In a recent LiinkedIn discussion, a new CCO asked about the characteristics of loyal customers. The definitions of loyalty are legion. They include willingness to forgive missteps, reduced price sensitivity, increased repurchase, profitability, etc. Some of the measures are increased willingness to recommend (NPS), increased share of wallet, and others.
Just like loyalty is a leading indicator of increased revenue/profits, there is a leading indicator to loyalty that is more powerful, even easier to measure, and easier to influence: customer engagement.
Customer engagement is the measure of customer’s involvement in your business, be it in in the customer acquisition process (ie. serving as references, making referrals) or the business operations (sitting on advisory boards), or even in defining the future of the business by participating in innovation activities. An engaged customer is by definition loyal, even if they are upset. An engaged customer sees value in helping you improve products, services, and operations. Oracle, a member of the CCO Council, has found that engaged customers are 7% more loyal, and 33% more profitable than similar counterparts.
Let’s not worry about loyalty. Let’s focus on customer engagement instead. Loyalty will follow, as will increased profitability.