Why companies are struggling (and will continue to struggle) in cultivating customer loyalty

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Only 17% of companies scored ‘strong’ or ‘very strong’ on customer loyalty

I read the following post – ‘Customer loyalty – does anyone care? and that got me thinking. The author is highlighting the research carried out by the Temkin Group that shows that only 17% (24) of the 143 companies surveyed scored a ‘strong’ or ‘very strong’ loyalty’ rating.

Many underestimate what it takes to be strong/very strong in customer loyalty

In my opinion a lot of people who write on customer experience, customer loyalty and customer-centricity simply do not get how hard it is for large established companies to deliver on this stuff. For these companies becoming customer-centric, delivering a great experience and generating loyalty is as likely as goals in the average soccer match – a rare event. Why is that?

An old quote that sheds light on the matter



There is a really good quote that gets to the heart of the matter, let me share it with you:

” A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it” Max Planck

What am I saying? I am saying that a big change in the customer-centric direction is highly unlikely until there are changes in the following domains: business models, business leaders, management mindset and organisational structure.

Plenty of companies are doing well without being customer centric or delivering great customer experience

The fact is that plenty of companies do well without being customer-centric. I explored this topic in the following post: Who says you have to be customer-centric to thrive

You can do well because you have strategic assets and I gave an example here: Bewleys shows that an organisation with strategic assets can deliver a poor customer experience and get away with it.

Existing business models are a huge obstacle in generating customer loyalty

I explored the issue of business models and how they get in the way of any customer-centric initiatives in the following post: ‘Contrary to popular opinion it is easy to become customer centred’

The organisational climate – mindset, culture, structure – is another big obstacle

If you are a gardener you will know that you simply cannot throw seeds anywhere and expect them to sprout into healthy, tall plants. It is the same with organisations. The way that organisations are structured, led and managed has a big influence on what kind of initiatives flourish and which struggle to take root. I explored this in the following posts:

Do the customer experience designers have what it takes to design experiences that generate loyalty?



And finally I took a look at the customer experience designers themselves and questioned whether they have what it takes to actually design customer experience that work for customers: The problem with Customer Experience is the designers

Conclusion: the heart of the challenge is leadership and ‘change management’

The heart of the challenge in cultivating customer loyalty is one of leadership and change management. Specifically, giving up the existing ways of thinking about, organising and doing business.

This challenge is a difficult one at the best of times. It is especially difficult when the people who have to change are the people at the top of the organisation. Yet there is good news: Gerstner managed to bring about a transformation at IBM. It helped that he really had nothing to lose as IBM was a basket case and headed for oblivion!

7 COMMENTS

  1. I agree that cultivating customer loyalty needs to be the responsibility of employees at all levels of an organization – from senior leadership to the sales and marketing team to the representatives who provide front line service to customers every day. In some cases that may require organizations to re-think how they do business and how they interact with their customers.

    Too many times in the pursuit for loyalty, companies focus on the end goal and not the steps in between that are essential in building mutually beneficial relationships with customers. It's critically important that companies create an ongoing dialogue with customers to determine their preferences and then create solutions to meet those needs.

    One way companies can nurture the overall customer relationship is to determine the best method of communicating with customers (voice mail, e-mail, text messaging, social media, direct mail) and when they would like to receive information. Once they have determined the appropriate channel for communicating, companies can engage customers in a highly personalized and tailored way.

    Companies that actively engage with customers on a regular basis can proactively offer additional products, services and information that cultivates customer loyalty.

    Thank you for the post.

    Scott Zimmerman, President of http://www.televox.com

  2. Hello Scott
    To cultivate loyalty we need to understand what factors give rise to it. The best way to unearth these factors is to take a look at your own life.

    Do you feel loyalty towards a new acquaintance simply because he has worked out that email is your preferred channel of communication and then regularly sends you information? Especially if that information whose underlying message is ‘buy from me’? Only you can answer that question. I know that it does not work for me – I feel sold to, even if the selling is soft.

    My experience is that loyalty is a function of gratitude. If I am grateful to you for some service you have rendered then I will look to pay you back: the principle of reciprocity. In the good old days, a shopkeeper that supplied good on credit when a customer was hardup generated gratitude in that customer. And that customer ended up sticking with that shopkeeper out of gratitude.

    To cut a long story short, my experience is that too many companies are ‘communicating’ only one thing: I want to sell to you. This is the natural domain of the marketing and sales folks. And they are the ones who are tasked with communicating with the customer. Very few companies are actually generating gratitude: think Zappos.

    I thank you for taking part and turning this post into a conversation.

    Maz Iqbal

  3. Excellent points. From my own experience as a Director of Total Quality for a major healthcare organization, I found that there were four dimensions to customer loyalty, which can be explained through the use of a simple four quadrant model based on expectations:

    Unstated and Expected
    Stated and Expected
    Stated and Unexpected
    Unstated and Unexpected

    More information on this framework can be accessed here:
    http://www.excellence2.com/customer-service/Creating_Customer_Loyalty_The_Customer_Loyalty_Grid.shtml

  4. I confess to being a Consumer Reports customer who believes that customer loyalty is a concept that works against the best interests of the consumer. Just because a camera from Company X is the best model doesn’t mean that the television set from Company X is also a good purchase. Customer loyalty makes sense only when the company markets only a few products where consistency can reasonably be achieved. For example, I have great loyalty to my insurance company because the company can assure consistency in its product. On the other hand, in a franchise hotel operation, I often find extreme variability from one location to another because the franchise owner can’t really control quality in the individual locations.

    When I need to select a product or service, I use the Internet and published sources to find information about the specific product or service that I’m interested in purchasing. Sometimes certain companies rise to the top for or go to the bottom on issues like service even if the product itself is good, but no one company is generally best across a full line or services, service locations, or different products.

  5. Hello Brian

    I have read your article (and the loyalty model) and I find it to be a useful way of thinking about it. I also like and find the RATER way of looking at the service experience useful.

    I thank you for taking the time to comment and to share your perspective.

    Maz

  6. Hello Bob

    You point out a truth: each of us is different and as such has his/her own way of dealing with organisations. Some of us will choose and then stick with one supplier (because it is convenient) and others will do the research and select the most appropriate supplier.

    If I look at myself then I find that Amazon has earned my trust and as such I tend to default to Amazon – most of the time – without shopping around. Why? Because I feel gratitude because Amazon have done all that I have asked of them especially when I have been in a tight spot. So I practicing the principe of reciprocity: treating them well in return.

    On the other hand when it comes to my Direct Line insurance renewal, I stick with Direct Line because they have a solid reputation yet I do not take up their renewal quote as I know that if I sign-up as a new customer, online, I can get the same policy cheaper. In this case my loyalty is behavioural – rational loyalty is the way that I describe it.

    And there are categories where I do what you do: take the time to research and shop around. In the main they tend to be high consideration purchases as I do not have the time to do this for every single product/service I use.

    All the best; I thank you for sharing your perspective.

    Maz

  7. Thanks Maz,
    The RATER dimensions are actually based on the SERVQUAL Model developed by Parasuraman et al at Texas A & M University, so I can’t claim credit for that. I have used it to measure customer satisfaction and it always gets a positive response from customers and staff.

    The STATED quadrants in the Customer Loyalty Grid represent the Voice of the Customer (VOC), whereas the UNSTATED quadrants are gaps that can be informed by the Voice of the Expert (VOE). The latter always see this as the “missing link”!

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