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Six Stages of Customer Loyalty and How to Leverage Them: Anchor Clients and Win–and Keep–Advocates

Article by on September 17, 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 final part of this three-part series, I’ll give you a quick tour of the highest stages of loyalty: anchoring clients and winning—and keeping—advocates. (Read Part 1, Attract Suspects and Convert Prospects and Part 2, Nurture First-Time Customers and Serve Up Value for Repeat Customers.)

Loyalty Stage 5: Anchoring Clients

A client is a buyer who feels a real commitment to buy from you and proves it by buying every product or service of yours he thinks he can reasonably use. So how can you consistently earn maximum share of wallet with a client? One way is to continually educate your client about your full breadth of products and services. Some savvy online merchants have devised creative ways to reward clients for their willingness to try new products and services.

The Camp eBay way: EBay used its “Camp eBay” promotion to reward buyers for flexing their “experimental” muscles. The online auction giant awarded merit badges based on various activities users performed on the site. The badges aren’t based on simple purchases. They’re based on how purchases are made and what’s purchased. Merit-badge-worthy behaviors included using the “Buy It Now” button (instead of bidding on an item), shopping in several different product categories and posting feedback. By rewarding users based on behavioral changes, the promotion encouraged more profitable multi-category behavior and extended the brand into product categories some regular customers didn’t associate with eBay.

Generally speaking, a multi-channel customer has a deeper relationship and represents more value to a firm.

Generally speaking, the more channels (Internet, store, catalog, etc.) your customer uses to buy from you, the better. Why? Because, generally speaking, a multi-channel customer has a deeper relationship and represents more value to a firm. (Judy Baker, Ph.D., Teradata’s vice president for CRM, conducted a comprehensive study on this issue in 2001.) The Internet is an especially effective vehicle for helping customers achieve multi-channel efficiency and value.

Best of two channels: U.S. classic-apparel retailer Talbots recognized that online shopping for clothes can be a huge time-saver for time-starved professional women. But the challenge is matching the customer to the sizes and shapes of the online selections. In February 2005, Talbots launched “Style Search,” a feature that puts the inventories from its more than 1,100 stores at the online shoppers’ fingertips. Using Talbots.com, customers can reserve items at a nearby store and then drop by the retail store to try them on. Are customers using this web feature? Phil Tracey, Talbots’ public relations manager, reports quarter-to quarter increases in customer use since the feature’s launch. “Customers really love it,” says Tracey.

Loyalty Stage 6: Winning Advocates and Keeping Them “Advocating”

There’s an important difference between a client and an advocate. Advocates do more than simply buy from you. Advocates are engaged customers who demonstrate their vendor allegiance through such activities as spreading positive word of mouth, recruiting new prospects and helping their vendors improve.

Communities that advocate. How can a firm build stronger advocacy in the wired world? One way is to create a secure environment in which customers can be listened to and engaged over a finite period of time. Online technologies provide just that opportunity. Here’s one scenario: A group of people with desirable demographics agrees to provide feedback, insight and advice though a facilitated online community. Surveys, discussion threads, brainstorms, chats and other activities engage community members on a private branded and secure web site, and community members agree to visit the site regularly to participate in the dialogue. Most importantly, the site supports and encourages interaction between members. These interactions are usually very robust and frequently provide novel, unsolicited insights into the opinions, emotions and behaviors of community members.

Such firms as Charles Schwab, Kraft, HP and Proctor & Gamble have created online communities to reap these benefits. Not only does deeply engaging customers by soliciting input on products, messages, ads and other topics result in better offerings and more efficient use of marketing dollars, but also the very act of listening can deepen customer loyalty. Control group studies conducted by online communities vendor
Communispace show statistically significant positive shifts among community members on such loyalty measures as “likely to recommend,” “would matter if I could not purchase from” and “committed to.”

How Google does it. What philosophy guides Google’s remarkable innovation process, and how do customer advocates play a vital role? Through reliance on the principle of “innovation, not constant perfection.” In a keynote speech at Stanford University, Marissa Mayer, Google vice president, Search Products, discussed the search giant’s “launch and iterate quickly” practice with this quick example.

As a member of the six-person team developing Google News, Mayer and her five teammates were deadlocked 3 to 3 on whether to first program the search feature to sort by date or sort by location. The discussion was heated, and the launch clock was ticking. That’s when the team acted upon the company’s “innovation, not constant perfection” directive and sent the rough product (without either feature) out for user feedback. It didn’t take long to get the answer. By the end of Day 1, 307 Google customers weighed in. Three hundred wanted it sorted by date. Done.

While many firms consult with customer advocates on product development issues, Google’s strategy is in a class all its own. By marrying customer advocacy with a host of cutting-edge innovation principles, the search giant continually produces unprecedented innovation and keeps customers “advocating” in the process.

This is just a brief loyalty tour. But your personal loyalty journey is just beginning! Start now to evaluate new customer touch tools by asking yourself these questions:

  • “What loyalty stage does this tool target?”
  • “What new customer value could the tool help deliver?”
  • “Does this tool support customer loyalty fundamentals?

After all, the only road to lasting loyalty is in making sure all your tools and techniques support strong loyalty principles and, in turn, propel your customers to increasingly higher levels of loyalty.

Read Part 1, Attract Suspects and Convert Prospects and Part 2, Nurture First-Time Customers and Serve Up Value for Repeat Customers.

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