Customer Loyalty: How Smart Companies Build Long-term Success

0

One definition of insanity is doing the same thing over and over and expecting a different result. Judging by the way some companies relate to their customers — focusing on transactions rather than relationships — the same definition could also apply to their idea of business as usual.

Customer loyalty is becoming the ultimate goal of smart companies today. Loyalty brings a basket of benefits, including lower cost of sales, better revenue predictability, lower customer acquisition costs, greater word-of-mouth referrals and reduced risk. Yet many firms are practically stone deaf when it comes to listening to the voice of their customers. They survey consumers. They handle customer complaints. They collect operational business data. All in a vacuum. And they fail to put in place the management strategies and structures that make customer care an overarching way of doing business.

According to John Goodman, vice chairman of TARP Worldwide, a firm specializing in customer experience research, only about 20 to 30 percent of companies have formal, effective voice of the customer programs that create the economic imperative to actually get most issues fixed. Often, responsibility for monitoring, measuring, assessing and addressing the customer experience is distributed among several departments, and the opportunity to glean actionable intelligence for anticipating consumer needs and solving problems before they occur is lost.

Goodman says, “The voice of the customer is available at every phase of the business lifecycle, from marketing and sales to support and billing. Putting these pieces together and integrating them with operational data creates a credible, holistic picture of the business enterprise. A few companies have sought to capture and elevate the end-to-end customer experience, but they are the exception.”

But it is only the “exceptional” company that truly captures the customer’s attention, appreciation, loyalty and enhanced margins. Having the processes, methods and infrastructure in place to move from an environment of commercial transactions to customer relationships is key. But opening the door to customer relationship building and, as a result, customer loyalty, begins at the top with a philosophy of capturing consumer loyalty as a way of doing business. In this context, the organization must be committed not just to satisfying customer requirements, but to anticipating potential problems as well as new requirements and proactively addressing them.

“Customers who are not loyal, but merely satisfied, are able to switch brands more quickly now,” says loyalty guru Micah Solomon. “Why? Because there are so many choices, many of them very similar, and all of them a click away.”

Solomon, author of High Tech, High Touch Customer Service, says the secret to building customer loyalty comes from “anticipatory customer service.” While magic is not involved, there is something magical about the ability of some companies to transform the consumer experience, turning a basic transaction into a trusted relationship. “When customers feel that you know what they are looking for before they ask for it, they feel at home at your business and their desire to wander — whether for a lower price or because you made a minor stumble in your service delivery, goes away to a significant extent,” Solomon says.

Creating the magic

Start with clarity. Companies sometimes confuse developing brands with establishing loyal customers. Advertising, earned media and marketing can certainly generate a sense of excitement to sell products and services. But their power to engage the customer over the long term is limited. A commitment to customer care puts organizations on the road to sustained customer relationships and greater loyalty.

The reason is people. Like every human emotion, loyalty is the result of behavior. According to James Kane, a speaker, author and consultant on the psychology of loyalty, deciding to be loyal is really deciding a pair of questions: Do you make my life easier? Do you make my life better?

“If I do not have to do as much work or use as much brain power, if you can complement something that I don’t do very well, then it’s a good thing to have you in my life,” he says.

So much for easier. What about better?

“Because we are self-aware creatures, we are not just living to eat and reproduce. We think about going on vacation, sending our kids to college, things that have nothing to do with our basic survival. It’s about fulfillment. If I can find an organization, an individual or a product that makes my life better and more fulfilling, that limits the number of choices I need in this world. We are always looking to limit the choices we have,” Kane notes.

Trust is an important consideration in answering these “easier and better” questions, but too often trust is merely asserted by the company rather than demonstrably proven to the customer. Trust is about being competent, reliable, honest and consistent. But even as important as these elements of trust are in establishing customer satisfaction, they fall short when it comes to true relationship building.

“You never get credit for being trustworthy,” Kane says. “I expect you to be fair. I am not going to give you credit for that. The only time that I have to question it is when you aren’t.” And here’s where the magical thinking comes in. Or maybe mind-reading: “It’s not about whether I am competent at my job; it’s about whether I am as competent as you think I need to be,” Kane says.

He notes that building trust is about managing expectations — but not in the sense that a client’s unrealistic thinking must be given a reality check. Rather, it is the process whereby the customer’s evolving needs and the company’s ability to meet those needs are constantly measured and addressed.

Transaction-based companies wring costs out of their systems to improve margins. By doing the same thing over and over, by standardizing operations, albeit with better quality and efficiency, they hope for a different result: higher profitability. But the transactions themselves may be based on false consumer assumptions and poorly managed expectations, hiking customer attrition. This may be a strategy for the short term, but in a world in which consumer preferences can change with a tweet, it is hardly a winning approach for the long haul.

Building relationships

Relationship-building companies invest in customer care people, processes and technology to gain a better understanding of the customer, to use more personalized interactions to give that customer a greater sense of belonging, and to nurture the sense of identity with a product or service that turns consumers into advocates. For these companies, employees coloring outside the lines to improve a customer experience is a virtue.

Gaining C-suite buy-in to the strategy of becoming the leading customer relationship company in a given market sector is a key step in building relationships. A recent TARP survey found just over half of chief financial officers and chief marketing officers felt comfortable investing in the customer experience to enhance revenue. That is great news and market advantage for companies actually making those investments.

Another step in building relationships involves empowering customer care employees to solve problems at the point of contact. According to Goodman, a single product or service problem can double a customer’s sensitivity toward price. It pays to resolve customer problems quickly.

Incorporating customer care into every aspect of virtual operations and social networking is also important in today’s tech-savvy culture. Websites need to support the goal of customer self-service, and social media channels must reflect customer preferences for effective and efficient problem resolution.

Finally, becoming a learning company is a critical step in building those customer relationships. From contact centers to social media sources to employees in the field, customers are talking, and what they are saying can identify trends, flag problems, recalibrate expectations and customize interactions. Make the voice of the customer valuable input to every department and business unit and adopt accountability measures to make certain all issues are resolved. Listen, learn and profit from this rich source of market feedback.

While changing from a company that simply performs transactions to a company that anticipates customer needs and exceeds customer expectations may sound like magic, the goal is quite practical and achievable. When companies are competing on this basis, to do otherwise is just plain crazy.

Matthew D’uva

Matthew D’uva, CAE, is president and CEO of the Society of Consumer Affairs Professionals (SOCAP) International, a professional society based in Alexandria, Va., representing more than 2,000 best-in-class customer care executives and professionals from more than 100 brand name companies throughout the United States and Canada. SOCAP is a member-driven organization committed to promoting customer care and engagement as competitive advantages within the business enterprise. SOCAP member benefits include education and training, peer-to-peer networking, relationship building, partnership programs, conferences and seminars, news and information, research, and more. Visit SOCAP on the web at www.socap.org.

Share.