Customer loyalty is a hot issue especially in markets where there is overcapacity, little price or product differentiation and where and customers have lots of choice (sound familiar?). We all know it costs a whole lot more to acquire a new customer than to maintain an existing customer. So, what really drives customer loyalty?
In a previous article we looked at Strategic Account Management bit.ly/XjJBIN and how the best use it to drive profits, but what builds Extreme Customer Loyalty? There is lots of research out there not least from the Chapman Group an organisation that works with Fortune 1000 companies to devise strategies for SAM For many decades the goal has been satisfied customers . While satisfaction is important, it is not sufficient to guarantee that your customers will continue to buy from you. The world changes quickly and the minute you get complacent, a new competitor surfaces with a solution they claim is better, faster or cheaper and your customer jumps ship. However we can see that even customers who are plainly not satisfied right now don't always leave so what else is at play?
We all know it costs a whole lot more to acquire a new customer than to maintain an existing customer. So, what really drives customer loyalty
Elemental Dependence - if you build houses you depend on a supplier for bricks, if you make windows you depend on your suppliers to deliver the product and if you are geared to make a specific product then an alternative is not easy at short notice (and by the way if you build houses right now you are doing deals on guaranteed supply not price!). This sort of dependence builds a common cause between supplier and customer, they depend on you to help them sell your product. If you understand what is important to your customer you can use this to help them to be more efficient or operate better or cheaper and with fewer risks and headaches. This is powerful but it can easily be abused, because your customer is dependant today that's no excuse for poor performance, it'll come back to bite you!
Mutual Benefit - customers who position their business to build on a marketing or other mutually beneficial relationship to grow their own profits are loyal. Identifying where you are strong and can help them and where they are strong and can help you makes for a powerfully dependant working relationship. Using supplier brands falls into this category as do approved supplier schemes - Dulux decorator centres and independent painting contactors or in our sector Network VEKA or other approved installer schemes that allow customers to share a brand.
Performance - how a product or service meets the customers needs, this is what six sigma measures, objective rather than the more emotional Customer Satisfaction Survey measures. It's important to understand this from the customers perspective however and how they measure your performance, 99% On Time In Full but every delivery missing bead or the stick of woodgrain your fabricator needs to complete an expensive job doesn’t feel like 'good' to them.
Value Proposition - the financial implications of a relationship are obviously powerful 'how do we help each other make money?' A customer will value a return on his investment with you and account managers who don't understand this throw away a vital relationship tool. How can you help customers reduce costs, how can you help them avoid expense and how can you help them increase revenue and profits ? These are key questions for a customer…. Even if sometimes they struggle to express them and simply ask about the price! Collaborating with customers, understanding and helping them is key and of course communication is vital.
Work With People Who Can Work With You - the best customers share your values , people buy what you believe not what you make and the fit with your proposition is vital, if you are about value add and your customer is all about lowest cost… you'll never build a long standing relationship, don't waste your time and theirs by trying. Building relationships with people who share your values and with whom you empathise builds emotional dependence and going the extra mile is worth the extra effort. The converse is also true, when you don't seem to care that the delivery is late or that your customers fitters are screaming blue murder that has a powerful emotional effect on their decision making.
These factors build extreme loyalty but some like elemental dependence or poorly delivered mutual benefit can also make hostages of customers, poor customer satisfaction might not drive a customer away in the short term but it will make them noisy and difficult to deal with and looking for the exit as soon as they can manage it.