Customer loyalty

How to improve Customer Loyalty and improve Customer Lifetime Value

A Customer’s loyalty is not a right; it needs to be earned through designing a deliberate and emotionally engaging experience that your Customers value and prefer over other available choices. Customer loyalty is one of the most over used terms in business today. People use this term without really thinking about what it truly means.

Let’s make this personal: consider the word loyalty and what it means to you. Think about the people that you are really loyal to. If you are like the thousands of people we have now asked during our training and conference speeches, your first answer is probably your family and friends. Consider your friends, how did they become loyal to you? This loyalty was earned over a period time, and thus grew over a period of time. You both did things with and for each other that you liked and valued. Now that you are loyal it means that sometimes they will do something that you don’t like, but you understand and forgive them.

Steven Covey in the Seven Habits of Highly Successful People spoke about each of us having an emotional bank account. He says people make deposits into that emotional back account. Sometimes things will go wrong and they will do something you don’t like then a withdrawal is made, but this is OK as the overall balance is in credit. The same applies in business. Businesses have an emotional bank account with their customers, but most of them are overdrawn.

So how do you deserve, earn and accrue loyalty from your customers? You need to show them that you care not just in your words but in your actions. They need to experience over time that you make and keep the right promises all along the customer experience. You should show them they can trust you; by being there when they need you; putting their needs above yours; listening, and by understanding them. You need to look at the things you are doing, and what you are putting your customer through -- that are driving and destroying value.

After understanding what drives and destroys value and loyalty, you need to design and consistently deliver an emotionally engaging Customer Experience, an experience that your customers will value; an experience that is focused at engaging with them on an emotional basis; an experience that is deliberately designed to deserve and build loyalty. In doing this you can build a truly engaging Customer Experience. To help you do this deliberately, we have developed a unique methodology called Moment Mapping® for which we offer training on its implementation

Customer loyalty is determined by three factors:

1. Relationship strength
2. Perceived alternatives
3. Critical episodes

However, you will lose your customer if:

1. You haven't built an emotional bond with your customer and more suitable alternative providers become available.
2. The customer feels no customer loyalty and the relationship strength isn't weak.
3. The company handles a critical episode poorly.

How to keep your customers by improving your relationship:

Deliver a quality Customer Experience that is emotionally engaging - This will increase customer loyalty and make your business less vulnerable to competitive offers and new players in your market.

Customer loyalty impacts on profitability:

The fundamental assumption of all the loyalty models is that keeping existing customers is less expensive than acquiring new ones. However, great Customer Experiences will increase customer lifetime value and reduce costs. Long term customers tend to be less inclined to switch and also tend to be less price sensitive. This can result in stable unit sales volume and increases in sales volume.

Key Points:

• Customer loyalty marketing kicks in as long term customers initiate free word of mouth promotions and referrals.
• Long term customers are more likely to purchase ancillary products and high-margin supplemental products.
• Long term customers tend to be satisfied with their relationship with the company and are less likely to switch to competitors, making market entry or competitors' market share gains difficult.
• Regular customers tend to be less expensive to service because they are familiar with the processes involved, require less "education", and are consistent in their order placement.