Guest Blogger Ryan Pellet: Customer Loyalty -- Follow the Customer's Lead

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Customer Engagement
Customer Experience
For years, companies have pursued loyalty programs that cater to their most valued customers. However, in a tough economic environment, where every dime of revenue matters, it is now essential to promote loyalty among a broader base of customers. Expanding loyalty requires that companies ensure a satisfying experience that moves high-potential customers up the value chain.

For years, companies have pursued loyalty programs that cater to their most valued customers. However, in a tough economic environment, where every dime of revenue matters, it is now essential to promote loyalty among a broader base of customers. Expanding loyalty requires that companies ensure a satisfying experience that moves high-potential customers up the value chain.

En route, however, companies can find that loyalty comes in many shades. Depending on the duration of the relationship and other factors, customers have their own definitions of what loyalty entails. Knowing the appropriate treatment for customers, at the right stage of their development, makes all the difference in the success of conversion efforts.
Traditionally, companies have thought of loyal customers as those who make frequent purchases or upgrades, act as advocates recommending the company to prospective buyers, and stick with a company through thick and thin. That characterization certainly applies to the "super loyal" few. Yet for most customers, it turns out, loyalty is fluid and hangs in the balance with every service interaction.

In the Convergys 2010 Consumer Scorecard Survey, 83 percent of respondents said they remain loyal as long as they're satisfied with their most recent service experience. For most customers, it seems, satisfaction is the same as loyalty.

What makes a service experience satisfying? To begin with, the Convergys research reveals that customers are satisfied when the effort required to receive service is minimal. According to survey respondents, customers are 80 percent likely to measure satisfaction and effort the same way. Thus, when customers are satisfied with their most recent interaction, it's because they find it easy.

When customers have a bad experience, however, their emotions tend to take over. Just 29 percent of the survey respondents said they would forgive a bad service experience, even if they said they were loyal.

Loyalty, it appears, can be fragile and tenuous. However, companies can improve their odds of retaining customers by proactively improving the service experience. If you want greater customer loyalty, you must take steps to show it.

  • First, know how customers feel about your company's service strengths and weaknesses across all channels, and beef up channels where customers say you need improvements.
  • Second, have a plan of action to ensure the continuing satisfaction and loyalty of all customers based on their value to your company.

In general, customers who are not already "advocates" fall into two broad categories: developmentally loyal and loyal. The goal is to always move customers up a notch, from developmentally loyal to loyal, and whenever the opportunity presents itself, from loyal to advocate.

"Developmentally Loyal" Customers: With these customers your company is in a trial period. The developmentally loyal customer certainly wants to deepen their relationship with you; otherwise they wouldn't have chosen to buy in the first place. To move these customers up the value chain, the most fundamental steps are:

  • Do what you say you are going to do, when you say you are going to do it.
  • If you don't, fix it -- fast, and with rigor.
  • After you resolve the issue, get back to the customer immediately to showcase your responsiveness.

"Loyal" Customers: Relationships with these customers are more complex. Your company has passed the trial period by doing what was promised. To move the loyal customer to be an advocate, your company now must incrementally surpass expectations. The keys to offering this deepened experience are in your company's own databases -- information about how loyal customers buy, interact, pay for, and incorporate your product or service within their daily lives.

Mining this data and applying it across every interaction, uniformly and intelligently, allows you to move up the loyal continuum. Converting a loyal customer to an advocate requires that the customer's information be holistically aligned to all end-to-end supporting: people, processes, channels, and technologies that are engaged in delivering the experience.

Customer "Advocates": Your advocates expect you to be aligned to and know them because of the information that you have jointly created over the course of your continuum relationship with them. It is this synchronization of mission that generates a major contribution to your company's cash flow through this group's own expenditures and through the new customer revenue they generate through their advocacy. In this regard, these customers represent the highest revenue potential for your company - so you need to keep them squarely on your side.

Focusing on your most loyal customers has always been smart business. The goal of loyalty, however, has shifted from preventing attrition to proactively and incrementally boosting growth from more customers.

Loyalty is now a journey. The path from developmentally loyal to advocate, however, may be shorter than you realize. Just follow the customer's lead.

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About the Author: Ryan Pellet is a vice president in Convergys' Customer Management line of business. Contact him at ryan.pellet@convergys.com.

EXPERT OPINION
EXPERT OPINION