Assessing Customer Loyalty Is Often Reactive Rather Than Proactive
Businesses tend to wait until customer pain points translate to attrition and abandonment before they build a reliable customer feedback loop. Innovative companies are leveraging big data in predictive models for customer relation management. But without mixed approaches in a well-defined customer loyalty program, defection could be highly miscalculated. Knowing what is important to the loyalty of your customer is not as simple as it appears on the surface. Whether it is stated or derived importance, depending on just one approach to uncover what customers prioritize can turn into a huge unforeseen disaster.
One of the greatest challenges for brands is what metric to track and how to improve those key performance metrics overtime. Naturally, you simply can not talk loyalty without a thorough discussion on NPS (Net Promotor Score) and its impact on the industry. Reicheld's article on NPS first appeared in the Harvard Business Review in 2003 - it disrupted the market research industry - especially because Reicheld was a Bain consultant, not necessarily a market researcher - and his article has had lasting implications for businesses world wide. Understand NPS pitfalls before you advocate for it.
But it's not enough to just address customer pain points in the customer feedback ecosystem. The brands that really stand out and understand customer loyalty are those that surprise, delight and exceed expectations. Some of the most surprising delights in customer service surfaced in brands and places that you would least expect it... small boutique brands where executives are continually in-touch with their customers' experiences:
"In all of my work and leisure travel over the years, it was an unassuming small boutique hotel in Phnom Penh, Cambodia, that delivered me the best customer service I have ever received. After being picked up from the airport in an antique Rolls Royce, stocked with chilled bottled waters, I checked in at the front desk to be told....
"it seems that your return flight is very late on the day of your check-out, so we've made sure you receive a late-checkout at 3pm on your day of departure"
I was speechless and no hotel has ever met that service standard since."
- Voice of the Customer
Bring together insights and verbatims from your customers and devote workshop hours with cross-functional teams to ideate and innovate on opportunities to delight your customers. Most importantly, link feedback metrics with behavioral and financial metrics overtime to truly understand the impact on your investment efforts.
Whatever customer loyalty metrics your organization decides on - just make sure it can be calculated at the individual customer level, or else it can never be statistically used in predictive analysis or directly tied with any financials.
Dashboards are a great way to get your Loyalty Metrics out to your organization in a timely manner. A reliable and mathematically sound Loyalty Metric by Department or Team can actually be linked to bonuses or incentives.
Shifts in Consumer Loyalty & Spend Reflect Current Social & Political Environments
In our new gilded age, consumers worldwide are experiencing greater social, cultural and economic challenges now than they have in decades. We see shifts to "experiential" purchases in the US and brands that know how to align to those emotional experiences with authenticity have seen massive droves of loyalty spending.
Retail Case Study
A retailer with a myriad of product categories is deeply troubled by its customer attrition rate and perplexed by limited insights to areas of the business that is driving weakness in repeat visit and purchase. A customer-based, holistic approach is designed to leverage existing information and identify gaps in understanding the customer experience. Perspectives are enriched by placing clients at the heart of the customer shopping exploration and decision-making process, online and in-store. To truly understand the joys and dilemmas of customers - feedback methods include raw observations and empirically sound approaches like driver analysis, which make for discernible insights and economically viable decision-making. Researchers must talk to cross-functional teams to understand their perceptions regarding the customer shopping experience. Thereafter, clients must go on shopping trips with customers, on-line and in-stores.
For large retailers with multiple product categories, the information needed to be actionable at specific product category levels. A customer loyalty program was designed from the research findings, which included business metric goals and cross-functional collaboration. Dashboards can alert senior management to key areas of the business that merit early detection and resolution. Driver analysis can reveal key areas that impact customer loyalty. Action Planning Workshops are implemented in strategic product categories to formulate actionable solutions across functional areas of the business (e.g. branding, marketing, merchandisers, etc). These can be held in conjunction with external business partners to maximize customer empathy and bring the customer experience and mindset to the forefront of strategic decision-making.
Recommended Readings - Opportunities for Innovation in the Customer Journey
B2B Case Study
Business to business loyalty is an entirely different beast than what is required in the business to consumer loyalty equation. Each partnership can translate to thousands, if not hundreds of thousands of dollars worth of revenue, while loyalty is harder to build and sustain. Whether your partners are a handful of key distributors or resellers, or hundreds, it is imperative to build a partner loyalty program to incentivize your partners to be highly accountable to their end-users and also be strong advocates for your business. Designing a partner loyalty program, as obvious as it seems, involves conversations with your partner, not just a cookie-cutter survey. Infusing in-depth conversations and insights around their perceptions, needs and values is crucial in developing a survey that embodies all meaningful touchpoints in the view of your partner. Businesses that come up with surveys designed solely by the researcher, with some feedback by the business team, have missed out entirely on what 'voice of the customer' means. If your partner can not differentiate your benefits over that of your competitors, then those benefits have not been clearly articulated and communicated by various touchpoints with your partner (see reference below to "Building Business Loyalty" article published in Harvard Business Review).
A partner loyalty program should also involve getting feedback from your business end-users, something that partners can voluntarily participate in if the benefits are clearly outlined. Businesses can develop a FAQ describing the Partner Loyalty Program and the procurement of an independent 3rd party research firm that will elicit feedback from partners and business end-users. This allows partner resellers or distributors to provide contact lists of their end-users directly to the independent 3rd party researcher, which protects the anonymity of individual responses and their contact details. Only summary scores are collected, in groups or as a whole. Partners can be incentivized by a variety of things - based on key loyalty metrics and percentages of champions and advocates, for example.
Adopting the right loyalty metric is also very important, especially with the advent of social media. Consider not only its measurability, simplicity and predictiveness, but its regressive and correlating applications to financial performance. When someone says they would recommend a brand, do they actually do it and how often?
Numerous research and publications on loyalty metrics indicate that satisfaction is not sufficient to determine loyalty. Depending on your business and industry, more than one metric maybe required. Historic metrics have included overall satisfaction, repurchase intentions and referenceability. There has been lots of debate on whether referenceability would be sufficient, but there would be many scenarios where partners would recommend your business, but not actually repurchase themselves (due to cost, or high barriers to exit, for example). The 'Making the Link' research article below indicates that referenceability has the highest correlation to financial performance out of these three metrics in the B2B space, while there is still significant value in collecting future purchase intentions and overall satisfaction as well.
Other metrics could include likeability and shareability on social media. Collaborate closely with your business and your customers to find the most appropriate and predictable metrics.
Action Planning Workshops are powerful in turning insights into strategic and tactical decision-making. Cross-functional teams can collaborate with external partners and vendors, as well as business end-users to develop solutions for pain points uncovered in the research. This is where open-ended verbatim comments from the research can be significantly leveraged, both as coded responses and as detailed descriptors of the customer experience.