Retaining customers is 7x cheaper than acquiring a new customer. We have to do the purchase analysis of a customer, he has 3-4 different behaviors before buying anything, Incentive-wise their behavior and they will get further. 

Sales nowadays run on formulas connected to the customer's behaviors. We will understand these with the following 5 Formulas For Customer Loyalty.

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1. Repurchase Rate

The repurchase rate is calculated by No. of Repurchase upon No. of Unique purchase X 100

No. of Repurchase
_____________________     X    100    =     Repurchase Rate

No. of Unique Purchase

For Example, 1000 people purchased a product from Ram, and from which 100 were the existing customers then the repurchase rate will be

______     X    100    =    10% 


The repurchase rate of the product is 10%, which means that 10% of customers are loyal customers. Now when you get the benchmark you can use some strategies to improve the repurchase rate which will automatically improve the profit.

2. Net Promoter Score

Net Promoter Score - On a scale of 1-10 how satisfied is your customer with your product or service. It can be anything staying in a hotel room, eating food in a restaurant, etc.

If a customer gives a rating between 1-6 it means his experience is not good or worst, he will not recommend it to anyone rather he would tell others to avoid it.

If a customer gives a rating between 7-8 it means that the customer is neutral, If somebody asks for the recommendations he will act neutral.

And if a customer gives a rating between 9-10 it means that the customer is very happy with your service or product, he will recommend it to his family and friends. He will act as the promoter for you and he is your loyal customer.

For example, You have 100 feedback forms, In which 70 gave you 9-10 points, 10 gave you 7-8 points, and 20 gave you 1-6 points. The neutral customers have no effect.

Net promoter score =  70 (Promoters) - 20 (Detractors) = 50 Net Promoters.

3. Up-Selling and Cross-Selling ratio

Up-selling and Cross-selling seem to be technical but are simple. 

If a customer bought a product and you offered a related to it and he buys that product as well is known as up-selling and cross-selling.

For Example, You are an insurance agent and a customer bought life insurance from you in a year. Did you offer any other product to him as you have plenty of products available with you such as Home insurance, car insurance, etc

                                                             1000 (Number of customers buying more than 1 product)
Up-Selling and Cross-Selling Ratio =    _____________________________________________    X    100    =    20%

                                                               5000 (Number of customers buying a single product)

20% of people are your loyal customers.

4. Frequency and Recency

Frequency means how many times your customer is coming and recency means at what interval your customer is coming.

Both frequency and recency are important in a business.

For example, there are 2 vendors Ram and Shyam. People generally buy products from Ram's store but he closes his shop for a week and all customers shifted to Shyam's store. But after a week Ram's store again opened and the customers again shifted to Ram's store. Here customers are loyal to Ram and come to him in frequency and recency.

5. Redemption Rate

Check the redemption rate.

Give your customer a coupon code or loyalty bonus or point coupon, give coupons for the next purchase. You may see many companies like big bazaar give coupons so that the customers come back for the next purchase. 

                                5000 (Number of coupons redeemed)
Redemption rate = __________________________________        X        100        =    50%

                                10000 (Number of coupons issued)

If the redemption rate is good it means that your idea is brilliant and on the other hand if the redemption rate is not good it means that your idea is not good or the scheme that you are running is not attractive.