Tuesday, March 25, 2008

Loyalty Creation From the Inside

When we think of customer loyalty many often see it as one or more measures that have been taken from customer responses. But the question comes to my mind that loyalty starts inside the company. I have written previous blogs that showed how customer loyalty is strongly related to employee loyalty. Now I would like to suggest a further step into the creation of loyalty. From this perspective customer loyalty is seen as loyalty to a brand (another way of defining a company).

If we look at the "brand" as consisting of two dimensions; namely, the management component and the employee component I believe there is a simple analysis that will provide clues to the ability of the company to create loyal customers. Here is how it works.

First, score the management component on a scale from low commitment to the company to high commitment to the company (this will be the subject of a future blog). The score can be on any scale so long as there is sufficient granularity to differentiate a highly committed management from one where the manangement team has objectives other than increasing involvement in customers. One indicator of management involvement with the customers is the rigidity of management to accommodate variations from the policy handbook to meet an unusual customer need.

Second, score the employee component on the same commitment scale from low to high commitment to the company. An indicator of the employee commitment is the willingness of the employee to stay a little longer to resolve customer problems rather than "punching the clock" and leaving before the customer issue is resolved.

Finally, compare the level of management commitment to the level of employee commitment and notice the following:
1. If both the management and employee commitment are low, then the likelihood developing customer loyalty is very low.
2. If the management commitment is high but the employee commitment is low, employee turnover will increase and the likelihood of developing customer loyalty is still low (but not as low as #1 above).
3. If the management commitment is low but the employee commitment is high, the likelihood of creating customer loyalty is reasonable and definitely higher than either #1 or #2 above because a committed employee has the most direct impact on customer loyalty.
4. If both the management and employee commitment are high the likelihood of developing customer loyalty is very high.

The bottom line is that internal commitment to the customer has two components; namely management commitment and employee commitment. If either or both are either missing or low, the likelihood of developing a strong customer loyalty program is low. When both groups are highly committed, customer loyalty will thrive.

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