Tag Archives: Customer Loyalty

Think Customer – On Customer Satisfaction, Customer Loyalty and Long-term Corporate Results

Today, like never in the past, we have the paradox of customer satisfaction being at all-time HI and, at the same time, customer loyalty being at all-time LOW.

There was a strong believe that there is a high positive correlation between the two. But the reality shows that even though customer loyalty is dependent on customer satisfaction there are other equally, if not more, important variables that determine customer loyalty.

Why companies are measuring customer satisfaction and not customer loyalty?

Talking to high executives I got very simple answer: “Customer satisfaction is easy to define and, since we can define it, we can measure it. On the contrary there is not a clear and simple definition of customer loyalty and measuring is not direct and easy.”

But why companies have derailed from “building customer loyalty” tracks?

First – “What is in the focus of the companies today?”

When we ask this question we get the answers: “Efficiency; Doing more with less; Better contribution margins – Better short-term results” from most of the executives. And these answers are modern mantras. By default these mantras eliminate all “expensive” activities and automate customer service. Employees are trained on corporate policy and efficiency, not personal development, since the later will cost the company and “will not improve” efficiency.

Second – “Who is the most important person in the world?”

If we ask the customer service employees, their managers or corporate executives this question, without doubt they will answer: “The customer”. But if we rephrase the question in a hypothetical situation that they have to choose between the customer and them one person who will have to die, who will they choose? “The customer” will be the answer in 100% of the cases. That drives us to the conclusion that the only right answer to the question “Who is the most important person in the world?” is the person that answers the question. In our case it is the employee, its manager or corporate executive. But the customer, same as the employee, manager and corporate executive, believes that he is the most important person in the world. So the customer should perceive that he is treated as such to vote us trust with his money each time he spends them.

Third – “Whom from the company the customers interacts with?”

Customer interacts with the employee from the front office, and by default these employees are the least qualified people in the company. Higher qualification is required and developed to the people in the back office, managers and executives. Front office is trained to execute, not think.

Forth – “Performance is measured by short-term benchmarks!”

When we analyze the appraisal systems in the companies, in most of the cases, we come to the conclusion that they focus on sort-term results. An employee is underperformer if he does not fulfill all his monthly targets, even if he over fulfilled some of them with a great extent. He will not get his monthly bonus/reward, or even worse he can be fired for underperformance.

Without any doubt we can say that all companies love customer loyalty, but are they working towards it? Yeahno…

Can an automated system make a customer feel, as he is the most important person in the world? Can and will an employee that is trained in execution and efficiency, is among the least qualified persons in his company, and his performance in measured by short-term focus results, create customer loyalty?

Back on customer loyalty tracks

If we all agree on the answers to the previous questions, what can a company do to move towards customer loyalty? A company that is squeezed to: be more efficient, spend less and improve contribution margin!

Probably the shortest answer is: Replace the focus from efficiency to effectiveness! And with financial terms replace focus on contribution margin with focus on total margin.

As a conclusion, if a company strives to move towards customer loyalty:

  1. There should be operational strategy to use every opportunity to interact with its customers using its employees, not systems;
  2. There should be widespread understanding among executives, manages and employees that customer loyalty is a function of customer care, employees competence, waiting line and long-term focus sales – endurance of the sales;
  3. Front office employees should be qualified to problem solve and help, since all the customer wants is help with his problem;
  4. Front office employees should be able to balance among quality, costs and service time, since all of them are constituent parts of the customer loyalty;
  5. The performance of the front office should be measured by value adding not short-term targets;
  6. Everyone in the company should feel as most important person in the world, since everyone is a customer.

Since benchmarking of the customers is done on relative (comparative) base, the first companies that will move towards customer loyalty will be the winners.

Think Customer is the newest edition to our business simulations portfolio. It is helping companies to move towards customer loyalty focusing on all 6 levers.