Building a Customer Loyalty Plan, Step 4

The average company loses 20 to 40% of its customers every year. Well conceived and well executed loyalty programs for attracting, retaining and winning back high value customers are essential for any company to succeed. Build your own plan around these customer loyalty stages.

Turning suspects into qualified prospects

Turning qualified prospects into first-time buyers

Turning first-time buyers into repeat customers

Turning repeat customers into loyal clients

Turning loyal clients into advocates

Winning back lost customers

Turning repeat customers into loyal clients

In developing any plan for upgrading repeat customers into loyal clients, there are a number of key factors to consider. One key element is to research your customers to determine who are you best customers are and why they buy. What makes customers buy? Value. Delivering value on your customers’ terms is critical to your success in the marketplace. The penalties for under-delivering and over-delivering value can be severe. Provide too little service, or the wrong kind, and your customers will defect; provide too much service, even the right kind, and your company will go bankrupt or, best case, price itself right out of the market.

Some of the most ground-breaking work on effectively delivering value comes from Dr. Noriaki Kano. Dr. Kano is a professor at the Science University of Tokyo and an international consultant and lecturer in quality management, marketing and statistics. He is well recognized as the advocate of ‘attractive quality vs. must-be quality’ also known as the Kano model.

Dr. Kano challenged the conventional customer satisfaction beliefs that the better a company delivers on each product or service attribute, the more satisfied its customers will be. Instead, Dr. Kano developed the thinking that not all service and product performance is equal in the eyes of the customer. Some performance creates higher levels of loyalty than others. Kano’s model suggests there are three performance levels:

Basic: This is expected or must-have performance. For an overnight shipping firm like Federal Express, for example, accurate billing and prompt telephone assistance are examples of these basic services. Failure to deliver these basic performance factors will result in customer dissatisfaction. Doing them well, however, will not increase customer loyalty because customers perceive them as minimum requirements for performance.

Expected: These are the performance factors that the leading suppliers in an industry provide. Delivery by 10:00 am on next business day is an example of expected service. Providing these things result in neither increased or decreased customer loyalty because most primary competitors offer them. As a market leader, a company must do these things to simply stay ‘even’ with the competition.

Unanticipated: These are the exciting, surprising and attractive performance factors which increase customer loyalty. This is what makes companies different from their competitors. As a company begins to deliver these performance factors, customer loyalty accelerates. Federal Express was the first to offer on-line customer tracking via computer. Customers could track where the package was in transit and when the receiver accepted a package delivered via FedEx. At the time of its introduction, this was considered a major, unanticipated service perk. Since first introducing its tracking system, Federal Express has added other tools to improve tracking effectiveness like providing drivers with a handheld computer and transmitting device. The more unanticipated value a company provides the deeper the loyalty. Says Fed Express Chairman Frederick Smith, “I don’t think that we understood our real goal when we first started Federal Express. We thought that we were in the transportation of goods. In fact, we were selling peace of mind.”

Customer loyalty research can help you uncover ongoing ways to deliver customer value. We’ve use our Customer Loyalty Compass to help clients identify and leverage their key loyalty drivers.

Step 1 | Step 2 | Step 3 | Step 4 | Step 5 | Step 6

Source: Jill Griffin’s Customer Loyalty: How To Earn It, How To Keep It