This article introduces us to the concept of customer loyalty and what makes it so important. It is the third strategy presented in our article: The Top 10 Customer Service Strategies
The late, great customer service and contact expert Paul Cooper wrote this article for us and it is a must read for those looking to build greater loyalty amongst their customer base.
Why Is Customer Loyalty So Important?
Now, I just don’t get it!
How could any organisation in this day and age not understand that the whole secret of business success is maximising long-term customer loyalty and retention?
Loyal customers buy more, cause much less stress, aren’t always chipping away at you on price…
Loyal customers buy more, cause much less stress, aren’t always chipping away at you on price, do your marketing job for you and much more.
Statistics show that it costs something like 10 times more to gain new customers than to keep the ones you’ve already got, so what do many companies do? They spend up to 80% of their precious sales budget to gain new customers and less than 20% on trying to keep what they’ve got. Ah well!
And yet, those who do get it right really do reap the benefits because they realise the two major secrets of success that get you to this desired situation in the first place.
Getting and Keeping the Right Employees
Firstly, recognise that customer retention and loyalty come directly from giving great (not just good) customer service, and that what really gets it right, time after time, are your people.
As Fred Reichheld says in his superb book “The Loyalty Effect”:“If you wonder what getting and keeping the right employees has to do with getting and keeping the right customers, the answer is everything.”
Harvard Business School came up with the concept of the Service Profit Chain over 25 years ago now, but it is as valid today as it was then, and there is so much more, overwhelming, evidence of it being right.
In fact, many companies see that hiring the right people and then treating them right:
- Leads directly to Higher Employee Satisfaction,
- Which leads to improved Customer Satisfaction,
- Which leads to improved Customer Loyalty,
- Which leads to increased Customer Retention,
- Which leads to improved Reputation for Customer Service,
- Which leads to improved PROFIT.
Even a Finance Director can understand that one!
So, How to Get There?
Well, firstly, you have to know a lot more about your customers, and there are many ways to do this, from comprehensive customer (and employee) satisfaction surveys to really good CRM systems, and even just talking to those loyal customers more and more.
You’ll often get a surprise. They actually like being loyal. Most of us do. They don’t want to leave you, it’s just that sometimes you can just drive them away, or at least drive them mad.
Find out what might be stopping you from creating loyalty in our article: What Is Stopping You From Creating Great Customer Relationships?
The Personal Touch
Secondly, what about the personal touch? Suppose that every time the customer makes contact, or vice versa, they are dealing with a different person?
Just imagine what that does to hinder the building of long-term relationships, and remember, also, relationships are mainly built between people, not companies. The relationship is personal, as is the loyalty.
I have banked with the same bank for 45 years. They have done nothing in this time to make me a loyal customer! However, I do have an outstanding business manager there, and have had for nearly 20 years.
If he called me and said he was moving to another bank, he would be taking my account with him.
Then there is the fact that many organisations don’t really know what great customer service looks like.
Many organisations don’t really know what great customer service looks like.
Oh sure, they do surveys, or get people to fill in those silly little cards you see in hotels, but these only cover the things the company wants to know – the hygiene stuff.
“Was the room clean?” – that’s the sort of thing. Rarely are they what the customer wants to tell them: “Yes, it was, but it was too small, and very noisy as it was next to the lift.”
Count the ticks in the boxes, by all means, but encourage the comments, too, and then read them.
Then, look at hairdressers – a classic example. In most cases, once you’ve selected one, you’ll stay loyal (pretty much regardless of price) until they do something wrong on service, and then you’ll never go back. There are some shops I haven’t been in for many years.
Totally irrational probably, but they got something wrong on service all that time ago and I’ve not been back. I don’t have to – I HAVE A CHOICE, and it’s my money!
For more examples of great customer service, read our article: 10 Examples of Exceptional Customer Service
Getting the Service Right
As Giorgio Locatelli, one of my favourite TV cooks, said recently: “If a customer comes to the restaurant and the food is bad but the service is good, and he feels he is being listened to, he will come back.”
“If he comes and the food is exceptional, but the service is snotty, then he won’t.” I guess it depends on how bad the food is, but I get his point!
I spend a lot of time talking to large organisations all over the world.
Some of them say to me: “Oh, loyalty is dead, the customers don’t have that any more; it’s all about price and convenience.”
Strangely enough, I don’t hear that from Waitrose, Virgin, Specsavers, Prêt a Manger and First Direct. I wonder why?
It couldn’t be because they’ve got the message, could it? Or is it just a coincidence that between them they seem to clean up at pretty much every awards ceremony for quality customer service in this country today.
This article was written for us by Paul Cooper a valued and not-forgotten member of customer service and contact centre industries.
For more great insights on the topic of customer loyalty, read our article: How to Achieve Customer Loyalty in a Digital World
Read the next three articles in the series by following any of the links below: