Friday, July 13, 2007

Natural Loyalty continued

In my previous blog I noted that customer loyalty has two major components; namely unnatural and natural loyalty. I described unnatural customer loyalty as that which is related to rewards rather than the company, its processes and its people. Thus, loyalty is primarily related to the character of the reward. The strength of this type of loyalty is related to the perceived value of the reward. Thus, the company may actually provide a less than quality product with below average service, but the character of the reward induces the customer to return. The best example that comes to mind is the mileage reward programs offered by most airlines. While the airline service continues to deteriorate, the customers continue to return to claim their rewards. The concern with this aspect of customer loyalty is that the customers may not continue to use the airline once the rewards are used. The reward appears to be a short-term reward which may not have any long-term impact on keeping the customer.

One way to examine natural customer loyalty is to break it down into two component parts. The first part is the loyalty that is derived from excellent process performance or excellent product quality or both. This component of customer loyalty may not involve any individuals in the company. In this case, the product was shipped on time, was packaged so that the product was in excellent condition when received, the instructions to initiate operation was easy to understand and the product met the customer's expectation for performance.

The second part of natural loyalty is the human element or the relationship component between the customer and the company. Many companies want their employees to build relationships with their customers because they believe if the customer likes the intereaction with the employee, that customer is more likely to return and than a customer who does not like the interaction with the employee. These companies will often spend large sums of money to train their employees the many techniques which build customer loyalty or at least, to train the employee not to offend the customers. There are a great number of consulting firms that make a great deal of money offering the latest and greatest course that converts the average employee into a super star who "wows" the customer. One important point to make here is that the relationship component of natural customer loyalty is uniquely different from the process and product component of customer loyalty.

Thus, now that we have a basic description of customer loyalty, it is apparent that any measure of customer loyalty may have as many as four components; namely, the reward component (unnatural customer loyalty), process component (e.g. delivery on-time - natural customer loyalty), product quality and performance (e.g. product meets customer expectations - natural customer loyalty), and relationship between the customer and the company (natural customer loyalty).

All four of these components contribute to customer loyalty, the next step is to examine each component to determine whether or not its contribution will have a short-term or long term impact.

No comments:


web visitor stats
OptiPlex 755 Desktops