When selling your business one of the typical buyer concerns that you will encounter is the possibility that your customers will defect to a competitor after the purchase. Having a high level of customer loyalty, and evidence to prove it, helps to mitigate this risk. Whether you’re considering selling your business, are in the middle of preparing your exit plan, or just looking to increase your customer loyalty point blank, this article will cover the best way to measure customer loyalty alongside my tips on how to increase it.

Measuring customer loyalty

It’s widely accepted that the best and most common measure of customer loyalty is what’s called the net promoter score (NPS). This is a metric that’s become increasingly popular with acquirers, particularly private equity firms. So, how do you create an NPS? In essence, you send your customers regular surveys in which you ask a standard question: ‘On a scale of 1 to 10, how likely are you to recommend us?’ Scores of 9 or 10 are considered positive, 7 or 8 ambivalent, and 6 to 1 negative. To calculate your overall score, you add up the positive scores as a percentage of the whole, remove the negative ones, and end up with a number which represents your NPS. For example, if 60% of your respondents are promoters and 10% are detractors, your NPS would be 60 − 10 = 50.

Having a high NPS doesn’t only reassure your buyer that your customers will stay with your company after the sale, it’s also evidence of your brand value. You’ve clearly worked hard to create a business that offers an excellent product or service that people are happy to buy and recommend, creating a high customer lifetime value in the process. That means your business is resilient, competitive and capable of growth. What’s more, buyers know that, as the saying goes, what gets measured gets done. So, the simple fact that you’re measuring your NPS before you put your business up for sale shows that you take customer satisfaction and loyalty seriously.

Although each of the ten drivers of business value interrelates with one another, high customer loyalty is one that encapsulates almost all of them. When customers are happy to buy from you repeatedly, you’re able to grow and scale. You’re likely to have recurring revenue, a positive market positioning, and healthy working capital, and the risks associated with being over-dependent on key individuals or customers dissipate. That’s why companies which measure their NPS and work on strategies to grow it usually achieve high valuations when they sell.

Tips for creating high customer loyalty

Given that your NPS is such a firm indicator of how viable and robust your business is, it’s worth spending time on these strategies for increasing your customer loyalty:

• Enhance your customer experience across all touch points. Carry out a review of all your customer touch points, from initial contact to post-purchase support. Then make sure that your employees are trained to give outstanding service at each stage. By consistently exceeding your customers’ expectations, you can raise your NPS
• Seek and act on customer feedback. As part of the above, you can put in place feedback mechanisms for customers to tell you what they think, so that you have the information to act on their concerns. You can use surveys, interviews and online reviews to gather data, which will give you the ability to spot trends and uncover pain points
• Personalise your communications and services. People want to be treated as individuals. By segmenting your customers based on whatever criteria are relevant to your brand, you can tailor your offerings to their preferences and needs. Ways of doing this include using data analytics and customer relationship management systems to track interactions and anticipate needs
• Empower your employees. When you give your front-line staff the autonomy and training they need to solve customer problems effectively, it makes a positive impact on those customers. It’s important to reward employees who do a good job of this, as having a customer-centric culture is key to raising your NPS
• Track your NPS metrics. If your aim is to create a higher NPS, it goes without saying that you need to measure it regularly and monitor its performance. So, set goals for improving it and track the key performance indicators (KPIs) related to customer satisfaction and loyalty. The wonderful thing about measuring your NPS is that you’ll find yourself putting initiatives in place to improve it. Then, as if by magic, your customers will become more loyal, they’ll spend more money with you, and your business will achieve the growth we talked about in the first two drivers of business value

In conclusion, whether you’re planning to sell soon or just want to future-proof your company, investing in customer loyalty today will pay dividends in the future. Keep customers at the heart of what you do, invest in your services and staff to provide the best experience, and continue to regularly survey your customers to track your NPS and you’ll soon have a business that not only performs well – but is truly worth more.

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