Loyalty is a Two-way Street

Most companies involved in retail or commercial sales are always looking for customer loyalty. It seems that companies often forget there is another side to loyalty. The other side of the relationship is being loyal to your customers.

We are often reminded as we see companies advertising special deals for new customers we, the current loyal customers, get nothing for remaining loyal. Upon reflection it would appear the new customers are more important than loyal customers to the company as they advertise special deals for new customers only.

This is a problem that many companies are ignoring; namely, negatively affecting their loyal customers by not being loyal to them.  Loyal customers expect loyalty in return and when they don't see it demonstrated, there is a distinct possibility that their loyalty may be negatively affected. Although little research has been performed to measure the extent of this situation of providing additional value to new customers while ignoring old customers, we think there is an opportunity to increase customer loyalty by demonstrating company loyalty to their customers.   This may be demonstrated in several ways (some of which are being tested at the present time).  For example,

1. Say thank you to your customers with an occasional surprise gift or token (which may even be a marketing give away e.g. logo desk products such as pens, note pads, etc)
2. Occasionally give special deals/discounts to existing customers only.
3. Exchange products and/or services with your customers (especially B2B customers)
4. Find ways to assist your customers to increase or improve their business (customer meetings where your customers can network with others who are also using your products or services)

The bottom line is that companies must learn to see loyalty as a two-way street.  It is one of the best ways of building lasting company-customer relationships.

The Internet Impact on Customer Loyalty.

This blog is a continuation of the previous blog that look at the traditional measures of customer loyalty. Again the Customer Institute regrets the inability to identify the author of the following information.

The Internet is has changed many of the basic concepts of customer loyalty. The following list represents a number of the ways in which customer loyalty may appear from an Internet perspective.
1.       A loyal customer will still patronize your business but will know the alternatives better.
2.       A loyal customer will still provide recommendation but is more likely to be on a reputation-based website.
3.       The premium that a loyal customer is willing to pay is getting smaller. This becomes more obvious this product or services become more commoditized.
4.       There's much less face-to-face communication.
5.       The customer is less connected with the company and hence the personal bonds between customers and company personnel are becoming a thing of the past.
6.       The customer is easier to make the relationship since the transactions are less personal.
7.       Customers are willing to become part of the community to be willing to take this association to high levels of commitment such as the Apple cult and other similar communities.
8.       Customer reviews and testimonials are becoming more important.
9.       A new kind of customer has emerged. That customer may be a brand evangelist or happy wanderer with no loyalty.

The bottom line is that the Internet has become the great equalizer in the in the business community. There is no difference in the virtual real estate of a small start-up company with virtual real estate of established industry giant.  On the Internet these two very different kinds of companies can appear equal.  The companies of today and tomorrow must manage their websites will is in terms of appearance and in real time.

Traditional Measures of Loyalty

The customer Institute recently uncovered the document with some excellent measures of customer loyalty. Unfortunately, there is no attribution to the writer of the document. The traditional measures of customer loyalty that are apparent in the market today include the following:

1. A loyal customer will patronize your business as opposed to all other alternatives.
2. A loyal customer will provide your business and natural, unsolicited, word of mouth recommendation to friends and strangers.
3. A loyal customer will be willing to pay just a small premium to patronize your business .
4. A loyal customer will recognize the business relationship as a meaningful personal relationship and not just a mercantile relationship.
5. A loyal customer will invest energy in the relationship both in the form of reputation validation , but also in personal engagement with the business.
6. A loyal customer will tell you when when something is going.
7. A loyal customer will not abandon you when something goes wrong, but gives you an opportunity to correct the shortcoming and to continue the relationship.
8. a loyal customer will wear your T-shirt or baseball cap and be proud of the Association.

The bottom line is that customer loyalty from a traditional perspective is based on relationship filled with positive feelings. . However, not every customer relationship will rise to this level of loyalty.  The traditional measures noted above change when customer loyalty is examined in the Internet age. This will be the subject of a future blog.

An Update on Customer Rage

 The WP Carey School of Business at Arizona State University has published the 2013 update of the customer rage study. The 2013 version is the sixth study wave. A general conclusion from the study is that if a company handles a complaint well, the customer is more likely to become loyal.  If the company does not handle it well they are likely to lose approximately 12 percentage points in brand loyalty than if the customer had never complained at all.

One of the key findings of the study is that satisfaction in 2013 study is no higher than the satisfaction reported in 1976.  A quote from one of the authors of the study notes “people are frustrated that there are too many automated response menus, there are not enough customer care agents, they waste a lot of time dealing with the problem, and have to contact the company an average of four times to get resolution.”

The top 10 highlights of the study are:
1.       The amount of people reporting customer problems went from 32% in 1976 to 50% in 2013.
2.       The number of households experiencing customer rage increased 8% since 2011.
3.       Yelling has increased from 25% to 36% and cursing from 7 to 13%.
4.       The product, most responsible for enraging customers is cable and satellite TV.
5.       Only 2% of the most serious problems involved dealing with the government.
6.       Customer complaint on social networking sites has increased from 19 to 35% since 2011.
7.       56% of customers who reported a complaint said they received absolutely nothing as a result. his is an increase of 9% since 2011.
8.       Customer satisfaction doubled from 37 to 74% when companies offered an apology along with  any other monetary action to resolve an issue.
9.       Despite the rise of the Internet, customers complained 11 times more by phone than through the web.
10.   Satisfied customers tell an average of 10 to 16 people about their problem and its resolution, whereas dissatisfied customers tell about 28 people.

The study was based on a phone survey of approximately 1000 households, and was performed by NOVO 1.

The bottom line is it appears Americans are becoming more dissatisfied with products and services and are expressing that the satisfaction more than the past. The answer is that companies must commit adequate resources to address customer problems. Research continues to show that companies who provide positive results to the customer experience have higher levels of customer loyalty and financial performance than companies who do not.