approach include system-captured metrics that
involve hard numbers regarding customer behaviors that are beneficial to
the company. Data can be obtained from historical records and other
objective sources, including purchase records (captured in a CRM system)
and other online behavior. Examples of objective loyalty data include
computer generated records of time spent on the Web site, number
of products/services purchased and whether a customer renewed their
service contract.
2. Subjective measurement approach involves soft numbers regarding
customer loyalty. Subjective loyalty metrics include customers self-reports of
their feelings about the company and behavior toward the company. Examples of
subjective loyalty data include customers ratings on standardized survey
questions like, How likely are you to recommend <Company> to your
friends/colleagues?, How likely are you to continue using <Company>? and
Overall, how satisfied are you with <Company>?
Customer Loyalty Measurement Framework:
It is important to point out that the subjective measurement approach is not
synonymous with emotional loyalty. Survey questions can be used to measure
both emotional loyalty (e.g., overall satisfaction) as well as behavioral loyalty
(e.g., likelihood to leave, likelihood to buy different products). In my prior
research on measuring customer loyalty, I found that you can reliably and
validly measure the different types of loyalty using survey questions.
Looking at the lower left quadrant of Figure 3, you see that there are different
ways to measure advocacy loyalty. While you might question why likelihood to
recommend and likelihood to buy same product are measuring advocacy
loyalty, research shows that they are more closely associated with emotional
rather than behavioral loyalty. Specifically, these questions are highly related to
overall satisfaction. Also, factor analysis of several loyalty questions show that
thesethree subjective metrics (sat, recommend, buy) loaded on the same factor.
This pattern of results suggests that these questions really are simply measures
of the customers emotional attachment to the company/brand.
I have include the metrics of level of trust, willingness to consider and
willingness to forgive as emotional loyalty metrics due to their strong
emotional nature. Based on what I know about how customers rate survey
questions. I suspect these questions would essentially provide the same
information as the other questions in the quadrant. That, however, is an
empirical question that needs to be tested.
Benefits of Measuring Different Types of Customer Loyalty
Target solutions to optimize different types of customer loyalty. For example,
including retention loyalty questions (e.g., likelihood to quit) and a purchasing
loyalty questions (e.g., likelihood to buy different) can help companies
understand why customers are leaving and identify ways to increase customers
purchasing behavior, respectively.
Identify key performance indicators (KPIs) for each type of customer loyalty.
Identification of different KPIs (key drivers of customer loyalty) helps companies
ensure they are monitoring all important customer experience areas. Identifying
and monitoring all KPIs helps ensure the entire company is focused on matters
that are important to the customer and his/her loyalty.
Obtain more accurate estimates of the Return on Investment (ROI) of
improvement initiatives. Because ROI is the ratio of additional revenue (from
increased loyalty) to cost (of initiative), the ROI of a specific improvement
opportunity will depend on how the company measures customer loyalty. If only
advocacy loyalty is measured, the estimate of ROI is based on revenue from new
customer growth. When companies measure advocacy, purchasing and retention
loyalty, the estimate of ROI is based on revenue from new and existing customer
growth.