How can an organisation build a global force of loyal customers? How can you get people submit to your brand? These are questions every business leader sincerely care about the answers. This becomes even more pertinent in the face of rapidly increasing global connectedness. The limitations of distance has been done away with as international boundaries holds no real meaning to today’s consumers.
In the past, producers took their customers for granted because at that time the customers were not demanding nor had alternative source of supply or suppliers. But today there is a radical shift. The changing business environment is characterised by economic liberalisation, increasing competition, high consumer choice, demanding customer, more emphasis on quality and value of purchase.
Reports indicate that companies lose half their customers every five years. The rate of customer defection is so high that some even argue that loyalty is dead. But that’s a serious mistake. How can someone say that? Loyalty is not dead. Every serious minded executive knows the importance of customer franchise. A company that doesn’t manage customer loyalty would soon go extinct especially as competition intensifies.
The interesting thing is that any business can effectively command loyalty; all it requires is a simple understanding of the true purpose of business. For many, the purpose of business is to make profit. Everything rises and ends with how much profit a business is able to generate. Well, that’s true and if it is true, you want not just profit, but sustainable profit. And you can’t have sustainable profit by running after profit. Sustainable profit is the result of securing and sustaining the loyalty of your customers.
The thing is, you don’t secure and sustain the loyalty of your customers through advertising, neither will sponsorship of any sort produce that. Many companies have focussed on that and did it so well, yet have gone extinct.
Customer loyalty is a natural consequence of creating value; value that blows the socks of your customers away, well intended value designed to leave people’s life better. When a company focuses on creating value first, then their loyalty management efforts will produce lasting results.
You can’t advertise deceit and expect to go very far in business. Sharp practices in pursuit of profit destroys customer loyalty. You can’t secure the loyalty of customers and sustain it through deceit. You may manipulate people’s mind into submission to your brand but watch it, they will soon fetter away soon as they come to real terms with the value you offer them. I love the way Charlie Carwey, the founder of MBNA, an American credit card company thought about it. On the cover page of his company financial report he writes, “Success Is Getting the Right Customers . . . and Keeping Them.” That about says it all. In MBNA’s entire history, the company has suffered only a handful of defections from its thirty-seven hundred groups. By 1994, its individual customer base had grown to more than 14 million cardholders!
Based on all of these, the ultimate question then is, how do I secure and sustain customer loyalty to my brand?
First, understand that there is no short-cut to anywhere meaningful. Building customer loyalty to your brand is not going to be an overnight project. In fact, it is a life time project, and always work in progress. You don’t start tomorrow morning and begin to expect instant results.
Next, you will need to know that loyalty management should be a CEO’s function. Loyalty is too important to be considered the work of the marketing department. If CEOs will devote time looking at stock performance, they should do even much more for loyalty metrics. Of course, the performance of the former depends on the latter. Reports have shown that even a slight improvement in customer retention by companies results to significant changes in financial performance. That’s how important it is.
But most importantly is for the CEO to define the customer loyalty philosophy in the company. The customer loyalty philosophy of a company is the set of ideas, facts and convictions of the company as it relates to customer loyalty. It is this philosophy that defines the dimensions of their commitment to securing and sustaining the loyalty of their customers. Not only should this be defined, it should also be clearly communicated to everyone in the company, not once but on a regular basis. This will help everyone in the company develop a customer loyalty attitude, a predisposition to think, talk and act in ways that will communicate optimal value to the customers. Imagine a company where everyone thinks in terms of the customers. What kind of organisation do you think that will be?
Finally, customer loyalty should be measured. It is sad that many organisation can’t really tell whether their customers are defecting or not. Customer loyalty works by the laws of economics and human behaviour, which means there are practical, objective, mathematical answers to questions such as: Just exactly how much value does loyalty create (and vice-versa)? How do we quantify the link between loyalty and profits? What’s the actual cash advantage of holding onto a good customer for one additional year, or five years, or 10? There are accounting methods, cash flow, net present value, and probability used in measuring customer loyalty. Although I can’t get into that in details here, there are available literature to help you.
No business without a customer loyalty culture can endure for so long. It is the core force behind growth and profitability.
By Brian Reuben.
Brian Reuben helps companies and individuals attain optimum performance and profitability. He is a global thought leader on business and leadership. @brianoreuben