This loyalty translates directly into tangible benefits for the business:
Higher profit margins due to reduced acquisition costs
More predictable cash flow thanks to recurring purchases
Greater ability to scale the business sustainably
How to improve CLV?
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1. Average Purchase Value This component reflects how much a customer spends on each transaction. We can increase it through cross-selling strategies, improving product quality, or creating attractive value packages.
2. Purchase Frequency Represents how often customers purchase. This can be improved with effective loyalty programs, timely reminders, and ensuring the shopping experience is so seamless that customers want to repeat it.
3. Average Customer Lifecycle This is the length of time a customer remains active with your brand. It is strengthened by building strong relationships, offering exceptional service, and anticipating customer needs before they arise.
Each of these elements reinforces each other. For example, a customer who is satisfied with their purchase value will likely purchase more frequently, and this consistent satisfaction will naturally extend their life cycle with the brand.
4. Net Promoter Score (NPS): The thermometer of customer loyalty
What is NPS?
The Net Promoter Score (NPS) is a fundamental metric that helps us understand how likely our customers are to recommend our business to their personal and professional circles. Think of the NPS as a thermometer that measures the temperature of your customers' satisfaction and loyalty.
This metric is especially valuable because it goes beyond simple satisfaction: it tells us the level of enthusiasm and commitment a customer feels towards our brand.
How is NPS calculated?
The Net Promoter Score (NPS) is calculated by asking customers a single question: 'On a scale of 0 to 10, how likely are you to recommend this product/company to a friend or colleague?'
Data from this question helps businesses improve their services, support, delivery, and other aspects to increase customer loyalty.
Based on the selected score, the customer is classified into one of the following categories:
Detractors (0-6) : Customers in this group had an unpleasant experience with your company and are likely to express their dissatisfaction to others.
Passives (7-8) : This group is satisfied with their experience, but could easily switch to competing companies and is unlikely to recommend.
Promoters (9-10) : These customers continue to return to your product or service and refer their friends.
The score is calculated using this formula:
Optionally, some organizations also ask, “Why did you choose this score?” This allows the business to get direct qualitative feedback in addition to the numerical score.
You may be interested in: NPS Question: Is it better to ask at the beginning or at the end of the survey?
NPS Formula Components Explained
The NPS formula has three key elements that help us understand the general sentiment of our customers:
1. Number of promoters
These are the customers who gave a score of 9 or 10. These are your biggest fans, the ones who will not only continue to buy from you, but will actively recommend your brand. They are like the unofficial ambassadors of your company.
2. Number of detractors
These are customers who scored between 0 and 6. They represent the critical voices that could negatively affect your reputation. It is important to note that even a score of 6, which may seem “passing,” is considered detractor because it indicates lukewarm satisfaction that can easily turn into defection.
3. Total number of respondents
This is the sum of all respondents, including the passive respondents (7-8). Although the passive respondents do not directly affect the final calculation, they are important in order to obtain the correct percentage.
Practical example
Let's imagine a company that surveyed 200 customers with these results:
80 customers gave 9-10 (promoters)
40 customers gave 7-8 (passive)
80 customers gave 0-6 (detractors)
Applying the formula:
NPS = (promotores - detractores) ÷ total de encuestados × 100
NPS = (80 - 80) ÷ 200 × 100
NPS = 0 ÷ 200 × 100
NPS = 0
In this case, the NPS of 0 indicates a perfect balance between promoters and detractors. While this is not a bad result, it suggests that there is room for improvement in the customer experience, as for every customer who actively recommends you, there is another who could be speaking negatively about your brand.
