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Putting Customers First
February 25, 2008
Nine surefire ways to increase brand loyalty
By Kyle LaMalfa
"Customers first." It's the mantra of businesses everywhere. Yet the average company still loses 10% to 15% of customers each year. Most of them leave due to poor service or a disappointing product experience, yet only 4% of them will tell you about it. And once they've left, it's difficult (not to mention expensive) to get them back.
Fostering true loyalty and engagement with customers starts at a basic level, but here are nine techniques you can employ to make customer loyalty a powerful competitive advantage for your company. They can be broken down into three categories: loyalty basics (one through four), loyalty technologies (five through seven) and loyalty measurement (eight and nine).
1. Give customers what they expect. Knowing your customer's expectations and making sure your product or service meets them is Business 101, yet often ignored. At the basic level, business needs to be a balanced transaction where someone pays for something and expects a fair trade in return.
Expectations of product quality come from many sources, including previous quality levels set by your organization, what competitors are saying about you, and the media. Marketing and sales should work together to monitor customer expectations through feedback and surveys.
2. Go beyond simple reward programs. Points and rewards encourage repeat purchases, but don't actually build loyalty. This is demonstrated by a drop in sales when the rewards are no longer offered. True loyalty comes when customers purchase products without being bribed.
3. Turn complaints into opportunities. Managing questions, comments and concerns benefits your business in two important ways. First, research indicates that an upset customer whose problem is addressed with swiftness and certainty can be turned into a highly loyal customer. Second, unstructured feedback, gathered and managed appropriately, can be a rich source of ideas. To that end:
• Establish channels (electronic, phone and written) to build engagement, one customer at a time.
• Encourage customers to voice their thoughts. • Create metrics to improve response to concerns (i.e., "time to first response," "time to resolution," etc.).
• Create metrics to measure loyalty before and after the problem.
• Use technology to help you centralize the information, create reports and structure drill-downs.
4. Build opportunities for repeat business. Give your customers a chance to be loyal by offering products for repeat business. Monitor what customers request most and offer products or services that compliment other purchases. In addition, exceed expectations by driving product development to offer more value for less cost. Use technology to track, classify and categorize open-ended feedback.
 5. Engage customers in a two-way dialogue. An engaged customer is more than satisfied and more than loyal. They support you during both good and bad times because they believe what you have to offer is superior to others. Engagement takes your customer beyond passive loyalty to become an active participant and promoter of your product. Engaged customers will give you more feedback so you should be ready to handle it! All this translates into a customer who will spend more money with you over time. Accordingly:
• Listen to customer feedback from comment cards, letters, phone calls and surveys.
• Respond quickly and personally to concerns of high interest to your customers.
• Organize unstructured feedback for tracking and trending over time.
• Trust your customers to tell you what the problem is.
• Use statistical techniques to discover which action items will have the most impact on your business.
6. Survey customers and solicit feedback. Actively soliciting information from a population of customers is a time-tested technique pioneered by Arthur Nielsen (creator of the Nielsen ratings) in the 1920s. Survey research can be used for problem identification or solving. Questions with simple scales such as "agree/disagree" deliver quantitative insight for problem identification. Open-ended follow-up questions can provide rich insight for solving problems. Some tips:
• Make sure your surveys are short, bias-free and well structured.
• Use random sampling to gather feedback continuously without over-surveying.
• Create summary survey indices that can be displayed graphically and tracked over time.
7. Create a centralized system for managing feedback throughout the enterprise. Technology such as enterprise feedback management (EFM) helps to centralize surveys and customer feedback and track both qualitative and quantitative information. EFM involves more than just collecting data, though; it adopts a strategic approach to building dialogs with your customers. Follow these steps:
• Empower customers to give feedback through common advertised channels.
• Centralize reporting for proactive surveys and complaint management solutions.
• Structure quantitative feedback into a drill-down or rollup report.
• Make open-ended feedback intuitively searchable.
8. Tie customer loyalty and engagement to business outcomes. Orienting your organization to focus on satisfaction, loyalty and engagement is no panacea. But researchers have clearly documented evidence of short-term benefits to customer/employee retention and long-term benefits to profitability. Hence:
• Determine whether to measure your engagement outcome by satisfaction, likelihood to purchase again, likelihood to recommend, or another voice of the customer (VOC) metric.
• If necessary, create hybrid VOC measurements using more than one metric.
• Link your VOC metrics with business outcomes like shareholder returns, annual sales growth, gross margin, market share, cash flows, Tobin's Q or customer churn.
• Be aware that changes in loyalty/engagement scores generally precede changes in business outcomes.
 9. Use analysis to predict future loyalty. Businesses use a variety of statistical techniques to make predictions about the potential for future events. Furthermore, predictive analytics may be used to ascertain the degree to which answers from a survey relate to particular goals (such as loyalty and engagement). Tactical knowledge of how action items impact an outcome discourages the wasting of resources on ineffective programs, and competent statistical modeling reveals which tactical options work. Consequently:
• Analyze data using a statistical technique to reveal the most important areas of focus.
• Ask your analyst about common statistical methods, including correlation and logit models.
• Recognize that the major areas of focus may change in response to changes in your economic, competitive and demographic environments.
• Following these steps may not be the easiest process, but stay focused. Increasing your engagement and loyalty equals increasing profits and a competitive edge.
Sales & Marketing Management Magazine
This article is brought to you by Sales & Marketing Management, the leading authority for executives in the sales and marketing field.
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