4 New Customer Loyalty Rules to Drive Business Success
by Martin Zwilling, Founder & CEO, Startup Professionals
Many startups and mature businesses have not yet accepted the fact that customer satisfaction and loyalty in this always connected age are about more than product and service quality. They are all about how customers broadcast their pleasure or unhappiness to others. With incredible ease, they can influence thousands or millions of potential new customers, or say nothing.
Most existing metrics and analytics for measuring customer satisfaction and loyalty, including the popular Net Promoter Score (NPS), dont distinguish between recommend messages to others (word-of-mouth), detract messages or no message at all.
In his recent book Innovating Analytics, Larry Freed, a customer experience and analytics expert, makes some convincing points on the drivers for business loyalty and success that every business owner should commit to memory. I believe his four basic rules should always come first:
1. Customer retention is priority number one: Keeping your current customers is one of the most important keys to revenue growth. According to Inc. magazine, acquiring a new customer costs about five to nine times more than it does to sell to an existing one. On average, current customers spend 67 percent more than new ones.
2. Customer upsell sell more to existing customers: Selling more to loyal customers is a great success strategy. But to engender loyalty, you have to be delivering a good experience and keeping satisfaction high. Existing customers today are fickle and will leave you quickly if they get word-of-mouth negative messages from their connected sources.
3. Marketing-driven customer acquisition: Traditional marketing efforts (advertising and promotions) are still important. In this context, the palette of channels for reaching customers has greatly expanded, to now include social media and digital, mobile and new online options. The challenge is to measure resources spent against return.
4. Word-of-mouth driven customer acquisition: The new dominant method of acquisition is engaging potential customers through social media and key influencers, and converting these prospects into customers with a satisfying experience. Here the satisfaction experience does double duty, as it is messaged down-line to other prospects.
In the past, retention and loyalty were often used interchangeably. Today, true loyalty, earned by incredible experiences and satisfaction, also does that double duty of bringing in multiple additional customers through broadcast and interaction with the huge connected community.
The more traditional purchased loyalty (coupons, rebates), convenience loyalty (corner market, coffee shop) and restricted loyalty (no other game in town) only work for single customer retention. They operate like competitive retention, forcing you to win every transaction over competitors.
Another reality is that todays consumers are multichannel, or omnichannel. This simply means that they may start a product search on a computer at work, continue on their home computer, visit a store for touch and feel activity, and then close the transaction on their smartphone. It really complicates the measuring process. Others are walking the aisles in one store, while scanning for better deals on their smartphone in other stores or online. Concurrently, they are asking for the experiences of the community through FourSquare or Yelp, and broadcasting their own experiences on Facebook and Twitter.
The common thread here is quality of the customer experience, more so than the quality of customer service, and the impact of that experience on other current and potential customers. Simple customer satisfaction surveys and analytics miss several of these dimensions, and simply are no longer adequate.
You need to take advantage of innovative new tools, like the Word of Mouth Index (WoMI) from ForeSee, and the analytic power of Big Data to gain a competitive advantage today, and predict customer behavior for tomorrow. Nobody said it would be easy. How much do you really know about your companys customer experience? Get busy and find out.
Martin Zwilling is the founder and chief executive officer of Startup Professionals, a company that provides products and services to startup founders and small business owners. Check out his daily blog or email him.