Loyalty from the Perspective of Human Capital

While this blog usually focuses on theory and modeling customer satisfaction and loyalty, it will, from time-to-time, discuss topics that are a little outside the normal discourse. Such is the case today where brief discussion of customer capital has some relevance to the topic of satisfaction and loyalty. This blog is the result of re-reading a book published in 1997 titled "Intellectual Capital" and was written by Thomas A. Stewart. Reviewing some of his concepts about how companies and customers can interact gave me some ideas that relate customer capital to loyalty. The idea is that both the company and its customers have knowledge that may yield greater benefit and loyalty when combined.

Successful companies will invest in employees because they know that employees are knowledge sources for the company. As employees become better trained and knowledgeable, they also become more likely to create knowledge assets, usually referred to intellectual property.

But when we examine the company from a broader perspective the question becomes can the company also form a relationship with its customers that might create knowledge assets? The obvious answer is yes. The combined resources of the company and its customers can very likely create knowledge that may provide new asset value to both. This seems to be an opportunity that many companies are missing.

It is clear that when a company solves a customer problem there may be some new knowledge created from the solution. However, these circumstances where new knowledge is created are more spontaneous that planned and rarely make it into any category of either the company or its customer that would identify the new knowledge as capital. Some of the more dramatic company-customer solutions may lead to a shared patent or copyright as well as a stronger relation with the customer. Another benefit of these new knowledge solutions might be another way to differentiate a product or service from the competition and lead to increased margins.

The bottom line is the company-customer interface is rarely seen as a place to create new knowledge capital even though the benefits are obvious and may actually lead to significant product and service breakthroughs. The challenge is to change the way we look at customers. Customers are no longer simply a source of revenue. They also bring the opportunity to create knowledge capital jointly with the company that can lead to a stronger customer relationship with the company as well as create barriers to competition that are built from the new knowledge.

The Customer Loyalty Ladder

I found a very interesting column in the Appleton Post-Crescent, June 18th about customers that made a lot of sense. The author of the article is John VanDriest and he offers the following identity to the rungs on the customer loyalty ladder. He sees these very discrete steps of customer involvement that he believes can/will? eventually lead to a loyal customer. I have modified the words to make it more inclusive to both products and services.
First rung - Awareness: the customer thinks - I wasn't aware of this product/service
Second rung - Comprehension - the customer thinks - This meets a lot of my needs
Third rung - Interest - the customer thinks - This is better than others I am aware of
Fourth rung - Purchase - the customer thinks - I think I'll give it a try
Fifth rung - Repeat purchase - the customer thinks - I liked it the firsst time; I think I'll try it again
Sixth rung - Advocate - the customer thinks - This is my brand of choice
Seventh rung - the customer thinks and concludes -Not only do I use this product/service, I have told everyone I know about it. Hmmm, I wonder what else they have to offer.

This ladder seems to make sense, albeit it is very simple. The key is that it gives an interesting perspective on where to spend the efforts to move the customer up to the next rung.