Corporate Training Magazine

Building Customer Loyalty
Vol 2 Issue 4- Jul/Aug 2006

The last 15 years have seen a growth in the belief that customer loyalty has been on a steady decline, in some cases to the point of being lost entirely.

In her book Customer Loyalty: How to Earn It, How to Keep It, author Jill Griffin purported that while many think it has forever vanished, customer loyalty is alive and well.

This is good news for the marketplace, and in particular the Canadian mobile telecommunications industry, which is on the brink of its largest competitive challenge to date‹cell phone number portability. The precedent was set in the US, where roughly 40% of all cell phone users switched to another provider within the first year of number portability.

Looking at this as a precursor for what is to come when Canadian providers follow suit in 2007, telcos need to find ways to combat the lure of increased consumer options and the declining perception of service provider differentiation as a means to protect their interests and retain their customer base.

Griffin identified the following as part of her 12 Laws of Loyalty as a means for companies to build relationships with their customers -- relationships built on trust, quality service and a genuine concern for their customers' 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 customer's true definition of value is not easy, because their definitions are constantly changing. Investing in customer loyalty research is one way to enable organizations to understand--through the eyes of the customer--how well you deliver value.

Griffin recommended grouping surveyed customer attributes into four actionable categories:

Loyalty Drivers: This area is most important to your customers; this is where your performance is highest. Stay the course. Your efforts are already producing loyalty.
Improvement Candidates: This area is important to your customers, but your performance is lacking. To improve loyalty, invest more resources to improve here.
Hidden Opportunities: Your customers may have emerging needs in this area that they themselves are yet to identify. Additional investigation may be warranted.
Over-Investment Candidates: Since customer importance is low in this area, avoid overspending. Trimming costs in these areas may be wise.

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 a company will be as hassle-free and gratifying for them as possible. Companies earn their business with service that is pleasant, productive and personalized. And they'll leave if companies don't deliver.

Practice the 80/20 Rule
In building customer loyalty, companies must recognize that all customers are not created equal and that some represent more long-term value than others. The 80/20 rule presents the view that 80% of a company's revenue is generated by 20% of its customers. A smart company segments customers by value and monitors activities closely to ensure high-value customers are treated accordingly.

Know Your Loyalty Stages and Ensure Your Customers Are Moving Through Them
Customers become loyal to a company and its products and services one step at a time. By understanding the customer's current loyalty stage, companies can better determine what is necessary to move that customer to the next level of loyalty. Griffin identified the following six stages: suspect, prospect, first-time customer, repeat customer, client and advocate.

The rule of thumb is that the goal within each stage of development is to grow the relationship into the next stage of development. The goal of interacting with the prospect is to turn them into a first-time customer, a repeat customer into a client, a client into an advocate. Once you reach the advocate stage, the objective becomes keeping the individual buying and referring. A company can enjoy real profits once the customer has evolved into the latter stages of loyalty. Failure to grow a customer into an advanced stage can be costly.

Become and Stay Responsive
Research shows that responsiveness is closely tied to a customer's perception of good service. The advent of communications technology such as the Internet has changed the customer's perception of responsiveness. More and more, customers are coming to expect round-the-clock customer service. Moreover, they arrive at websites time-starved and eager to locate answers. Technology tools such as customer self-service, email management, live chat and web callbacks are proving increasingly critical for companies as they address customer needs.

Aggressively Seek Out Customer Complaints
Statistic show that only 10% of complaints get articulated by customers. The remaining 90% are unarticulated and manifest themselves in many negative ways, the most serious of which is negative word-of-mouth. Unhappy customers can and will tell would-be customers about their negative experience with an organization. Companies can head off this bad press before it happens by making it easy for customers to complain and treating complaints seriously. Establish firm guidelines regarding customer response time, reporting and trend analysis. Make customer complaint monitoring at the front lines a key input tool for identifying loyalty improvement initiatives.

Only time will tell how the Canadian telecommunications industry‹and the marketplcae as a whole‹will fare in this increasingly customer-driven environment. But with customers being increasingly discriminating, more knowledgeable and having more choice, customer loyalty built through solid relationship management could easily become the crucial differentiator between companies that fail and those who prevail.