Measuring Loyalty

It’s a cliché but attracting new visitors to your site is many times more expensive than keeping existing ones. With this in mind, it makes sense to have a metric that tracks loyalty so that you can see how good you are at creating, keeping and building on loyal customers.

A very simple way of tracking loyalty is to measure repeat visits. However, you can get more scientific than this by breaking repeat visits down into three core loyalty metrics: recency, frequency and monetary value.

Recency

It’s an established e-marketing fact that someone who comes to your site is more likely to return if they have been there recently. You can use the recency metric to trigger marketing activities. For example, when 2 weeks have elapsed since a customer’s last visit, send them an email.

Frequency

Measuring how frequently a visitor comes to your site can reveal a lot. A sudden increase in frequency could be a pre-cursor to some sort of event such as a purchase whereas a drop could indicate that your visitor is being enticed away by a competitor. In each case, it is possible to react and influence what is happening, either by sending emails, offering discounts, following up with a phone call etc.

Monetary value

If a web visitor has made purchase as a result of visiting your site, the value of this customer suddenly increases. They are more likely to make subsequent purchases and you should have mechanisms in place to encourage this. However, it is also important to track monetary value so that you can begin to spot customers who have not yet purchased but are displaying similar behaviour to those who have.

Pulling the three together

You can create a single metric that incorporates recency, frequency and monetary value. Develop a scale for each metric, for example 1-3 where 1 is low and 3 is high. Each visitor can then be given a loyalty metric. Brand new visitors will start off with 111 and the ideal visitor will be a 333. You can then segment your visitors into 27 (i.e. 3 times 3 times 3) separate loyalty segments and plan activity for each segment. You might need to group similar segments together for simplicity.