Building and Maintaining Customer Loyalty

By Dan Polito
Posted Tuesday, January 18, 2005

It’s a fact: firms with high levels of customer loyalty have also earned high levels 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. Key rule of loyalty: serve your employees first so that they, in turn, can serve your customer.

In building customer loyalty, the 80/20 rule is alive and well. Roughly speaking, 80% of your revenue is being generated by 20% 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 that 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. There are six stages of customer loyalty: suspect, prospect, first-time customer, repeat customer, client and advocate. If your customer relationship processes and programs aren’t moving customers forward, rethink them.

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 a 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.

A word about complaints

For most companies, only 10% of complaints get articulated by customers. The other 90% 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.

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. More and more, 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 such as customer self-service, email management and live chat/Web callback 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 customer’s 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 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% 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% 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 that customers get the same consistent service whether coming into the store, logging on the Web site or calling the service center.

To achieve consistency, 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.

Give your frontline the skills to perform

Increasingly, for many companies, the employee “frontline” 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 multi-channel access points (phone, fax, email, Web) are on the rise.

Gartner Group estimates that 70% of North America’s call centers will migrate to multi-channel contact centers by 2005. This means that those 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 throughout the distribution chain.

Store your data in a centralized database

Most firms lack a 360-degree view of their customer because they 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 touchpoints 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
Dan Polito, an expert in both business and marketing strategy provides senior leadership to clients focused on establishing a customer-centric business model. His experience includes the design and implementation of integrated advertising, marketing, loyalty and sales processes based upon a media-neutral Customer Relationship Management (CRM) strategy.

At Dun & Bradstreet, Dan served as Vice President of Marketing & Communications where he built a team that was responsible for the development of an aggressive global marketing strategy which contributed to the company's highest revenue growth in ten years. Currently, as VP of Marketing & Communications at Reuters America, he successfully introduced customer relationship management (CRM) throughout the enterprise not only as a business strategy, but also as a marketing process and customer benefit.

Dan is an accomplished author and speaker and has served as a guest lecturer at New York University Stern School and the New York Institute of Technology. He can be reached at danpolito@hotmail.com or visit (http://www.danpolito.com/).

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