Loyalty. Everybody wants it. In their customers and business partners. In their friends and relationships. In their sports teams. And, above all, in their pets.
Loyalty isn’t much to ask for, but it can be very elusive, especially in the world of e-commerce. Today, buyers have more choices than ever, and every day it seems harder to distinguish one company’s products from another’s. At the same time, the Internet has accelerated buyers’ decision-making processes, making it harder for companies to build meaningful relationships with their customers.
As we always do in this column, we go out to the field to find the true meaning of loyalty and to see how technology can help companies inspire loyalty in their customers.
What Is Loyalty?
Loyalty must be earned. It comes from delivering a solid product on time and at a fair price or from doing a good job on deadline and on budget. But in today’s competitive economy, companies are often forced to cut costs and speed delivery of goods and services. Quality suffers. Here is an example of how one company earned loyalty from one of my friends:
This summer’s oppressive heat in my hometown of Chicago caused a sudden rise in demand for air conditioning maintenance services. Most people don’t have a preferred vendor, so the cry went out: "Does anyone know a good air conditioner repairman?"
My friend called a random repair service he picked from the Yellow Pages, which quoted an exorbitant $1,000 to get his home’s central air conditioning system up and running. Before agreeing to the repairs, my friend caught a TV news story about misquotes and overcharges by similar repair companies. He decided to find another company, this time by asking friends, family and acquaintances. My friend was referred to another repairman, who checked the system, declared the problem "trivial" and tightened a few connections free-of-charge. Unfortunately, I guess he got what he paid for since my friend spent that night in a sweltering house.
After several days he finally found a new repair service, referred by his insurance agent, that fixed the problem for a fair price and even called back the next day to double-check that everything was OK. My now-cooler friend plans to call this company back to his home for regular maintenance to his A/C and heating systems he’s also referred several other people to them.
Trust and Consistency
Companies inspire loyalty through trustworthy and consistent behavior. The best companies generate a simple thought in their customers’ minds: "I can trust these guys to do the job right the first time, because they’ve done it before. I know they’re not going to mislead me."
Here’s a simple trust story: I’ve got a friend who was extremely confused by the wide array of audio and video equipment available today. He wanted a new stereo, but he needed someone to give him an honest appraisal of his options. After visiting several stores, he finally met a salesman who took time to explain the difference between surround sound, satellite systems, stereo, mono and multiple other options. They listened to Kid Rock’s new album with and without surround sound and watched the dogfight scene from Air Force One. He left with a reasonably priced system of a quality that made sense for him.
Recently, this same friend bought a new house and wanted to wire the same stereo system into all the rooms. I had just wired my house in a similar way and tried to offer some advice:
Me: Do you want the name of the guy I used?
Me: But he beat every other price by 30% or more
Friend: I don’t care.
Me: Don’t you want to know what I bought
Me: Well, what are you going to do?
Friend: I am going back to the guy who sold me the stereo in the first place.
The assuredness that a product or service will perform consistently is important. Many people will accept lower quality or pay a higher price if consistency is assured. For example, of the many Italian restaurants in Chicago, I only go to one: Rudi Fazuli. Why? They have served an exceptional meal every time I’ve been there, for more than three years. Sure, there are restaurants that are much cheaper than Rudi’s. There are definitely restaurants that are closer to my home or office. But I know if I want to go out for Italian, I will always get a great meal at Rudi’s. I have taken business partners, my boss, my wife, my parents and even my in-laws to Rudi’s. I’ve sent friends there for important meals. It’s just not worth rolling the dice anywhere else. I only have one Saturday night a week.
Stand By Your Product or Service
No matter how consistent or trustworthy the relationship, there is bound to be friction. Sooner or later something will go wrong, straining what was once a harmonious relationship and testing the loyalty. The smartest companies will stand by their product and do whatever it takes to make things right especially for their loyal customers.
I recently talked with a friend who had severe problems with a new car. It was the first version of this particular model, and let’s just say it wasn’t an economy car. Consistently, for more than two years, my friend had trouble with this automobile. Dashboard warning lights would flash, strange sounds would come from deep within the car. Sometimes it would start, sometimes it wouldn’t. After two years, the warranty was about to end and my friend was faced with a decision should he replace the car (an expensive proposition) or pursue a "lemon law" claim (a big headache). The auto manufacturer came up with a third option: extending the warranty for the life of the car, covering all future repair costs. My friend avoided a painful decision and the auto maker won a customer for life.
Understand Your Customers
How can companies determine what matters most to their customers? How do companies find out what specific loyalty drivers are important to customers in their industry? The answer: by asking and watching. In the past, companies relied on focus groups and surveys. Today, cutting-edge customer service, sales force automation, telemarketing and Web site technologies can automatically gather qualitative customer information for detailed analysis. This information can be distilled into the customer segmentation equation, allowing quantitative measures such as revenue, profitability or lifetime value to be crossed with loyalty drivers such as quality, consistency and trust. By understanding each customer’s specific loyalty drivers, companies can deliver personalized, meaningful service to every customer.
Once specific loyalty drivers are identified, the sales force and customer service representatives must collect and process information when they interact with customers. It is not enough, however, for companies to just gather and analyze customer information. Salespeople and customer service representatives must use it at every customer interaction. The loyalty drivers must be infused into all of the company’s customer touchpoints. In other words, companies can use loyalty drivers to treat their customers exactly how they want to be treated.
As more sophisticated customer interaction software hits the market, demanding greater corporate investments, we will start to see something of a convergence between marketing, sales and customer service functions. The marketing department will categorize, codify and segment the varying loyalty attributes of their customer base, while sales and service representatives will use this information to ask customers simple, quick questions to verify their reasons for electing to be a customer. Once codified, the mystery is taken out of the loyalty question. The information will flow to a data warehouse and a marketing database for detailed analysis, be incorporated into customer segmentation and retention models, and ultimately drive loyalty programs.
Codifying the loyalty drivers is a very large step toward understanding the customer base and enhancing each interaction point. Most companies probably have a "feeling" for what these loyalty drivers are and probably just need to do some testing to verify. Will this type of analysis answer all the problems of every company? Of course not. But it can go a long way toward keeping your customers happy and loyal — not to mention cool during Chicago heat waves.
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