Customer loyalty: Why you should focus on the people
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Despite years of marketing research and advanced analytical solutions, the key focus needs to remain on people when examining issues of customer loyalty. Designing customer-loyalty solutions without a strong emphasis on the human aspects of your client relationships is probably misguided.
Why strengthen customer loyalty?
Marketers have a clear understanding of the rationale behind brands seeking to increase their clientele’s loyalty; it results in increased brand equity and allows firms to reduce their financing costs (see Does Customer Satisfaction Matter to Investors). Even so, many firms still manage customer loyalty as a technical process (think CRM analytics), when the core focus should really be on people.
Let us initially ask ourselves how we can define customer loyalty. This topic carries endless research, but as an empirical definition, I suggest the formula, Loyalty = f(Preference, Satisfaction, Price) with:
Related to consumers’ personal tastes and needs, cultural preferences, barriers to exit, brand & competitor marketing activities and an ever growing customer voice conveyed through communities on social media channels and blogs
Affected by suitable tangible and intangible benefits, partly conveyed at various touch-points by people
Related to the elasticity of demand for a category and pricing transparency (the extent to which a brand displays hidden costs, such as those of many low-cost airlines which often antagonise customers)
The perception one has of a brand as a consumer is complex and multiform. Loyalty levels therefore vary throughout the entire lifetime of a customers’ increasingly fragile relationship with a brand.
You may have noticed under the definition of Satisfaction above that benefits need to to be “suitable”. Why is this? Brands often approach satisfying their clients by attempting to systematically delight them during interactions, yet Harvard Business Review research has shown that up to 20% of satisfied customers abandon a brand and another 28% of unsatisfied clients remain loyal.
Solving client problems rapidly and smoothly ought to be the focus in delivering benefits. This approach applies equally to the luxury sector, where “time” has become one of the most precious aspects of many HNWIs’ lives.
So, where to begin?
Start your journey to sustainable customer loyalty by identifying the touch points that count both for your clients (impact on solving their problems) and your company (impact on profitability), by mapping out the entire customer journey:
- What are your customers’ pain points?
- In what areas do your clients need to apply effort to solve their problems?
- What are the cost and revenue implications of any changes you make?
- With this customer journey map completed, avoid the temptation of seeking best practices from other companies in your sector. Instead, define your own good practices that work well within your environment and then determine areas which you can act upon easily and with a great impact (see “Customer Journey projects analysis” in below).
Customer Journey projects analysis
This matrix can be used to analyse the various projects that originate from analysing your customers’ journey.
It outlines the level of positive impact on customers of changes you may apply, the level of difficulty involved in doing so and the impact on profitability of any given change.
Obvious opportunities lie in Quadrant 1 (quick wins) and further long-term projects are located in Quadrant 3.
- Vertical axis shows the level of positive impact of a project on customer satisfaction
- Horizontal axis outlines the difficulty implementing a project within your organisation
- The colour and size of the dots representing the individual projects indicate the impact of
- each project on profitability (green=positive impact, red=negative impact; the size of dots showing the level of impact on profitability)
Gaining a deep understanding of your clients and their needs as individuals will help you identify the optimal areas for change to target. Social media channels provide a great opportunity in this context to actively engage with your customers, listen to their issues, accept criticism and co-create solutions.
The people inside your company
Equipped with a greater understanding of your client-base, how do you then go about ensuring you meet their expectations? The focus should these days be equally placed on another important group of people; those inside your company, your staff.
Research conducted by Convergys in the US shows that customers’ top expectations of client servicing are knowledgeable staff, the ability to address needs on first contact and showing customer appreciation. All these aspects are driven by your staff, yet research as early as the 2013 Conference Board survey show that more than half of US workers are feeling disengaged. Lack of job satisfaction is particularly true for lower income employees, many of whom represent an important share of client-facing staff. Perhaps it is time for many firms to attempt to make their employees happier at work?
Companies such as Four Seasons Hotels recognised the importance of staff commitment a long time ago. One story I remember with a smile occurred at the employee restaurant of FS Cairo, Egypt, when the hotel first opened. Entry-level employees would often be sitting next to the hotel’s General Manager for lunch in the staff restaurant, something they found unusual. This was a fine case of leading by example, teaching employees that everyone was in the same boat. It was something of a cultural shock in a country where people display a certain distance with figures of authority. Four Seasons carries a strong belief that people cannot deliver the best service to other people (the guests) if they are not treated in the best way possible.
Providing comprehensive training for your employees is an important step in ensuring they can care for your clients, yet this is not enough. No training could possibly anticipate all possible situations and ensure your staff is ready to respond effectively. Empowering your people to act creatively during client interactions is therefore vital. Are your people empowered (see Harvard Business Review research)?
- Ask them how empowered they feel to act to please your clients
- To what extent do they innovate in doing so?
- Do they adopt solutions that the company hasn’t prescribed?
Moving from the customer journey map analysis conducted above in which you will have adapted your processes to make servicing clients seamless, train your employees to be knowledgeable and empower them to act creatively to solve client issues.
It is today critical to establish a proper framework to empower your staff, which includes specific performance feedback and monitoring (regarding their approach to helping customers meet their needs and in relation to company expenses incurred in doing so). Attempting to increase customer satisfaction without setting up such a structure may prove an expensive endeavour.
Where does this leave us?
Let us conclude by asking a provocative question: Are brand positioning and loyalty still relevant in a world of shared consumer opinions? When clients are able to accurately assess the quality of products & services through shared information, branding and customer loyalty programmes may have lost some of their former puissance (read more in Harvard Business Review research).
As a final thought perhaps future focus will reply upon playing on emotions, something only made possible by empowering people (both your customers and your employees).
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