Customer Value and Loyalty

0
990 views

Share on LinkedIn

What is loyalty?

To add Customer Value one must be very clear about terminology. Loyalty is often used as a goal. What you should understand is that loyalty is not the same as love. Loyalty is not constant. In the Customer context it really means are we likely to retain the Customer for his next purchase or his next recommendation. A loyal Customer is only loyal at a point in time. If you create more value, chances of retaining the Customer are higher, and if you continue to create value your Customer will continue to be loyal (versus the term “be loyal”). You also have to get employee loyalty, and we will talk about this later.

Customer Value Management tells you that you have to earn the Customer’s loyalty at every transaction and every point in time. So you need to understand what causes loyalty at a point in time. It is the value you are adding. But more importantly, we need to understand what the Customer values, and what is important to a Customer in the Value s/he perceives. This means trying to customise to the extent you can your offering to the Customer. The customisation may only be possible in some aspects of your offering (let’s say on a one on one interaction, or on the service, or choosing the right time to contact the Customer).

Why do I choose to start a discussion on Customer Value Management with loyalty? Because we want to retain the Customer and want them to re-buy. We want them to help us get more Customers

Thus, we have to win our loyalty spurs at every instance of the Customer Journey. We have to understand that Customer Value Creation is an ongoing and necessary process in keeping the Customer loyal. And we have to work on this. This means that we cannot take loyalty and the Customer for granted.

Free Trial: NPS® Software

Collect and act on NPS-powered customer feedback in real time to deliver amazing customer experiences at every brand touchpoint. By closing the customer feedback loop with NPS, you will grow revenue, retain more customers, and evolve your business in the process. Try it free.

What do we have to do?

1. We have to build a Customer culture and a Customer Value creating culture.

2. We have to put the Customer first. That means the company comes second (what this means is that the Customer priority has to be higher than the company priority in the eyes of the executives).

3. The convenience of the Customer must take precedence over the convenience of the company. Executives have to wear a Customer hat and not just the company hat

4. Executives have to understand what the Customer considers Value and to create it. Customer Value Creation goes beyond just doing your functional job, but into consciously figuring out how to create Value and how to prevent destruction of Value.

5. The company has to understand that for the executive or employee to create value, the company has to create value for the employees, the partners, the eco system (sustainability, and the society), and that this will create incomparable value for the company: read profits)

6. That an understanding will come that the purpose of a company is not to create profit, but a higher purpose such as serving society or improving lifestyle, and that profits are only a measure of the success of a company.

7. That to create Customer Value and to have an incessant focus on the Customer, everyone in the company has to have a Customer role and understand, irrespective of the department s/he is in , the Customer is priority one. This means breaking of silos and no internal walls.

8. That for Customers to be loyal, the company has to be loyal

Should a company be loyal?

I came across a cartoon at Economic Times, which showed two executives speaking and one saying: “It’s no more about employee loyalty… try winning company’s loyalty…”

It got me thinking. Should a company be loyal? Can a company be loyal? To whom? I quickly googled, and there was hardly anything on a company’s loyalty.

The first question is an easy one, a company can be loyal.

Should a company be loyal is more complex, till we answer the question to whom.

I guess we have to scroll through the stakeholders: Employees, customers, partners, shareholders and society. The easy answer is that a company should be loyal to all of these. If this is true, then we have to ask are most companies you know loyal, and to whom? Are companies you buy from loyal to you? I have found that whenever we as Customers have been good and fair to our suppliers, they tend to be more loyal to us than to other customers who are not as fair or good to them.

I would imagine most companies tend to be loyal to their major shareholders. They generally show their loyalty to the shareholder by offering him what he wants most: dividends, stock price, long term growth and market leadership. I suspect most shareholders want either dividends or stock price growth. Thus the loyal management works on these aspects.

Are companies loyal to employees? Is this loyalty secondary to the loyalty to shareholders? This makes us think of the Japanese lifetime employment system (only 8.8% of Japanese companies have this now). There were three models:

  • Stationary (governed by a set of rigid rules, and the expectation that some non-performing employees would voluntarily leave)
  • Growth (depends on organisational growth, and all grow with the organisation)
  • Stagnant (where the company when in bad shape let’s employees go)

Assuming employees were given life time employment, what value was this loyalty? Apart from a somewhat guaranteed employment, this system did not allow employees to easily switch and they became captive employees. Was company loyalty good for employees?

Outside of Japan, I am sure there are examples of companies being loyal to employees. I cannot think of many. We also notice that companies work on making employees loyal. One way is to make the employee feel indispensable. Or by giving golden handcuffs. If you leave you will be worse off or lose bonuses, or stock options.

The less said about true loyalty to customers. As long as the customer can be milked (can buy), he is worthwhile. In this instant gratification society, even this is short lived. Also, as I mentioned earlier, there is some loyalty to customers who are good to them.

I had written about company loyalty to suppliers, and that too is minimal and based on the benefit to the company (sometimes called mutual benefit). This loyalty is generally purchasing department led, though it is true mutual bonds between the supplier and the end user in the company do form.

The company’s loyalty to society and to sustainability has yet to be proved. There are examples of Unilever and others who are trying to be loyal to the environment and sustainability

So, the company is loyal to the Owners… in reality!

How can they change or be otherwise. Others have written that the company has to think of itself first. I think this is true for survival (first put the oxygen mask on yourself, and then on the kids… but not put the oxygen mask on yourself and abandon the kids). So instead of abandoning the other stakeholders, companies try to sustain them to the extent their loyalty to the owner will let them.

Many Customer consultants would want the company to be customer-centric. Does that include company loyalty? I think company loyalty and customer-centricity is a thought process and requires enlightened owners, and enlightened managers, who look beyond profit being the purpose of a company and in creating Value for Customers

Discussion

You have been able to see how you must look at loyalty differently. Customers are not constant; they cannot be taken for granted. You have to earn your loyalty spurs everyday. You also have to create employee loyalty. To do this, the company also has to be loyal.

Do it yourself

Ask yourself, is there true loyalty. Are you loyal to a company or a product? Could you change your loyalty?

Think of times you have switched brands you were supposedly loyal to

Is loyalty and love the same?

How could you get someone who is loyal to your competitor to become loyal to you? Give a generic answer and another answer specific to the context

Are companies loyal to customers? To employees? Should they be?

If they are, what are the benefits and the downside?

Ask if you think you give your company higher priority than you give Customers. Is there anything wrong in giving the Customer a higher priority? Does this help the company or hurt it?

Think of the times that the convenience of the company is higher than the convenience of the customer. Cite some examples.

Do you wear a Customer hat at work or an executive hat. How about outside work?

How many meetings have you attended where the company discussed improving value to the customer, apart from reducing price?

How do you create employee Value and loyalty?

Should the company be loyal?

You can contact the author at [email protected] for answers or view the website www.CustomerValuefoundation.com

LEAVE A REPLY

Please enter your comment!
Please enter your name here