Loyalty

Over the last several years in corporate America, retention-marketing efforts have gained substantial visibility--though not necessarily won committed followers--through the much-touted customer retention management (CRM) movement. Spending on CRM is staggering: over $5 billion will be spent annually, by 2005. All too often, such initiatives have meant substantial investments in hardware and software accompanied by a total lack of marketing strategies! Results have been disappointing, causing many sponsoring companies to question the value of CRM.

Businesses' marketing efforts can be seen as being composed of two basic activities: acquiring new customers and retaining current customers. Most companies spend a dominant portion of their resources on the former, leaving current customers to fend for themselves. However, customer satisfaction measurement and management (CSM&M) and customer relationship management (CRM, or what we call `Aftermarketing' activities) tools can help you improve customer retention programs and results and increase the attractiveness of your business and your products or services in order to help you to attract new customers. This approach can be summarized by five major activities:

1. Understand Customers' Needs and the Dynamics of Competition in Your Market Customers' needs and requirements constantly evolve. They are influenced not only by your competitors, but also by practice leaders in other categories as well. Needs and requirements also change with your customers' ever-fluid lifestyles and demographics. The competition in your markets is also a moving target. To formulate appropriate customer-centric practices, businesses need a sound understanding of their category consumer and the nature of the competition they face.

2. Measure Quality and Performance Satisfaction and loyalty begin with quality in the products and services businesses sell and in the processes they use to deliver them. Yet many businesses simply assume their products, services and processes are meeting their standards. Take the time to analyze your own internal metrics and correlate with external measures (like CSM), and employ independent objective assessments, such as are collected in Mystery Shopping exercises. Feedback from such objective audits helps a business take necessary corrective actions.

3. Monitor, Manage, and Optimize Customer Satisfaction Perceptions of your organization's performance are also critical to your success. That's where customer satisfaction measurement and management is involved. But many current programs make assumptions about the relationships inherent in satisfaction data that we believe are misleading. The solution? Focus on customer delight. The six steps for managing delight:

1. Discover what is important for your customers.
2. Determine your customers' level of satisfaction with each product/service issue.
3. Model the non-linear relationship between performance and satisfaction to maximize ROI.
4. Devise the best strategy with which to optimize customer satisfaction.
5. Measure backward--link actions to actual business processes.
6. Measure forward--link actions to purchases, share-of-spending, and profitability.

4. Identify and Manage Drivers of Loyalty Despite the universally acknowledged importance of customer satisfaction, it's becoming clear to most companies that satisfaction alone simply isn't enough to keep companies profitable! Investigate the loyalty surrounding your company, product, or brand. Loyalty can be thought of as the emotional glue that sticks customers to a company or brand--often for life. Loyalty is the result of a unique blend of brand metrics and customer metrics stimulated by the competitive context of a category. Individual differences in consumers further complicate the issue, but loyalty segments can be identified and strategies can be created to attract the most profitable segments. Companies can validate loyalty segments by using observed behaviour--primarily share of spending.

5. Ensure ROI from Your CRM Investments Finally there are tremendous opportunities waiting for most companies, if they'll only integrate their attitudinal data (CSM) with transactional data to create realistic CRM models. Economic data from your customer databases can be mined to evaluate the customer equity and financial potential of each customer, thus profiling customer value. Far more customers change their spending patterns with a company than end their relationships altogether. Focusing on customers' spending patterns to improve their share-of-wallet can contribute as much as ten times more value to a company than simply focusing on retention alone.