Exploiting your business assets to win the hearts and minds of your customers

30 Mar

The economics of customer loyalty are simple; it costs on average 7 times more to acquire a new customer than it does to retain an existing one. Furthermore loyal customers are more cost effective to maintain in difficult times; they typically increase their purchases and percentage of spend with you; their value exponentially increases as they go out of their way to refer others; they are willing to pay a premium in return for what they perceive as value; and the costs of sales associated with them are amortised over a longer period. Companies with high rates of customer retention and loyalty are typically seen to outperform the competition.

Building customer loyalty becomes challenging however for companies offering highly commoditised products and services as they are less able to influence the customer’s level of involvement or indifference in a purchasing decision. In this environment inertia is low, ambivalence high, and switching suppliers requires little effort. In a highly competitive sector where differentiation on products, service, and price is difficult, more creativity is required in the loyalty building program.

The first step in building loyalty is to adopt a customer-centric approach within the organisation; although the benefits of this are well documented, many companies remain either product or service-centric, daunted by the prospect of the transition.  Only when a company has placed the customer at the heart of its operation, can it start to optimally leverage its business assets in order to cultivate and nurture loyalty within its customer base.

Business assets that can be exploited in the process of loyalty building principally comprise Environment, Knowledge/Data, People, Product, Service, Process, and Brand:

Environment has a multifaceted part to play in engendering loyalty. Whilst the location, attractiveness, and accessibility of a company’s physical premises can impact the customer’s perception and experience of the organisation; so can the intuitiveness and usability of the company’s online presence; or the efficiency and responsiveness of its contact centre.

Knowledge/Data otherwise referred to as customer insight or intelligence is paramount in building loyalty and advocacy. Rich data pertaining to customers’ preferences, purchase history, and expectations provides a firm foundation for effective customer incentives and highly targeted loyalty programs.

People play a key role in building customer loyalty; they have the interpersonal skills and inherent ability to establish credibility, confidence, and trust in their relationships with customers. Employees best equipped to support a company’s loyalty drive are those who are fully engaged and who have been empowered to make decisions that benefit the customer. Research undertaken by Towers Perrin found significant correlation between engaged employees and emotionally engaged customers; 84% of highly engaged employees believing they have an impact on product quality and 72% believing they have the ability to positively impact customer service (compared with 31% and 27% of disengaged respectively).

Products are most successful when they are developed and marketed in the context of the customer’s requirements and objectives. Companies are no longer able to dictate what they sell or how they sell it, rather if they are to compete effectively in this loyalty economy they need to define and communicate their products’ quality and value from the customer’s perspective.

Service provision that is able to demonstrate reliability, flexibility, and consistency will always draw customers back. Reliable service is crucial, if there is a reason why a deadline is going to be missed – be proactive, communicate, and be prepared to compensate. Inject flexibility and employee empowerment; loyal customers expect to see a commitment to resolving their issues, not to be rigidly read the company’s policy guide.  Be consistent, whilst loyal customers have a greater tolerance of the occasional mistake or inconvenience, inconsistency in a company’s level of service has the power to erode loyalty that has taken years to build.

Processes must be designed and implemented with customer experience and loyalty in mind. Most companies have deployed technology designed to facilitate process automation and the management of volume customer throughput, resulting in operational efficiency and significant cost savings. However loyal customers do not tolerate being treated as “transactions”, they value real-time exchange of communication via whichever media they chose and during whichever point in the process they require it. Onerous, inefficient, non-customer friendly processes and procedures will ultimately lead to customer defection.

Brand is defined by what a company is and what it can offer; as such it plays a tremendously important part in securing customer loyalty. Customer experience is the delivery of a company’s “brand promise”, so developing and delivering a consistently branded experience for customers is paramount in enabling them to form the essential “emotional” bond that keeps them loyal to the brand and the company. So what is a branded customer experience? A customer’s loyalty is increasingly determined by the experience he has with a company; companies who have succeeded in securing loyalty and indeed advocacy, have done so through providing customer experiences that are intentional, differentiated, consistent, and valuable. A branded customer experience must meet a customer’s perceived needs or wants (for example product quality or value for money) whilst at the same time evoking a highly positive emotional response. A product can be of superior quality, but if the process of obtaining that product results in stress or irritation, then the customer experience is severely impacted. Acknowledging the important role “emotion” plays in a customer’s choice processes and propensity to give you their business and refer others, is key to defining a branded customer experience.

Ultimately companies who profit despite this challenging economic climate will be those who have leveraged all assets at their disposal in order to create truly branded experiences that encapsulate both their customers’ physical and emotional needs. They will have won the hearts and minds of their customers leaving them insusceptible to competitor offerings, loyal to the brand, proactively referring others, and driving profitability well into the future.

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