Loyalty as a Profit Strategy?
Strategy. We all want a winning strategy for our businesses. And a winning strategy, we believe, will bring us maximum profits. So we have a strategy for marketing, one for sales, one for growth and innovation, one for finance. But rarely do we find companies that have a strategy for building relationships and keeping customers.
Why is that? I think our 700 year old accounting system (the “old math”) has us all believing the only way to create profit is to increase the top line of the balance sheet (new sales), and squeeze all we can out of the middle parts (costs). And so that’s what we focus on: selling and squeezing. Most companies overlook a simple and relatively inexpensive way to create profit; keep more of their customers, keep them happy and keep them referring friends.
Industry experts claim that it takes anywhere from 6 to 30 times more time, energy and money to get a new customer than it does to keep one you already have. The more customers you keep, the fewer new ones you’ll have to attract to replace the ones that are leaving. In some businesses, like real estate, construction, computers and even medicine, the customers you have today might not be ready to ‘buy’ again for a good long time, but they should be a steady source of referrals and serve as a solid reference to help you get new customers in the future. The “Lifetime Value” of customers extends beyond their own ability to buy. It reaches out to the community they influence.
While many would say “Loyalty is dead” in today’s cost conscious and competitive business environment, I disagree heartily. Loyalty is not dead – it’s just sleeping. Customers, tired of being treated poorly in almost all their dealings, are in the driver’s seat. They are demanding more than ever before, they are smarter, they are more educated (thanks to the Internet and easy access to information) and they are less tolerant of suppliers who don’t consistently provide them with value. Because there are more choices than ever before, the customers are in charge. They vote for the companies they like with their credit cards, and vote for the ones they dislike with their feet (and by spreading “bad word of mouth” advertising.)
If you are not consistently creating the value customers seek, they simply look elsewhere. If you are not actively building, supporting, and nourishing the relationship you have with customers, they can too easily find another who will promise to do the job cheaper, faster and better the next time. If their last experience with you wasn’t all they hoped for, if you haven’t stayed in touch, if you haven’t asked for feedback on how you did on the last job, you may not be “top of mind” when the opportunity comes for them to make a referral.
In today’s value conscious world it’s important to continually recalibrate the customer’s changing needs and make sure that you are not only meeting or exceeding them, but anticipating them. It’s important to have a strategy and a plan for “checking in” before, during and after the initial sale to make sure you are still on track with what the customer needs.
A customer-keeping strategy is one that articulates clearly what kind of experience you are trying to create, what kinds of feelings you would like the customer to have while dealing with you and what they might say about you when they talk to their associates and friends. It includes: ∑
Acknowledgement of your organization’s strengths and weaknesses and a plan to address both. ∑
A framework for decision–making that gives direction to those responsible for interfacing with the customer. ∑
A definition of what distinguishes you from competitors, the value that service adds to your organization. ∑
A crystal clear vision of service excellence that helps people understand what behaviors are appropriate.
And a good customer-keeping strategy touches the human spirit. It inspires people to do their best and instills a sense of pride in belonging to an organization that truly cares about its customers.
When was the last time you and your team sat down to talk about what kind of experience you would like to create for your customers? Not recently? Most companies only sit down to discuss keeping a customer when something has gone wrong and the relationship is in danger. That’s a poor strategy because it’s reactive. In today’s fast-paced world, being reactive puts you behind the curve – customers are looking for companies that are proactive in their approach.
What would happen if everyone in your organization, from the person who answers the phone to the person who does the billing, packs the boxes, and washes the floor all knew exactly the experience they were trying to create for the customer? Might it change the customer’s perception of the whole company? Of course it would. A company that has all its people “on the same page” and knowing what kind of experience they are there together to create will brand itself in the marketplace far better then those that think branding is done in the advertising department. Disney’s done it best of all, but Harley- Davidson and Southwest Airlines follow quickly behind.
These are companies that take the time to understand the customers they serve and what their needs are today and what they might be tomorrow. If keeping more of your customers and keeping them happy is important to your company, I suggest you start a process of inquiry today to uncover customer needs, desires and problems and understand how you are uniquely suited to serve them. Gaining a reputation for delivering “Exquisite Customer Care” doesn’t come without thinking, planning and a solid plan of implementation. It’s work to keep customers and keep them referring business! But the bottom line results of customer loyalty show it’s worth it! Imagine the results if just half of your customers routinely referred one more new customer a year.
Here’s a short list of things to consider to get you started on the loyalty track.
Define who the “customers” are.
What titles and functions do they hold in their company? Are they consumers and end users? Are they your distributors and dealers? Are they young, old, or in between? Do you consider your referral sources (like accountants, brokers, agents) to be customers? Who are the “internal customers” in your company? Carefully list all your customer groups and then brainstorm with a representative of each part of your team what their needs are. What’s important to them? What’s essential? What would make them say “WOW”?
Pick select customers to dialog with and ask them what is important to them in dealing with a company like yours. Combine the results of their answers. Then act on those results.
Define the experience you are trying to create. Using what you know now about what the customers want, determine how it is you want them to feel when doing business with you. Joseph Pine in his book The Experience Economy tells us that companies create an experience whenever they engage customers, “connecting with them in a personal, memorable way.”
Why leave the definition of that experience up to each individual when you can decide as a company what you want that experience to be – consistently? Take a look at what Starbucks has done with a commodity item – the coffee bean – as it redefined the “coffee drinking experience.” By defining the experience they want the customer to have, and then training everyone in the organization to deliver it, Starbucks has branded themselves around the world.
Review your strengths and weaknesses. Determine if you need to fill some gaps to create that ideal customer experience. If the customers are looking for more “touch” do you need to hire someone to “hold their hands” during the course of a job, staying in close contact? Do your customers need to know just what is going to happen and when? Post a list of items for them on the web, or in a letter, so they can be prepared with what they need to do, before the workers show up on the job. Do they need help with the financial dealings? Have a specialist you can send to them to walk them through the paperwork. Build your strengths in the areas necessary to best take care of the customers you have today and the ones you want to attract tomorrow.
Train everyone in your organization. And that means everyone. Caring for customers and nurturing relationships is everyone’s job. First it requires the awareness of the true economic value of the customer to the company. Teach people the lifetime value of a customer (include the value of the referrals they make, too.) Teach people the skills they need to deliver “Exquisite Customer Care.” Relationship skills don’t come easy to everyone.
Referrals and references are the lifeblood of any business, and they don’t come from unhappy customers. It’s your group of happy, delighted, amazed, astonished, dazzled and “WOWED” customers that will sing your praises over and over again. Loyalty as a profit strategy – you bet! The less money you have to spend to get new customers, the more money drops to your bottom line. It’s the “new math!”
