On Creating Customer Loyalty

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

The 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.

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