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Six Stages of Customer Loyalty and How to Leverage Them: Nurture First-Time Customers and Serve Up Value for Repeat Customers

By on Sep 10, 2007 Editor's Pick No Comments

There’s an old saying, “Rome wasn’t built in a day,” and neither is customer loyalty. Customers become loyal to your company and its products and services one transaction at a time. In today’s digitized world of ever-expanding customer-touch tools, finding the right tool for the right loyalty-building job can get downright confusing. I find that it helps to think in terms of loyalty stages, as people evolve into your best customers. They are: suspect, prospect, first-time customer, repeat customer, client and advocate.

In the second part of this three-part series, I’ll give you a quick tour of the middle stages of loyalty: nurturing first-time customers and serving up value for repeat customers. (Read Part 1, Attract Suspects and Convert Prospects, and Part 3, Six Stages of Customer Loyalty and How To Leverage Them: Anchor Clients and Win—and Keep—Advocates.)

Loyalty Stage 3: Nurturing First-Time Customers

Loyalty research has long confirmed the importance of a seller’s accuracy, reliability and responsiveness in transacting with first-time customers. After all, first-time customers are people who try things, and their perception of the value they receive from their first purchase will drive their repeat purchase decisions. Bottom line: You better get it right.

Passing the “Try” Test. Automation and Control Solutions (ACS), an $8 billion unit of Honeywell whose 40,000 employees provide environmental sensing and control expertise for corporations, employs a wired alert system tied to customer feedback. That means that feedback from new (and established) customers can be closely monitored. When a customer survey score falls below ACS-specified thresholds, or if the customer asks to be contacted, the system sends a detailed action alert to the Blackberry, mobile phone, laptop or desktop PC of people responsible for that customer. Those include ACS field service leaders, customer care advocates, sales representatives and regional general managers.

The system automatically opens cases and, using business rules, assigns them to case managers and teams. Online case management enables team members to share information and coordinate response actions. ACS control group studies found that cancellations were 40 percent lower in the pilot group that received alerts and cases than in the group that did not. ACS credits this wired alert system (provided by research supplier, CustomerSat) with preserving several million dollars in service contract revenue.

Want to crack your customers’ loyalty code? Think ‘analytics,’ not just ‘anecdotal evidence.’

An information gap. To successfully nurture first-time customers (and subsequent loyalty stages), a firm’s systems must be “right.” So customer intelligence should drive most firms’ operational improvement priorities, right? Wrong. That’s one finding from my 2007 Customer Insight Study fielded with research firm, CustomerSat. When making operational improvement decisions, a whopping 57 percent of marketing executives and 50 percent of sales executives reported using internal factors—or no formal process at all—to identify problem areas and prioritize improvement efforts. That means departmental lobbying, squeaky-wheel dynamics and management “gut feel” are driving most firms’ operational improvement decisions. Yikes! Little wonder why, in most industries, the customer experience is anything but satisfying.

But a new breed of competitor has emerged: the company that applies customer analytics, data and fact-based decision making. Look no further than casino operator Harrah’s and its enormous financial success. Reports Harrah CEO Gary Loveman, “We use database marketing and decision-science-based analytical tools to widen the gap between us and casino operators who base their customer incentives more on intuition than evidence.”

To succeed as an analytical competitor, data intelligence must be focused on the “right,” high-impact areas of the business. That’s why Ariba, a Silicon Valley spend-management company with $300 million in annual sales, uses customer-metric-driven correlation analysis to identify customer touch-points shown to strongly drive repurchase decisions. Continuous operational improvements are then targeted in those critical areas. Want to crack your customers’ loyalty code? Think “analytics,” not just “anecdotal evidence.”

Loyalty Stage 4: Serving Up Value for Repeat Customers

Want to build loyalty with repeat customers? Deliver on the “show me you know me” customer promise by relentlessly searching out new, untapped ways to add value.

Customized care. As in many industries, ocean shipping lines have responded to the customer need for customized, real-time information feeds. For example, Maersk Line, an ocean freight line, developed sophisticated online alert systems to notify customers when delays such as bad weather or port backups slow shipments. This information optimizes the customer’s production cycle. For example, an automaker that knows that the engine part made in China will arrive a day late can slow down production of other parts of the car assembly and, in turn, avoid the complication and cost associated with an assembly line shut-down or temporary storage of surplus inventory. Finding new, untapped ways to deliver customer value is key to growing loyalty with repeat customers. For Maersk, that means using shipping status to increase production efficiencies and reduce uncertainties. Says Piet Jan Ten Thije, Maersk’s director of electronic commerce, “The shipping period isn’t the black hole it used to be for our customers.”

But delivering customized care on the customer’s terms is more complex than ever.

Devil in the details. A seasoned retail executive (of the Baby Boomer generation) complained to me recently that her “youngest vendors” (Generation X) did not, in her opinion, understand how to deliver great service. Her proof? That very day, she had phoned a young clothing rep and left a voice mail, posing her question and requesting he return her call with the information she needed. He got back to her promptly but not by phone. Instead, he sent her an email. But she felt under-served for the simple fact that he did not contact her through her requested (and preferred) channel of communication: the telephone. She perceived his use of email as a less personal response. Contrastingly, the GenX clothing rep probably viewed the telephone (and the telephone tag that typically accompanies it) as an antiquated, unreliable means for communicating. In his wildest dreams, he would never have guessed that using email with this client costs him service points. The lesson here is that, with so many wired communication options now available, it’s important to teach your front line to be alert for customer communication preferences and honor them.

In Part 3, Six Stages of Customer Loyalty and How To Leverage Them: Anchor Clients and Win—and Keep—AdvocatesI’ll look at the highest stages of loyalty, the client and the advocate.

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