Blogs related to customer loyalty

The Customer Loyalty Lifecycle!

We’ve all heard of the business life cycle, however today I wanted to introduce you to a different type of life cycle, i.e. the customer loyalty life cycle.  When managing a business it is imperative to know what sort of a life cycle the business is likely to go through, and hence we can make appropriate strategies.  Similarly, when wanting to manage loyalty, it is important to understand what type of a life cycle a loyal customer is likely to go through, so that we can make appropriate plans.

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WOM still the most powerful tool for a marketer

Word of mouth, or recommendation, is the most powerful tool marketers have in their arsenal for attracting and retaining customers.  Despite this being the most powerful of the tools, it is one of the most overlooked, and hence I thought I would devote this blog to the importance of WOM.

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Learning from Customer Experience Awards Winners

Yesterday I was attending the UK Customer Expereince Awards.  While judging the awards I got to learn about a number of faciniting things that various companies were doing and thought I would share some of those with you.

One of the finalists for the Toursim category was Carnival UK.  The really interesteing thing this company is doing is looking after their customers in times of crisis.  So if a person falls really ill, or has a family member who passes away, etc. the company steps in and provids all the possible assistance.  This stuck me as a best practice which needs to be adopted in some form or the other by others.  Normally tour companies would just leave the customer and ask them to get assistance from their insurance companies, etc.  However Carnival has a dedicated team of specialists who provide assistance in times of crises for their customers.  As the old saying goes, a friend in need… Although the company has not followed up with a feedback form, due to the nature of the circumstances, they do receive many letters of thanks from customers.  I personally think this is a great practice in developing emotinal attachment.

Eurostar which was another finalist has done really well despite the techincal trouble they had last year.  They not only have recoginzed the need to be more customer focused, they are working towards changing the corporate culture and putting the customer first.

Butlins the winner in the category has developed some really great customer training initiatives.  The training they provide are not only very relevant but also seem to be interesting, and comperehensive.  Their training programs ensure that their employees are focused on the customer, and on solving problems queries so that they can enjoy a great holiday.

Overall there were five different categories.  A lot of interesting companies submitted their applications, and a number of great practices were brought forth.  Looking at the winners we can see there is much development within the Customer Experience domain, however there is still much work to be done.

I am in the process of developing a while paper with Prof. Morris Pentel.  More details will be posted once the paper is done.

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Customer satisfaction doesn’t cut it anymore

There is much talk about satisfying customers.  In fact nearly any marketing text you pick up, and the main definition of marketing is ‘satisfying’ customers.  Researchers, managers, experts in the past have said that satisfaction can lead to loyalty, profitability, customer retention, etc.  However, this is now changing.  I believe we need to do a major rethink on this topic.  Customers are no longer satisfied with being satisfied!!!

What is satisfaction?  Well satisfaction is essentially meeting the customers expectations.  If you promise to deliver a document by 1 pm, and you do it at 1pm, the customer will be satisfied.  If you’re late, then that results in the dissatisfaction.  However, if you are considerably early, then that results in a higher degree, which can also be called delight.

The problem with satisfaction is that competition has increased.  There are many companies out there offering similar products and services.  With the globalization of the economies, the number of new companies entering markets from countries like China or UAE are increasing.  Similarly western companies are expanding into these countries.  Hence, overall we have an increased level of competition.  Each company is trying to excel and beat competition.  Furthermore, the customers are much more aware of their surroundings today, than 10 years ago.  The internet, and more specifically Social Media, has really revolutionized the way how we communicate and how information flows.  Customers can find out about a sale, or promotion, or the latest features of a product even before any of these are launched.

Research now says that there is no guarantee that satisfied customers will become loyal (any level of loyalty).  So what does that mean for companies?  Companies now need to go beyond satisfying their customers if they want to get them to come back.  Hence strategic management needs to rethink their goals and objectives.  I think companies should now aim for delight, instead of satisfaction.  Companies that can make their corporate culture around this idea will be winners.  Delighted customers are ones that are most likely to not only come back to you, but also achieve higher levels of loyalty.  Moreover, these guys will be telling not tens, but hundreds or even thousands of their pals (through social media) about what a fantastic company you have.

In the short-term, it may mean an increase in costs.  However these are far out weighed by the benefits they bring in.  A number of companies that I’ve worked with that have adopted this philosophy have seen their revenues and profits increase over time.  Moreover, they have also seen their marketing budgets decrease, since word of mouth brings in more customers than any other form for them.  Interestingly this is true for both B2B as well as B2C companies.  Moreover, it works for all sizes of firms, from SMEs to Multinationals.

What do you think about this?  Do you see an problems or issues in implementing this strategy?  What other benefits could companies get by doing this?  I would love to hear your views.

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Why loyalty programs don’t actually build loyalty!

Loyalty programs have been the focus of attention of both managers as well as researchers.  In fact, when most companies think of building customer, or partner loyalty, they think of a loyalty program or scheme.  However, increasingly we find that loyalty programs don’t actually build loyalty, or at least not the right type of loyalty (one of my blogs talks about different types of loyal customers).  So what exactly is wrong with loyalty programs and how can we improve them?

Many companies today heavily rely on loyalty programs.  Most think that they will build loyalty, and others use it as a means of getting customer data.  As a tool for getting access to customer data, I think they are brilliant.  You can get all sorts of information about the customer’s spending habits, which you wouldn’t normally get through any other source.  This data can then help you to target your marketing strategies according to the individual customer.

What’s wrong with loyalty programs

On the other hand, many companies are in an illusion, thinking that they will building customer loyalty.  If we break down what loyalty programs really do, we can see that they don’t achieve their stated goal.  Loyalty programs give customers points for every purchase they make.  The higher the quantity and frequency of purchases, the more points you get.  These are then traded in for discounts, and awards, etc.  Looking back at the definitions of loyalty, the higher end of the spectrum focuses on creating positive attitudes, and an emotional bond with the brand.  The lower level of loyalty focuses on repeat buying.  Hence, loyalty programs actually only encourage the customer to come back, and does not form a bond with the customer.

Some managers argue that this repeat purchase will eventually lead to higher levels of loyalty.  That may be true, only if it is accompanied with other factors, as I discussed in my blog on emotional attachment).  The loyalty program on its own will not achieve this.  In fact loyalty programs may be doing the opposite.  Customers become attached to the loyalty program, instead of the company.  For instance, in the UK there is the Nectar card.  This is a loyalty card which can be used by the customers in a number of different companies, ranging from BP and Sainsbury (supermarket) to Ford and Hertz.  Customers who become loyal to the card, would stick with whichever company is associated with the card.  For instance, if the card dropped BP, and instead went with Shell, then those customers who are loyal to the card would switch to Shell.

A similar situation can take place where a loyalty scheme is run by a single company.  For instance, if a customer uses the Emirates Airlines loyalty scheme, and later finds that Singapore Airlines is offering more points, or better rewards, he/she may switch airlines.  In both of these cases, the performance or the quality of the products or services are not considered by the customer.   Instead, the loyalty is towards the points, or the rewards that a customer gets.

How to improve your loyalty program

So what should you be doing to improve your loyalty programs?  Scrapping the loyalty program is not the best option.  The idea should be to improve it to adapt to the ever changing consumers.  More importantly, we need to reward the right things in order to build real loyalty.  For example, giving rewards not just for using the product or service, but also for things like recommending it to others, giving suggestions, complaining about poor services, taking part in customer focus groups, etc.  These are just a few of the behaviors we need to reward to encourage customers to build bonds with the brand.  The main idea is to move the customers from being passive to active, and to take ownership of the brand.

As an example, I worked with a firm based in Manchester, England to improve their B2B loyalty program. One of the things we did was to introduce an incentive for customers to take the initiative to help other customers.  So a customer who was familiar with the system would help out a new customer who may be having a problem setting up the machines or equipment.  In this case, both customers were offered rewards, with the one doing the helping getting higher rewards.  This not only reduced the burden on the tech support help lines, but also build a sense of comradeship between the customers.

There are countless other things which companies can do to improve their loyalty programs.  If your company is doing something innovative, or you’ve seen something which matches any of this, then please do share it.

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Creating memorable experiences!

First, apologies to those who posted comments, and they’ve only just come up on the blog.  There were quiet a few spam comments, which I had to go through before I found the real ones.  To make things faster, you can register and then post.  Second, the visitors have crossed 2100, with over 20,000 hits.  I now have visitors from all continents, and 50 different countries.  The top visitors continue to be from the UK, USA, The Netherlands, Canada, and the rest of Europe.  Although visitors from the Middle East are catching up.  Will post the full list later in the week.

Memorable experiences, what are they?

Last week I discussed emotional loyalty.  This topic generated much discussion.  Several Linked in groups had this as the number one topic of discussion.  One of the key factors in developing this was memorable experiences.  I thought it would be good to talk about this topic, as it came up numerous times in various discussions.

So what are memorable experiences?  A memorable experience is something which is out of the ordinary.  Something special, or unexpected.  Often we can link this to delight or a pleasant surprise.  When we talked to customers who appeared to be almost identical on paper, one main factor that distinguished the category of loyalty they belonged to was the fact that most emotionally attached customers felt that they had had memorable experiences with the firm, where as those who were only attitudinally loyal had none!

How to create memorable experiences

So what did the organizations do to create these memorable experiences?  Sometimes you don’t have to do much.  One customer was very happy when her flight was upgraded because she was flying on her birthday.  Another said that the hotel left flowers, and a bottle of champagne for the couple on their anniversary.  Amazon used to give out vouchers to people who purchased from them!  Most of the cases of memorable experiences or delight resulted from small acts such as these.  The interesting thing is that these customers remember them, even if this took place years ago.  Moreover, after having such an experience, their perception of service changed.  Most thought perceived the ‘normal’ level of service as very good.  Hence, one act changed the way how the customer looks at the company’s brand, and its services from a totally different perspective.

There were other ways of creating memorable experiences.  One of the most important of these is great service recovery.  Often those customers that were not emotionally attached had things like this to say, ‘we complained, but nothing happened’ or ‘yeah they did give us compensation but it wasn’t worth it.’  Usually the compensation was too little, too late, or did not exist at all.  On the other hand, the emotionally attached had received great service recovery, which was much more than what the customer expected.  For instance, one customer’s food was not done right.  The restaurant apologized right away, replacing the meal with the right one, gave the person a huge discount and then told him that the next time he would get 50% off his bill!  It is acts such as these which result in the memorable experience for the customer.  Some of the main factors are to acknowledge the mistake as quickly as possible, apologize to the customer, and then compensate the customer for the bad product / service, making sure that the level of compensation is more than the loss.

Another interesting method of creating delight or memorable experiences is by delivering a consistently good quality of product or service.  For instance, many Sony customers felt delight with the products, simply because the products always were up to the level of quality that was expected of them.  In this case, the company was not offering a surprise, or something extra, just delivering on the quality they promised.  Overtime, the customers start to feel good about the product or the service, and this results in an overall memorable experience.

All of this does not mean that after one memorable experience, you can disappoint the customer.  The high level of quality needs to continue to the emotional attachment bond to get stronger.  There are many aspects to this discussion, such as employee empowerment, corporate culture, etc.  Unfortunatley I don’t have time to discuss these right now.  However, I would like to find out what you think of delight or memorable experiences, as well as service recovery.  Have you had such experiences.  Or what does your organization do to create these.  If you don’t then why aren’t you?

Pakistan Floods

Last week I posted a small note on the flooding in the country.  Its good to see that a number of people clicked on those links.  Just a reminder, now the area covered is the size of Italy, or the United Kingdom!  Over 20 million are now affected.

Awards in customer experience

I will be the chair of Judges on the UK Customer Experience Awards 2010 (http://www.uk-ce-awards.co.uk/judging/).  The nominations for this year are closed, but you can come and attend the event.  Click on the link to get more info.  I am also on the Chair of Judges for the UK Theme Park and Visitor Attraction Awards 2011 (http://www.tpvaa.co.uk/judging/).  The nominations for this particular one are still open, with only 35 days left.

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