Customer loyalty programs can bring immense value to your organization ...
if done right
Customer Satisfaction and Customer Loyalty:
- Are these fads or key business principles?
- What are they worth to your business?
- What is more important: Satisfaction or Loyalty?
- How can you measure them?
- What do you do to improve?
and many more questions ...
How much effort do you expend learning about your customers and figuring out how to get them to be your best ambassadors?
Sam Walton, CEO of Walmart, certainly implied that he placed a high priority on keeping customers happy when he said:
"There is only one boss. The customer.
And he can fire everybody in the company from the chairman on down,
simply by spending his money somewhere else."
- recommend your products and services to others
- continue purchasing your products and services, at minimum, at the same level
- purchase other products and services you offer
- believe your products and services are superior to others offered in the marketplace
- provide your company with opportunities to correct problems and not use these as a basis for compromising the relationship
The article further shows how the "return on loyalty" can be calculated and fed into budgeting to support loyalty activities.
What is the return on investment if you make efforts to satisfy customers and make them loyal?
The Globe and Mail article at http://www.theglobeandmail.com/report-on-business/careers/management/is-your-company-loyalty-program-worth-it/article19370754 quoted Dylan Bolden of the Boston Consulting group as saying ROI for loyalty programs can go as high as 25% - when done right.
However, having a loyalty program does not, in itself, guarantee you loyal customers or a successful business. According to a McKinsey study quoted in the article at http://www.businessinsider.com/effective-loyalty-programs-2014-3 , organizations with customer loyalty programs do NOT necessarily grow faster than those without, and in some cases, grow slower. Just having a loyalty program is not enough; having an effective, relevant (to the customers), differentiated loyalty program is needed. When companies do develop good loyalty programs (explained in the article), revenue and value can improve.
So how do you do it right?
What can we do to measure and build the loyalty of our customers?
Answers typically given include:
- Over service the customer - strive to deliver more than promised
- Hold client appreciation events - and follow up with the customers after the event
- Create a community with your customers - and listen carefully to their feedback
- Hold lunch and learn events to keep customers current on trends, developments
- Ensure regular contact with customers via 1-on-1 discussions, email, newsletters, twitter, facebook, ...
- ... numerous other activities that reflect a focus on understanding and staying connected to the customer ...
and of course,
- Regularly survey your customers to see how well you are doing
But how do we know what activities have the most impact on loyalty?
- how many questions should we ask in each survey?
- what questions do we ask, in what sequence?
- to whom do we ask the questions / who actually answers the survey?
- are we looking for point-in-time answers or trends?
- what decisions do we make based on the answers?
- what actions do we take based on the answers?
Help is available.
You may have heard of a metric called Net Promoter Score or, more recently, Net Promotor System (NPS) ( http://www.netpromotersystem.com/about/measuring-your-net-promoter-score.aspx ). NPS was introduced in 2003 by Fred Reichheld of Bain & Company as an indicator of the loyalty and advocacy customers show for a company.
The metric now goes from 0 to 10 with 0-6 being detractors, 7-8 being passives and 9-10 being promoters. NPS has spawned a lot of consultants to help companies determine how loyal their customers are and what companies could do to improve the loyalty of their customers. If you want to try implementing NPS without outside help, Reichheld authored a book called "The Ultimate Question 2.0" (second edition) which you can use to understand NPS and develop your own loyalty programs.
NPS is one methodology; there are others.
One idea has been suggested to get your team thinking about how to anticipate customer needs and pro-activley implement programs to keep customers loyal:
- Pull your team together for a planning session
- Tell the team to start with the assumption that all customers are satisfied
- Ask the team to identify things that could happen that would make customers less satisfied
- Create a prioritized list of the potential dissatisfiers and how to prevent the problems
- Check the list with customers
- Put processes and systems in place to prevent the issues from happening, with checkpoints for where things stand
Step 5 - check with customers - is like most other customer interactions: it can only be relied on to give you honest feedback if you have a good relationship, based on mutual trust.
A key to keeping customers happy is setting expectations accurately up front. This includes developing a common understanding for things like budget, service levels, deliverables (by each side), and schedules. This clarity applies to any written contract and any advertising or promotional material.
What about price? What happens when the customer has an idea of what they want and are willing to pay and you have a different idea? You may think you know what they need (you are, after all, the expert in your field, right?). The customer may want something different because they have an different understanding of what can be done or how much things cost. Their wants do not align with their needs (by your understanding) and therefore there will be a disconnect in the perceived value of what you are offering, resulting in an unhappy customer. Again, setting expectations up front will go a long way to alleviating this problem.
A special challenge / opportunity for understanding and managing customer loyalty exists when you sell/service/support through channels of distribution. Who "owns" the customer? How do you keep connected to the customer so you understand what they want and make sure they get what makes sense? This is a conversation with numerous dimensions, so will not be covered here, but it is something to keep in mind.
And of course, Howard Schultz, CEO of Starbucks, reminds us that we will not have happy customers if we do not have happy employees when he says:
"You can't expect your employees to exceed the expectations of your customers
if you don't exceed your employees' expectations of management."
Can customer loyalty programs bring value to your business? Yes. But it takes time, energy, commitment and dollars to make it work for you.
Stuart Miles: Loyalty Sphere, Feedback Button, Lose Dice
Jeanne Claire Maarbes: Loyalty scrabble pieces
mapichai: Thailand Banknotes
photostock: Man walking away with suitcase
Iamnee: Bouquet of Flowers
Master isolated images: Steps to profit