Pages Menu
Twitter
Categories Menu

Posted by on Feb 19, 2013 in 21st Century Customer Service, Business, Customer Service, Featured, Leadership, Social Era | 3 comments

On Creating Customer Loyalty

loyalty_wallpaper_worn_by_slench-d4gcaws700x300

Your brand is now what your customers say it is.

Companies can no longer hide behind big marketing campaigns. Ornate words and “marketing speak” can no longer mask mediocre products. Today’s customer is an educated and empowered consumer. And access to your competition is now only a click, tap or swipe away.

 

Ornate words and “marketing speak” can no longer mask mediocre products

 

What’s a Brand to Do?

Forget about chasing and catering to the prospect. Instead, take care of customers first with an inside-out approach. Aim to increase satisfaction and to create positive word-of-mouth. Your loyal customer becomes your best marketing asset when they evangelize for you.

Loyalty as a Competitive Differentiator

urlThe industry standard to gauge customer loyalty is called the Net Promoter Score, or NPS. The score was created by Fred Reichheld, a Senior Fellow at Bain & Co. The New York Times credits Fred for putting the concept on the map. And The Economist goes one step further, having ordained him as the “High Priest of Loyalty”.

What Reichheld found in his research is that it’s nearly impossible to grow a profitable business without the loyalty of your customers. It has been shown that loyalty leaders grow 2.6 times as fast as their competitors.

The NPS system consists of exactly one question or, in the words of Reichheld’s book on the subject, “The Ultimate Question.” The system is presented to the customer in the following form:

“On a 0 to 10 scale (10 being the highest) how likely would you be to recommend _______ to a colleague or a friend?” The final score comes from taking the percentage of 10′s and 9′s (promoters) and subtracting the percentage of 6′s and below (detractors). The 7′s and 8′s are considered “passives” and therefore are not counted.

url

Image courtesy of checkmart.com

Frugal Wow

I recently had a chance to hear Fred Reichheld speak at the 2012 Compete Through Service Symposium hosted by ASU’s Center for Services Leadership. Reichheld spent a great deal of time talking about the concept of a “frugal wow.” A frugal wow is an inexpensive way to make the customer feel valued. For example, at Chick-fil-A the frugal wow includes a warm welcome, anticipating customers’ needs, active service recovery and providing remarkable customer experiences (here is a post that contains a Top 10 list from Chick-fil-A.)

 

A frugal wow is an inexpensive way to make the customer feel valued.

 

I caught up with Fred after his talk. We discussed the concept of the Purple Goldfish and the idea of giving little unexpected extras (g.l.u.e.). I also asked why he focused the majority of his talk on “frugal wow”. Reichheld stated that this was because of its ability to influence NPS. The message was clear: NPS is a barometer, but companies need to invest in the experience.

The Need for Innovation and Trojan Mice

Actions speak louder than words when it comes to customer experience. Brands need to start to take small steps to add value for the customer. Here is a great analysis by Peter Fryar on the concept of Trojan mice:

“Trojan mice . . . are small, well focused changes, which are introduced on an ongoing basis in an inconspicuous way. They are small enough to be understood and owned by all concerned but their effects can be far-reaching. Collectively a few Trojan mice will change more than one Trojan horse ever could.”

Admittedly, Peter is talking more about the employee experience. But the same logic can be applied to innovate the customer experience. Little changes can truly make a big difference. They become beacons along the journey from being an “also ran” to becoming a “loyalty leader”.

Maybe the ultimate question is really, “What are your frugal wows?”

 

Want more? The customer service series continues here: What’s Right (And Wrong!) About Zappos’ Customer Service Hiring and HR.

Loyalty art graphic by  Nikolaj  Lepka

 

Stan Phelps

Stan Phelps is the founder of 9 INCH marketing, a consultancy that helps brands obtain customers that are four times as valuable as ordinary customers through the Goldfish Rule. He works with senior leaders to focus on meaningful differentiation to win the hearts of both employees and customers. Driven by client objectives and inspired by bold vision, Stan creates custom keynotes, workshops, and programs that are memorable and on brand, inspiring businesses to become talk-able by design.

468 ad
  • http://9inchmarketing.com Stan Phelps

    Switch and Shift readers. Here’s some lagniappe (a little extra thrown in for good measure). My book, “What’s Your Purple Goldfish? 12 Ways to Win Customers and Influence Word of Mouth” is free today and tomorrow on Amazon (2/19 and 2/20). Download a copy courtesy of Jeff Bezos:
    http://www.amazon.com/Purple-Goldfish-Customers-Influence-ebook/dp/B006UO8R7S/
    Don’t worry if you don’t have a Kindle. Just down the cloud reader and you can view on your computer, smart phone or tablet.
    The book contains over 100 examples of “frugal wow,” little extras that make a big difference.
    Best,
    Stan
    @9INCHmarketing

  • Pingback: Does Great Customer Service Still Matter? | Switch and Shift

  • http://www.pretiumsolutions.com Scott Heitland

    Enjoyed the post, Stan. NPS is without question the driving force in the customer loyalty metrics industry but is not without its own set of detractors, most notably Dr. Bob Hayes, a customer experience metrics guru (can I use that word?) who really takes NPS to task in one of his books.

    Without even getting near that debate, one area where I do think Satmetrix falls short is an effective program or system that shows companies exactly HOW to improve NPS in any kind of sustained way. The Ultimate Question 2.0 sorta kinda tries to venture into that jungle but doesn’t do an effective job with it in my opinion.

    There are a lot of companies out there with all of this great fancy pants NPS data, but they still don’t know exactly how to improve their NPS! And it’s no wonder – improving NPS is hard, really hard, because it involves changing agent and customer-facing employee behavior on the front lines and doing it in a way that can be sustained. That in turn requires a lot of other important stuff – superior and regular coaching, supportive and committed leadership, etc.

  • http://9inchmarketing.com Stan Phelps

    Thanks Scott. Great points. I like to think of NPS as more of a barometer than a map. I truly believe that creating frugal wows can move the needle. This assumes you are getting the big things right first. Similar to A/B testing, you can try different little extras to see how they affect your score.
    Marketing in my opinion is about innovating through differentiation.
    Best,
    Stan

  • Pingback: In marketing, actions speak louder than words. What’s your frugal wow? « 9 INCH MARKETING