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7 Factors For Building Extreme Customer Loyalty

Wednesday 22 July, 2009
A satisfied customer is NOT always a loyal customer! Discover seven indicators that will help you go beyond simply satisfying customers, to protecting and growing your strategic accounts.

For many decades the goal has been satisfied customers. While satisfaction is important, it is not sufficient to guarantee that your customers will continue to buy from you. The world changes quickly and the minute you get complacent, a new competitor surfaces with a solution they claim is better, faster or cheaper.

Suddenly your customer no longer needs you. We all know it costs a whole lot more to acquire a new customer than to maintain an existing customer. Existing customers play an even greater role in our ever-changing global economy - we must keep them and grow them. There are actions we can take and behaviours we can measure that create long term relationships between sellers and buyers.

What really drives customer loyalty?

Josiah Royce, an American philosopher in the mid-to-late 1800s, claimed that the trait of loyalty was most often associated with political institutions - religion, war, and family. In these situations, people had one key influence in common - a passionate link a "common cause".

We believe that you build loyalty when you and your customers are aligned on seven key factors. These factors are:

  1. Emotional dependence
  2. Structural dependence
  3. Business dependence
  4. Satisfaction
  5. Performance
  6. Economic value proposition 
  7. Alignment and fit

7 key factors of extreme customer loyalty

  1. Emotional dependence

    Emotional dependence is the psychological commitment from the customer. It is the customer’s reliance on an organisation for support, guidance, and decision-making - the tendency of the customer to see help from you as a supplier in making decisions or in carrying out difficult actions. When an individual is emotionally dependent and things do not go as expected, they can distance themselves and seek out a relationship that provides the support they need.

    Emotional dependence includes; integrity, reliability, depth of relationship, and empathy. Go above and beyond your customer's expectations to satisfy their emotional needs. Sometimes the smallest things can make the biggest difference.

    Conversely, a negative experience can have a detrimental effect on customer loyalty when you’re in a heighted emotional state. For example, when your IT staff can’t get the right engineer on a support hotline after your network has crashed, or if the on-line flower shop botches your order and your wife doesn’t receive her gift in time for Mother’s Day. These are both performance issues, but the emotional element magnifies the impact.

    How to create emotional dependence:

    • Learn what your customers value on a personal level and go beyond their expectations to demonstrate that you care about them.
    • Show a high degree of empathy and responsiveness when you sense your customers are getting emotional about an issue. Even if you can’t solve the problem on the spot, let them know they are important and that you will do what it takes to satisfy their personal needs. 
    • Put the right person on the job. This person should be able to connect with the customer on a personal level. Make sure your employee can provide this support and that you have the right processes in place for triaging issues. Make the customer feel good about working with your organisation.
  2. Structural dependence

    Can you help strengthen your customers’ weak links?

    Structural dependence is the operational foundation of the relationship and consists of people, facilities, systems, and distribution channels. Structural dependence builds a common cause between the buyer and seller, and this helps build loyalty. 

    An organisation outsourcing non-core operations to companies creates structural dependence. Having outsourced, it is much more difficult for them to bring these functions back in house because the investment is high and expertise is scarce. Although switching service providers is possible, it is difficult and risky. Structural dependence is among the most powerful loyalty builders.

    How to create structural dependence:

    • Understand how your customers’ businesses operate. Then determine where they have gaps or inefficiencies that would enable you to operate portions of their businesses better, cheaper and with fewer headaches or risks for your customer.
  3. Business dependence

    You scratch my back and I’ll scratch yours!

    Business dependence is the marketing positioning of the relationship. This includes how you help your customer create go-to-market solutions, grow and retain their customers, and be competitively sound in their market. 

    How to create business dependence:

    • Identify areas where your customer is weak but you are strong - as well as areas where you are weak and your customer is strong.
    • After conducting this analysis, identify opportunities for building on each other’s strengths and minimising each other’s weaknesses.
    • Then, start to envision how the relationship would work operationally and financially to build mutual value
  4. Satisfaction

    Customer satisfaction influences loyalty, but it isn’t the only predictor. Customer satisfaction is often an indication of how well your organisation performed during a recent event. This often includes elements of service, support and delivery - delivering a new product or service; solving a service or maintenance issue; or executing a campaign, pilot program or evaluation.

    Customer satisfaction measures are too limited to be an accurate predictor, especially when it comes to complex business solutions.

    Satisfaction ratings are important because we need to know that if we’ve been tasked to deliver something, we have successfully done so. But we need to be careful that we don’t use that as the only driver or only metric of our loyalty assessment.

    How to create high customer satisfaction:

    • Creating high customer satisfaction starts with a careful assessment to determine needs and uncover expectations with regard to price, impact and level of service. Then you must meet or exceed expectations.
    • "How" you deliver can be as important as "what" you deliver, so don’t underestimate the impact emotions play in satisfaction scores. Formal surveys and properly designed questionnaires are a big help.
  5. Performance

    Not too hot, not too cold - just right!

    "Performance" refers to how a product or service holds up to expectations and required industry standards. Measurements of performance can include meeting ISO and Six Sigma requirements. Typically performance is measured over a longer period of time and with more objective criteria than the measurement of satisfaction, which is event-based and emotionally influenced.

    Performance is important, but is not the sole predictor of loyalty. 

    Know what matters and what is expected:

    • It is important to know which performance factors really matter to your customers and which don’t. Your customers might not care that you have a 97% on-time delivery rate for air freight if they sell a bulk product that can only go by ground.
    • For the factors that do matter to your customers, it is important to understand how your customers define different performance levels and their minimum acceptable performance criteria.
  6. Economic value proposition

    Show me the money!

    Economic value proposition refers to the financial implications in the relationship with a customer, such as the economic impact of having or not having a supplier’s products or services. In other words, it answers the question "How do we help each other make more money and stay in business?".

    A customer who has a great appreciation for the return on investment in your solution will have a higher propensity to remain a customer. You typically help a customer create value through one or more of the following three ways:

    1. You help them reduce expenses
    2. You help them avoid expenses
    3. You help them increase revenue and profit
    When value creation is a mutual goal then loyalty prospers; but when value is one-sided, loyalty suffers.

    How to create mutual economic value:

    • Collaborate with your customers to understand how your solutions are impacting them. Then ask yourself, "What’s the impact of having or not having this solution?".
    • It is very important to document this information and validate it with the client, and then ensure that this is communicated inside the customer's organisation. The more people inside your customer organisation that understand the value you bring, the more loyal they will be.
  7. Alignment and fit

    Custom fit or off-the-rack?

    Alignment and fit in a buy / sell relationship includes factors such as shared mission and vision, culture, collaborative practices, leadership and expectations. The higher the degree of alignment and fit, the greater the degree of loyalty. 

    It does not mean that you walk away from those with whom you do not fit, but you will probably need to work harder and endure some discomfort.

    How to create alignment and fit:

    • First, you need to know yourself. Think back to the customers who work best with you. Why do you believe this is the case? Are there any common characteristics? Conversely, can you identify the customers you wish would go away? Are there any common characteristics that predict poor fit?
    • Then use your criteria to segment your accounts into those who fit well and those who do not. Ask your customers "fit" questions as part of your strategic account planning process and manage them accordingly.

Important rules for applying the 7 factors

Bringing your customer loyalty program to life 

  1. You don’t need to track all 7 factors

    Each company is unique, and for that reason you may not be able to measure all 7 loyalty factors. It is recommended that you track a minimum of 5 and track all 7 when appropriate. For example, in some organisations, performance or alignment and fit may not be measurable - or even appropriate to measure. 
  2. Gather insights from multiple contacts in an account

    Having multiple points of contact within an account is a sign of a healthy account. It is very important to gather insights from multiple players in the customer organisation to get the most accurate measure of loyalty. Large differences between groups signals a major issue.
  3. Knowledge + Relationships + Economic value = Exponential success

    Your success in an account will increase exponentially as you increase your collective knowledge, relationships and economic value. Remember, a strategic account is an extremely valuable asset and must be managed accordingly. 
  4. Prioritising your loyalty building activity

    • Where are you today?
    • Where do you need to go?
    • What needs to happen to get there?

Author Credits

Profiles International helps organizations worldwide create high-performing workforces. Through their comprehensive employment assessments and innovative talent management solutions, Profiles’ clients gain a competitive advantage by selecting the right people and managing them to their full potential. Profiles serves 122 countries around the globe and has material in 32 languages. For further information Phone: (800) 960-9612; or visit the Website: www.profilesinternational.com
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