Many CRM professionals would agree that hanging on to customers is every bit as important as—if not more important than—acquiring new ones. But the reality is that customers are also becoming increasingly fickle and harder to satisfy by the day. In his new book, The Customer Loyalty Loop, author Noah Fleming sets out to help businesses get inside their customers’ heads and understand what keeps them coming back for more. Associate Editor Oren Smilansky spoke to Fleming about the psychology behind customer retention.
CRM magazine: This is your second book about customer loyalty. How does it build on your first, Evergreen?
Noah Fleming: Evergreen was my methodical, high-level, mind-set approach to why we need to slow down the chase for new customers and focus on existing customers. The Customer Loyalty Loop is more a book of “Here are some specific, actionable, pragmatic tactics you could use for the entire customer experience to ensure that the customer is willing to engage with you again.” More importantly: how to understand your customers’ mind-set, what they’re thinking at each point of the experience, and how to make that experience powerful and as interesting and meaningful as possible.
What kind of research did you undertake?
I consulted with privately held companies across an array of industries—from B2B manufacturers selling conveyer belts to online retailers that distribute guitars. [I tried] to understand what psychology was happening through each stage. Before a customer decides to become a customer, when he’s learning about us through our sales and marketing, to once we have him as a customer, what is he thinking? There’s a lot of interesting consumer psychology research that allows us to see what’s going on, and we can take that and apply that to the customer experience.
What were your conclusions?
Simple stuff like the most meaningful part of the customer experience is when the customer experience starts and when the customer experience ends. That’s pretty standard research—peak-end goal, stuff like that. But then there are some other studies that show why and how the experience ends can impact the entire journey. So you can have a great seven-day vacation, but an awful experience checking out of the hotel can jade your entire experience. Even though everything was stellar from a customer service point of view, you remember that experience.
You write that “customer retention and loyalty starts long before you have a customer in the first place.” Can you elaborate?
Customers are experiencing all the time. The first time they hear about you—whether it’s through word of mouth or referral or they drive by your business or see an ad—they’re starting to experience, and they’re making up their minds about what that experience is going to look like. Most companies don’t think that once customers have paid they’re in customer retention and loyalty mode, [but] they should be building those things from very early on. Customer retention starts in the sales department; it starts when customers first hear about you; it starts in that handoff between sales to your post-sales team.
Is there a typical mistake companies make with retention?
Most companies believe that as long as you provide great service, a decent experience, and give customers what they want, then they’re probably going to come back and do business with you. That’s not entirely true. You need a process to make sure that happens. Loyalty has to be earned through day-in, day-out marketing, through building relationships. And so these are things we need to be thinking about long before we have a customer.
Can you cite a company that has succeeded in sealing the loyalty loop?
Eastwood Guitars does a great job of leveraging its fan base and working to understand what’s of value to them. One thing they did was essentially change their whole business model by introducing a hybrid crowdfunding platform. Now, some people look at this and say that it’s sort of a Kickstarter clone, but the reality of what they did was to say, “Look, we’ve got all these customers that buy multiple guitars from us, let’s change our business model and see which guitars they want us to build and we’ll build them.” That sort of thinking—how can we add more value to our existing customers—has changed their whole business, and they’ve essentially doubled their revenue.