I had an interesting conversation this morning with a customer who is currently in the process of reengineering the way in which it measures and processes customer feedback. Value-based metrics can be misleading, and it seems too often companies are making the mistake of misinterpreting or overvaluing, as this business discovered, customer loyalty and other related metrics.
What we measure as loyalty is not always real loyalty. And while there are countless studies that correlate loyalty and re-purchasing, wallet-share, increased value, etc., I think many businesses make the mistake of tracking two distinct metrics and establishing a nonexistent relationship between them.
Customer segmentation across different demographical, sociological, or behavioral buckets can often mislead analysts about the true correlation between customer loyalty and profitability. CRM has always been good at tracking and correlating transactional and behavioral information, but attitudinal data, which is what customer loyalty seeks to capture, is a very popular, but still very separate measurement that the industry is still figuring out how to add into the analytical mix.
When it comes down to it, I don’t believe there’s a concrete, proven method that can denote whether a specific customer will continue to do business with a company, at least not for the broad range of businesses out there. Segmenting your customer base, finding the key metrics for each, and co-relating those based on historical actions…with customer loyalty acting as a sort of third-party opinion…seems the best route to go.