Link Customer Loyalty to Business Outcomes -- Guest Blogger Chris Cottle

Customer Engagement
Customer Experience
Many executives will say they believe that having loyal customers is critical to business success. But what are they really doing about it?

Many executives will say they believe that having loyal customers is critical to business success. But what are they really doing about it?

Most will point to their customer care training or CRM system and say, "That's how we take care of loyalty here." Some will point to their monthly newsletter or discount program to demonstrate their efforts. All of these are good attempts. However, they are not enough. Companies need to take a more holistic approach to creating greater customer loyalty and engagement. It's one of the most critical ways to retain more of your customers and grow your business faster. Getting back to basics

Fostering true loyalty and engagement with customers starts at a basic level. Before you begin a loyalty initiative, make sure you are providing a quality product or service that meets your customer expectations. This is basic business 101, but often it is ignored.

Next, be acutely responsive to customer questions, comments, and complaints (yes, especially complaints). If you resolve a complaint quickly, you can actually grow loyalty. Then give your customers a chance to be loyal by offering products for repeat business.

Listen to customer feedback from comment cards, letters, phone calls, and surveys, and then respond quickly and personally to concerns of high interest to your customers. Eventually you will be able to organize feedback for tracking and trending over time and use statistical techniques to discover which action items will have the most impact on your business outcomes.

Implementing technologies

Managing customer 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.

Therefore, use technologies to establish channels (electronic, phone, written, social) to build engagement one customer at a time, then encourage customers to let their voice be heard. Next, create metrics to improve response time and to measure loyalty before and after a problem. Technology can also help you centralize the information, create reports, and structure drill-downs.

Using surveys to actively solicit information from a population of customers is a time-tested technique. Survey research can be used for problem identification or problem solving. To ensure better responses, make sure your surveys are short, bias-free, and well structured. Use random sampling to gather feedback continuously without over-surveying, and create summary survey indices that can be displayed graphically and tracked over time.

A voice of customer (VOC) system can help you to adopt a strategic approach to building dialogs with your customers. Your company can use this technology to create a structured, searchable, and quantifiable body of information that can be used to drive critical business decisions.

Business outcomes

Determine whether your engagement outcome is best measured by satisfaction, likelihood to purchase again, likelihood to recommend, or another voice of the customer (VOC) metric. Create hybrid VOC measurements using more than one metric if necessary. Then link your VOC metrics with business outcomes like shareholder returns, annual sales growth, gross margin, market share, cash flows, Tobin's Q, customer churn, or employee turnover.

Be aware that changes in loyalty or engagement scores generally precede changes in business outcomes (typically by 45 to 60 days). It may not be the easiest process to do by yourself, but stay focused and keep your eye on the goal. Increasing your customer engagement and loyalty gives you a strong competitive edge.

Your ultimate goal should be oriented to optimize business outcomes specific to your circumstances. Orienting your organization to focus on satisfaction, loyalty, and engagement is no panacea. However, researchers have clearly documented evidence of short-term benefits to customer/employee retention and long-term benefits to profitability.

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About the Author: Chris Cottle is executive vice president of marketing and products for Allegiance, Inc.