Given the many problems with customer satisfaction measurement, it is little wonder that many companies are failing to find a strong relationship between customer satisfaction measures and economic performance. For example, the CEO of a manufacturing company that produces industrial equipment was feeling intense frustration with the lack of results from his firm’s satisfaction program when he remarked, "It gives me a warm feeling to know that the customer satisfaction score is up again for the fourth straight year. Now, can someone tell me why profitability and market share are down again?"
The Twelve Laws of Loyalty
1. Build staff loyalty.
It’s a fact: any firm with a high level of customer loyalty has also earned a high level of staff loyalty. It’s darn near impossible to build strong customer loyalty with a staff that is in constant turnover. Why? Because customers buy relationships and familiarity. They want to buy from people who know them and their preferences. The key rule of loyalty: serve your employees first so they, in turn, can serve your customer.
2. Practice the 80/20 rule.
In building customer loyalty, the 80/20 rule is alive and well. Roughly speaking, 80 percent of your revenue is being generated by 20 percent of your customers. All customers are not created equal. Some represent more long-term value to your firm than others. A smart company segments customers by value and monitors activities closely to ensure high value customers get their fair share of special offers and promotions. Unlike many firms that simply measure overall redemption, these savvy loyalty builders pay close attention to who redeems.
3. Know your loyalty stages, and ensure your customers are moving through them.
A customer becomes loyal to a company and its products and service one step at a time. By understanding the customer’s current loyalty stage, you can better determine what’s necessary to move that customer to the next level of loyalty. Our Profit Generator loyalty system comprises six stages: suspect, prospect, first-time customer, repeat customer, client, and advocate. If your customer relationship processes and programs aren’t moving customers forward, rethink them.
4. Serve first; sell second.
Today’s customers are smarter, better informed, and more intolerant of being “sold” than ever before. They expect doing business with you to be as hassle-free and gratifying for them as possible. When they experience good service elsewhere, they bring an if-they-can-do-it-why-can’t-you? attitude to their next transaction with you. They believe you earn their business with service that is pleasant, productive, and personalized; if you don’t deliver, they’ll leave.
5. Aggressively seek out customer complaints.
For most companies, only 10 percent of complaints are ever articulated by customers. The other 90 percent are unarticulated and manifest themselves in many negative ways: unpaid invoices; lack of courtesy to your frontline service reps; and, above all, negative word of mouth. With the Internet, an unhappy customer can now reach thousands of your would-be customers in a few keystrokes. Head off bad press before it happens. Make it easy for customers to complain, and treat complaints seriously. Establish firm guidelines regarding customer response time, reporting, and trend analysis. Make employee complaint monitoring a key tool for executive decision making.
6. Get responsive, and stay that way.
Research shows that responsiveness is closely tied to a customer’s perception of good service. The advent of the Internet has changed the customer’s perception of responsiveness. More and more, customers are coming to expect round-the-clock customer service. Additionally, customers now arrive at a Website time-starved and eager to locate answers. Technology tools such as customer self-service, e-mail management, and live chat and Web callback are proving increasingly critical in addressing the demanding customer’s responsiveness needs.
7. Know your customer’s definition of value.
The loyalty password is value. Knowing how your customer experiences value and then delivering on those terms is critical to building strong customer loyalty. But knowing your customer’s true definition of value is not easy because value definitions are constantly changing. Invest in customer loyalty research that enables you to understand, through the eyes of the customer, how well you deliver value.
8. Win back lost customers.
Research shows that a business is twice as likely to successfully sell to a lost customer as to a brand new prospect. Yet winning back lost customers is frequently the most overlooked source for incremental revenue in many firms. Why? Because most firms consider a lost customer a lost cause. With the average company losing 20–40 percent of customers every year, it’s imperative that a firm create a hard-working strategy, not only for acquisition and retention but also for win-back. Since no customer retention program can be 100 percent foolproof, it follows that every company needs a process for recapturing those high-value customers who depart. Think of it as loyalty insurance.
9. Use multiple channels to serve the same customers well.
Research suggests customers who engage with a firm through multiple channels exhibit deeper loyalty than single-channel customers. But take note: this finding assumes the customer gets the same consistent service whether coming into the store, logging onto the Website, or calling the service center. To accomplish this, your firm must internally coordinate sales and service across multiple channels so that customer preferences are accessible no matter how the customer chooses to interact. Today’s customers expect to hop from channel to channel, and they expect good service to follow.
10. Give your front line the skills to perform.
Increasingly, the employee front line is a call center where agents interact with customers. These agents are the loyalty warriors of the future. Converged call centers that bring together multichannel access points (phone, fax, e-mail, Web) are on the rise. Gartner Group estimates that 70 percent of North America’s call centers will migrate to multichannel contact centers by 2005. This means these agents need to be equipped as much to produce a well-written e-mail reply and navigate the company Website as to be helpful and friendly on a phone call.
11. Collaborate with your channel partners.
In today’s complex marketplace, a firm is often dependent on many suppliers to help serve its customers. Embracing these supply chain relationships for the greater good of the ultimate customer creates customer value that is hard for competitors to match. For example, a European auto manufacturer converted its customer database program into a system that could be shared by all channel partners. By refusing to hoard the information, the manufacturer helped create a blended-channel strategy that built greater customer loyalty throughout the distribution chain.
12. Store your data in one centralized database.
Most firms lack a 360 degree view of their customers because they have no centralized database. Billing departments, sales divisions, and customer service centers might all have their own database, with no effective means for creating a complete customer information composite. To effectively implement a sound customer loyalty strategy, data from all customer touch points must be combined into a centralized customer database. Without it, the firm is greatly handicapped in its efforts to serve the customer.
- Jill Griffin, Customer Loyalty
