Customer Retention - Strategic Management of Customer Loyalty

We now know that building Customer Loyalty is key to success in any organization. The philosophy was first articulated by Fredreich Reicheld – who studied the relationship between three factors - customer satisfaction, customer loyalty and profits. (Bain & Company) He stated several facts that seem glaringly clear now, but until then, had not been clearly stated.

Tom Peters, author of the seminal business bible – ‘In Search of Excellence’, described great management ideas as " a blinding flash of the obvious" - because they're so right, so simple and so obvious.

This is certainly true of Reicheld’s statements on Customer Loyalty. They are equally – extremely POWERFUL. With them – we have the key to success. Without them, we are left without a clear direction forward in competing within our marketplace. What Reicheld stated was “Customer loyalty appears to be the only way to achieve sustainably superior profits”.He used as an example the life assurance business stating that a 5 per cent increase in customer retention has the effect of lowering costs per policy by 18 per cent – no small cost in any business.

The Customer Loyalty GoalsThe more Customers we keep the more profits we make. Poor service, bad quality and deficient delivery are all factors that encourage some people to go. To stay – they must like you. The bare minimum is ‘customer satisfied’ – expectations met. This will not send customers away – but it will not keep them.

To keep the customer we must EXCEED expectations – deliver the extra special positive experience. A positive experience can involve ‘cheaper’ or ‘better quality’. But the really powerful positive experiences involve feelings - of ‘personal touch’, ‘like’, ‘special’, ‘trust’, ‘ honest’, ‘straight’, ‘fair’ and so on.

And now things stop being ‘blindingly simple’ – because delivering ‘likeable’ as a business strategy involves a complex system of interrelated KPIs, competencies, attitudes and behaviours – that actively drive a powerful ‘customer focussed culture’.

Learning from Success
What do successful Companies do? They accept the basic premise – customer retention is our business strategy.
Customers stay because they like you – they want to stay. To have our people deliver this ‘want to stay’ service - we need them to WANT TO keep the customer. We need them to have the competencies to do that and be in an environment that motivates and empowers them.

Customer Focus involves adopting an overall strategy that will result in increased customer retention – e.g.

1. We will measure, report on and discuss that which is related to customer loyalty – number of defections, customer complaints, positive feedback from customers, focus group reports, feedback from customer care agents, complaint handling, cash collection etc

2. We will manage the Customer Experience. We will study, report, learn from and take action on CRM data on the Customer Experience.

3. We will reward people, actions and behaviors that encourage high use of customer focused behavioral competencies or contribute positively to increased customer retention.

4. We will set targets, expectations, and definition of accountability based on customer focus attitudes, values, and competencies.

5. We will include customer focused core values and behavioral competencies in the job description of all – from MD downward.

6. We will recognize that leader behaviour is a fundamental determinant of follower motivation and success.

7. We will use customer focused skill building and creative problem solving as motivational tools for all our teams.

This Customer Focus Strategy must create an engine that will drive every individual within the Company. The pay back lies not only in increased retention, but in a huge surge of highly motivational drivers that, in turn, increase performance and drive towards success.