Customer Loyalty

The essence of marketing isn’t about goods and services. It isn’t about selling. It isn’t even about profits or beating the competition. It’s about developing a relationship with customers so that they will grow loyal to a company’s goods and services. It’s about developing trust between customers and the firms from which they purchase goods and services. Let’s face it, getting and keeping customers is an expensive endeavor. The average U. S. business loses half its customers in five years. Generating a new customer costs five times as much as keeping a current one and firms pay a steep price when customers stray to other brands. In a slow economy, creating unsurpassed value for a customer so that they stay with you is even more important. Contemporary Marketing, Boone & Kurtz, p. 3.

How do we keep our customers? An important trend in marketing planning is relationship marketing. Relationship marketing looks at customers as equal partners in the buyer-seller transaction. When this process works the way that it should, what you see is a motivated customer entering a long term relationship in which they repeat purchases and buy multiple brands from the same firm. This allows marketers to get a more clear understanding of their customer needs. This intern leads to better customer service and improved products. The end result is increased sales with lower marketing costs.

You can develop an intentional approach to retaining customers by cultivating your relationship marketing plan. Your plan can be centered on some straight forward strategies such as routinely offering small, but noticeable, favors for your customers. Fulfilling orders early, upgrading software before it is requested, thank you notes, calling customers when sought after items arrive in the store, answering the phone with a person instead of an automated system, all of these are just a few ideas of an intentional strategy to understand and manage your customer preferences. Don’t stop there. As we have discussed before in this opinion, empower your first line sales people or service representatives to creatively add value, boost referrals, and create retention. Think about how you feel when you go to your favorite restaurant and ask for “YOUR” waiter or waitress; the one that really takes care of you, and makes your visit unique.

An important measure of relationship marketing is the “lifetime value of a customer.” This refers to the revenues and intangible benefits such as referrals and customer feedback that a customer brings to the seller over an average lifetime, less the amount the company must spend to acquire and service the customer. In keeping with our restaurant theme for example, let’s suppose that a customer eats at O’Charleys in Fultondale twice per month and spends $25.00 each time over five years. That business translates this calculation to revenues of $600 per year or $3000 in five years. When the business owner then subtracts out the average cost for labor, food, and overhead, she is left with a per-customer profit. This type of information helps the business owner to focus on drivers to enhance the customer relationship, control marketing costs and ultimately lead to increased sales.

Bottom-line is this: If you have an infinite stream of potential customers you can probably keep them happy only once and perhaps still grow your business just fine. But, if you are like the rest of us, a strategy to include some relationship marketing strategies that will keep your customers coming back could really help to drive your sales, fine tune your customer service, decrease your marketing cost and sell a good bit more.

Remember to take care of your customers or someone else will.

Managing Change and Measuring Value

In the spirit of seeing yourself as your own franchise, as the owner of your own business, or perhaps you do own your own business, here are a few thoughts on managing change.

A brief read of the business headlines can leave you feeling overwhelmed with the challenges of managing an organization, team, or running a business. It can seem that sometimes all there is to be found is a bleak and dire view. Take the personal challenge to look at the things that you can control, and one by one, make those changes.

For example, a big “item of control” is Customer Service whether it is your customer service or the customer service of your employees. Challenge yourself to take great customer service to heart, lead by example, and coach those around you to raise their level of expectation of what great customer service should look like.

But do you know what great customer service looks like? Here are a few steps to ponder to get you on your way.

Step One is to develop what you define as great customer service. Develop your own specific vision of what great looks like working with the customer’s perspective in mind. Creating a vision of customer service taps into your heart and spirit of excellence, and will allow you to uncover embedded concerns and needs that you may have overlooked. For example, what would happen if you really take the time to make your customer feel like he or she is your most important priority of the day?

Step Two is to appreciate the difference between customer satisfaction and customer loyalty. Satisfied customers are not necessarily loyal customers. According to a Gallup Survey (2002) of 36 companies in 21 industries, the difference between customer satisfaction and customer loyalty lies in creating an emotional bond with your customer. How do you do this? Pay attention to your customer contact people. Train them as to how you want them to interact with your customers. According to this same Gallup Survey, customer contact people are 4 times more important in generating customer loyalty than the product or service itself.

How do you measure customer loyalty? Ask your customers. Were you satisfied? Will you come again? Will you RECOMMEND me to someone else? Simple, direct questions will reveal much about how you conduct your business. Which leads us to Step Three, be prepared to Change how you connect with your customers. Learn what your customers want, and don’t expect that what you did last year will still hold up. Develop a deep understanding of the customer’s needs and expectations. This close connection with your customers will foster an environment where your customer will come to depend on you. And for goodness sake, learn what your competition is offering!

Lastly is Step Four: Be thoughtful and systematic about any change the you create. Decide if your change will hold up to your Vision, your environment, and your strategy.

In today’s competitive environment, you often don’t get a second chance. Make the first one count, and give it your best customer service first.

Remember, take care of your customers or someone else will.