The X-Factor that Drives Customer Loyalty
The ability to create emotional bonds with your customers is the true x-factor that drives customer loyalty.
You have more ways than ever before to engage with customers and enhance our product and service delivery. But the greatest opportunity for moving the needle on customer loyalty—that critical driver of long-term growth and competitive advantage—lies in consistently building value for customers.
Here’s something that’s not always so intuitive: Customer loyalty starts with employee loyalty. In fact, there are a myriad of statistics showing direct links between the employee experience and the customer experience, none more powerful than the fact that companies with highly-engaged employees outperform competitors by 147%.
McKinsey & Co. points out that genuinely empowering employees has a positive impact in creating meaningful work, is a critical driver of performance, and is also something many people want in their jobs. Meanwhile, Gallup notes that organizations that empower employees experience 50% higher customer loyalty.
As all of these statistics and plenty of real-world examples demonstrate, customer loyalty is rooted in the employees who are driven by their own experience to create a superior experience for each and every customer. These employees are inspired to create more value for customers by uncovering, understanding and addressing their needs. And that’s a big advantage for their companies. As Gartner puts it, “Customer Experience (CX) is the new marketing battlefront.”
At a time when products are becoming more commoditized, a commitment to and robust foundation of exceptional customer value creation can help protect your company from vulnerabilities and competitive threats from all sides. Now more than ever, your competitive advantage lies in your customer-facing teams that build deeper, trust-based partnerships.
To understand how they can do this, you first have to understand the different types of customers.
3 DIFFERENT TYPES OF CUSTOMERS
Customer dissatisfaction can come from many sources, but regardless of what causes it, the impact can be far-reaching and long-lasting for your brand, your revenue goals and your employees’ confidence and morale. After all, part of what makes salespeople successful is the degree to which they have confidence in their company’s ability to deliver on the promises being made to customers.
Consider that 48% of dissatisfied customers will tell friends personally about their (bad) experience or post their negative experiences on social media. Brand reputation can take years to recover, customer lifetime value can quickly drop, and a vicious cycle where a company tries to save money by cutting back on customer service training can makes service levels plummet even further. You could even start losing some of your best and brightest employees.
Rationally Satisfied Customers
Rationally satisfied customers on the ones who will tell you they’re satisfied (and maybe they are), but then only 4 in 5 will buy from you again. While it’s nice to have customers tell you or others that they’re satisfied with your offerings, a purely rational sense of satisfaction doesn’t necessarily translate into long-term loyalty.
Emotionally Satisfied Customers
Only your emotionally satisfied customers will:
- buy multiple products from you
- be willing to pay more than alternatives offered by your competitors
- endorse your company to others people
Emotional bonds are built by sales and customer service teams that have the skills to provide high relationship impact. By understanding customer needs, delivering value based on those needs and helping customers achieve their goals, they consistently create deep, trust-based relationships that make their organization and brand stand apart from the rest of the field.
Considering all of this, it’s not surprising that Gallup research found a 23% premium over the average customer (in terms of revenue and relationship growth) when customers are emotionally satisfied.
THE CUSTOMER VALUE SEGMENTATION MODEL
So, how do you make sure more of your customers are emotionally satisfied, not just rationally satisfied or, worse, dissatisfied?
Organizations that have established themselves as benchmarks for customer loyalty and growth develop sales and service teams that consistently rate high in two areas, which are the key factors that determine the type of value a customer derives from an organization: Relationship Impact and Product and Service Differentiation.
The Value Segmentation Model below is a tool for assessing how your customers perceive the level of value your organization is creating:
The key take-aways:
- Supplier and Value-Add customer relationships are vulnerable to an offer of equal or greater value.
- Trusted Adviser customer relationships lack the ingredients needed to maximize value, from the customer’s perspective.
- Partner customer relationships have the strongest emotional bonds with your organization, use you as a single-source provider and refer you to friends and family.
5 STEPS FOR BUILDING CUSTOMER LOYALTY
Here are five steps to ensuring your customers view their relationship with you in the Partner quadrant of the Value Segmentation Model:
Establish and nurture a customer-centric culture.
A true customer-centric culture is built on bold commitments, measurable actions and ongoing practice and reflection that makes the customer experience everyone’s responsibility. Because individual beliefs impact behaviors, it’s important to:
- Emphasize values and integrity as the key drivers for building internal and external client relationships.
- Align your team’s view of sales and service with their view of their abilities, values, commitment to activities and their belief in products.
Develop differentiated customer experiences to drive customer loyalty.
Regardless of the source, dissatisfied customers have a problem that needs to be addressed. But it doesn’t have to lead to lost business or reputational damage. When your sales and service teams are able to solve a customer’s problem effectively and consistently demonstrate through their behaviors and follow-up that they really care, that customer might just become even more loyal than those who never had a problem to begin with.
Create a laser focus on developing front-line skills and abilities, enabling your sales and service teams to:
- Develop trust, credibility and rapport, gaining a deeper understanding of their customers’ goals.
- Understand the power of listening and asking questions.
- Identify unarticulated customer needs, delivering value beyond the products and services you offer.
- Demonstrate the uniqueness of your products and services compared to competitive offerings.
Develop your people to their highest potential.
Managers play a critical role in reinforcing the culture and empowering their teams to move past self-limiting behaviors. Make sure your front-line managers have the mindset, skills and tools to balance their dual responsibilities of developing their teams and achieving results. Specifically, they need to be able to:
- Coach effectively and develop strategies to expand beliefs.
- Create an environment where employees are challenged and motivated to perform at higher levels.
- Improve performance by helping people set and achieve goals.
Link customer loyalty and employee engagement metrics.
Research shows that engaged employees exhibit customer-centric attitudes and behaviors. You can demonstrate the connection within your own organization and support continuous improvement by providing closed-loop learning for employees and management. This might include:
- Sharing customer survey data and quotes with employees.
- Generating a steady stream of open and honest feedback from the front line.
Sustain improved performance with ongoing training and coaching.
Maintaining a customer-centric culture isn’t a one-and-done event. It requires continual focus, assessment and learning. There are a number of things you can do to make development and reinforcement integral to the culture, including:
- Providing phased learning and development opportunities over time to reinforce and apply new skills and behaviors.
- Building in accountability to apply new behaviors and skills over several months.
- Holding managers accountable for effective, consistent coaching.
- Celebrating progress with reward and recognition on a regular basis.
CUSTOMER LOYALTY: REAPING THE BENEFITS
Moving customers from dissatisfied or rationally satisfied to emotionally satisfied, and from satisfied to engaged, requires everyone’s involvement. For some, that may mean shifting mindsets, changing behaviors or building new skills. But it’s a strategy that pays off.
When your employees are engaged, they’ll put in extra effort to create more value for the customer. Through their behavior, they’ll promote loyalty to the brand, the company and the product.
Those engaged employees will, in turn, create more engaged prospects, who are 50% more likely to become customers. And your engaged customers will not only buy more products from you, they’ll be more emotionally satisfied — and more loyal.
Building a foundation of customer value creation will allow you to reap the resulting benefits of customer loyalty. It’s an ongoing cultural commitment, one that many companies won’t or can’t sustain. And that’s exactly why it’s so powerful.
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Vice President, Client Development
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