Customer Satisfaction, Retention And Loyalty

Existing customers are essential to any organisation's business development initiatives, particularly when you consider that it costs several times more to acquire new customers than to retain existing ones.

Today, customers take it for granted that their suppliers have excellent products & services with reliable service & support. To gain customer satisfaction, loyalty and hence future value, we have to go beyond this as customers are looking for additional drivers to give them a reason to continue dealing with a supplier.

The Challenge

Existing customers are essential to any organisation’s business development initiatives, particularly when you consider that it costs several times more to acquire new customers than to retain existing ones. Today, customers take it for granted that their suppliers have excellent products & services with reliable service & support. To gain customer loyalty, we have to go beyond this as customers are looking for additional drivers to give them a reason to continue dealing with a supplier.

The Solution

“Provides programmes to assist in the resolution of business problems related to satisfaction” LOYALTY

“The independent specialist” MANAGEMENT TODAY

Successful organisations monitor their customers’ attitudes towards and perceptions of the products & services they deliver, benchmarking their performance against the competition to ensure they have no weaknesses. The information they gain proves a valuable competitive tool to guide operational improvements; recognise and leverage strategic advantages; anticipate customer requirements & potential issues and identify potential weaknesses.

Customer satisfaction sets the balance between customer priorities, company and competitor performance. Our process presents information at 3 levels. At the top strategic level we have a ‘customer satisfaction index’ for a company, which guides change in those directions, which improve customer satisfaction.

The next level derives a Relative Customer Satisfaction Index for each company function or process (compared to the competition).

The final operational level then evaluates customer priorities and both company & competitor performance, for each of the key activities within customer facing functions or processes. The management grids identify the action required for each activity.

Customer Value

Customers often provide high satisfaction scores but still buy products and services from competitors if they consider they will gain additional value. A high customer satisfaction score on its own is therefore no indicator of customer loyalty.

The customer value model considers a price/quality or performance trade off for each competitive brand (or sector of your company).
Brands below the diagonal are at risk.

Customer Loyalty

It is more critical than ever for companies to focus on loyalty as well as satisfaction. Loyalty means continued business and this drives revenue. Keeping customers loyal, relying on them to refer your business to their friends and colleagues is good business. Customer loyalty is evaluated in terms of propensity to continue with the current supplier and attitude towards recommending.

Influence of Brands on Customer Loyalty

Customers make decisions on numerous dimensions and even after we have gained customer satisfaction at a physical level there are buying behaviours that appear more emotive than rational. In this instance we turn to the brand. A powerful influencing factor in purchasing habits is the subtle, often-overlooked brand, which has a "relationship" with loyal users not unlike a healthy relationship between two people.

To build a strong brand relationship, you must first understand the core values of your target market. In marketing, we often talk about this as "laddering up to emotional end benefits." These are the unspoken customer values that are the glue to brand loyalty because they validate the user's self-perceptions.

We also need to know where the competition is in this emotional terrain.

Segmenting Customers By Loyalty

Customers are individuals and ideally need to be treated as individuals however, if a company has hundreds or many thousands of customers then individual attention proves a significant challenge. An alternative approach is to segment the market by monitoring Satisfaction versus Loyalty, and to then serve each segment according to its needs.

The four basic segments are:

Loyalists
Those who have high satisfaction and high loyalty. Sub-segments are Apostles, who have the highest satisfaction and loyalty scores, and Near Apostles, who give high ratings for both, but at a slightly lower level.

Defectors
Those who have low satisfaction and low loyalty and who may broadcast their disgruntlement to others.

Hostages
Those who have low satisfaction, but high loyalty. This is typically due to lack of competition or high cost of exit.

Mercenaries
Those who have high satisfaction, but low loyalty. These are the customers who are highly price-sensitive and will switch easily

Finally, targets can be established to drive a company forward. These are divided into two categories of service and sales & marketing and with targets for each hierarchical level in the company. As we pass down the organisation the number of activity targets and the level of detail increases. Targets are based on the critical performance factors that drive customer loyalty and which have been identified from the survey programme. The targets often form the basis of bonus schemes.

• Customer Loyalty Index is a corporate target for MD's, CEO's or General Managers based on satisfaction levels, propensity to recommend and repeat purchase

• Indices are targets for functional or process heads

• Key performance indicators are the activity level for the operational staff

• Ad Hoc targets can be aimed at any level in the company but generally at operational staff and are concerned with tactical challenges that affect customer loyalty