12 Laws of Loyalty
To encourage their customers to be evangelists, companies must first build customer loyalty.
Posted Sep 8, 2003
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There is no more powerful marketing weapon that word-of-mouth. To encourage their customers to be evangelists, companies must first build customer loyalty. Here are 12 strategies for doing so. Build staff loyalty It's a fact: Firms with high levels of customer loyalty have also earned high levels of staff loyalty. It's near impossible to build strong customer loyalty with a staff that is constantly turning over, because customers buy relationships and familiarity. They want to buy from people who know them and their preferences. The key rule of customer loyalty is, Serve your employees first so they, in turn, can serve your customer. 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 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. Know your loyalty stages and ensure your customers are moving through them Customers become 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. Look for 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. 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 that you earn their business with service that is pleasant, productive, and personalized--and if you don't deliver, they'll leave. Aggressively seek out customer complaints For most companies only 10 percent of complaints get articulated by customers. The other 90 percent are unarticulated and manifest themselves in many negative ways: unpaid invoices, lack of courtesy to your front-line 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. Get and stay responsive 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. Increasingly, customers are coming to expect round-the-clock customer service. Moreover, customers now arrive at Web sites time-starved and eager to locate answers. Technology tools like customer self service, email management, and live chat/Web call-back are proving increasingly critical for companies as they address the demanding customer's responsiveness needs. Know your customer's definition of value The loyalty password is value. Knowing how your customers experience value and then delivering on those terms is critical to building strong customer loyalty. But knowing your ' true definition of value is not easy, because your customers' 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. 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 in many firms winning back lost customers is frequently the most overlooked source of incremental revenue. The reason? Most firms consider a lost customer a lost cause. With the average company losing 20 percent to 40 percent of its customers every year, it's imperative that firms create hard-working strategies, 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. Use multiple channels to serve the same customers well Research suggests that customers who engage with a firm through multiple channels exhibit deeper loyalty than single channel customers. But take note: This finding assumes customers get the consistent service whether coming into the store, logging on the Web site, or calling the service center. To accomplish this your firm must internally coordinate sales and service across multiple channels so 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. Give your front line the skills to perform Increasingly, for many companies the employee front line is a call center, where agents interact with customers. These agents will be the "loyalty warriors" of the future. Converged call centers that bring together multichannel access points (phone, fax, email, Web) are on the rise. Gartner estimates that 70 percent of North America's call centers will migrate to multichannel contact centers by 2005. This means that these agents need to be as equipped to write a well-written email reply and navigate the company Web site as they are in being helpful and friendly on a phone call. 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 data base 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 through out the distribution chain. Store your data in one centralized database Most firms lack a 360-degree view of their customers because the firms have no centralized database. Billing departments, sales divisions, and customer service centers might all have their own databases 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. About the Author Jill Griffin is principal of the Griffin Group and author of Customer Loyalty: How To Earn It, How To Keep It, from which this article is adopted. Griffin was among the first to point out that even customers who are satisfied will readily switch suppliers for greater convenience or lower costs, and that companies must do more than merely satisfy customers, they must engender loyalty. Griffin Group, in Austin, TX, specializes in customer loyalty training, research, and consulting. Griffin is coauthor of Customer Winback: How to Recapture Lost Customers and Keep Them Loyal, which chosen as one the 30 best business books of 2002 by Soundview Executive Book Summaries. She is on the board of directors for Luby's Restaurants, a publicly held corporation with more than 190 restaurant locations across 10 states. She has held senior marketing positions at RJR/Nabisco and AmeriSuites Hotels. She holds MBA and undergraduate degrees (Magna Cum Laude) in marketing from University of South Carolina, Moore School of Business.
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