Extreme Customer Loyalty

Here are a few tips on creating an organization with extreme customer loyalty.

With the holiday shopping season kicking into gear, it seems like a good time to discuss the importance of customer satisfaction and loyalty.  Even if you are not in a retail businesses depending on the holiday season to make your annual numbers, it is important to make sure you understand your customers so they return year after year.  Okay, so if you work for a Government agency or some other organization that does not have traditional customers, you are not excused.  Keep reading.  Fact is, that Government organizations, even the military, have customers.  They may not be clearly defined, but they exist.  Government organizations also have to fight for budget and human resources.  Often your customer is the very organization that grants your budget and resources. Understanding your customers and their ever changing needs is vital to defining Value, the guiding light for Lean Agile delivery of products and services.  If you are an organization espousing Lean as part of your strategy for organizational excellence, you must understand your customers or you do not understand Value and hence cannot be Lean.

Customer Loyalty Cycle

To begin, let’s review a few key facts about customer satisfaction.

Customer satisfaction is:

  • A mix of perception and reality
  • A moving target
  • Highly correlated to employee satisfaction
  • Driven by process and product excellence
  • Quantifiable
  • Critical to the success of almost every organization

In my years of study and consulting with various organizations, I have come to believe that organizations with fiercely loyal customers subscribe to two key principles of extreme loyalty.

  1. Directly addressing customer satisfaction does not work. Successful organizations excel with the root cause drivers of customer satisfaction.
  2. Customer satisfaction, employee satisfaction, process excellence, and corporate performance are bound in a continuous cycle of performance.

Consider the organizations known for extreme customer loyalty: Apple, Toyota, BMW, Walmart, McDonald’s, Twitter, Amazon, etc.  Each of these organizations has a clear market strategy based on a detailed understanding of customer segments and they effectively manage the drivers of customer satisfaction rather than react to the symptoms. Business insider has an interesting albeit dated list of brands with fierce loyalty, http://www.businessinsider.com/brand-loyalty-customers-2011-9?op=1.

Consider Toyota’s focus on quality and Lean process with products that are very sensible for their target customers.  I have always found it interesting that lower quality auto manufacturers advertise the quality of their vehicles, while consistently being beat out by Toyota who sells more and owns the global customer perception of Quality. Consider alternately Apple and their brash strategy of forging new markets.  It seems to work for them time and again, because they know their customer base eagerly awaits the next iThing. At the same time Hewlett Packard and others try the same strategy, but fail time and again.  Different customer base means different strategy.  McDonald’s provides tremendous training and career opportunity for its employees.  All of these organizations excel in the root drivers of customer loyalty and almost all of these organizations understand that success is a cycle of learning, improving, and delivering.  Without learning cycles at all levels, these incredible brands would not enjoy such success.

Here are a few quick tips for understanding and managing your organization for extreme customer loyalty.

  1. Begin with the end in mind. Understand that you must work toward a model that aligns customer segments, lines of business, internal operations, products and services into a measurement and management program that drives customer loyalty.
  2. Analyze and Segment Customers
    1. Clearly identify customer segments

Segments

  1. Use key attributes and key performance metrics
    1. Understand that perception and reality are not always the same.
  1. Perception must be measured and managed
  2. Reality must be measured and managed
    1. Data must be collected in recognition of timing and method
  1. Timing: At time of service & 6 months after service
  2. Direct Methods: Web, paper, phone, in person
  • Indirect Methods: Process data, returns, price analysis, social media
  1. Create customer segments and further analyze each segment by developing Kano models and House of Quality

The Kano Model of Customer Satisfaction

KanoPlot

The House of Quality associates key customer requirements with product and service attributes.

HOQ

  1. Develop detailed measurement and management plans for each customer segment.  Make sure accountability for continued improvement of the relationship with each segment is clearly defined and make sure each Line of Business knows their role in overall customer management.

CSModel

  1. Develop a detailed plan of action for near term customer loyalty and satisfaction improvement along with implementation of the mechanisms that will ensure ongoing success with each customer segment.  I recommend the use of the Hoshin Planning Matrix as a way to establish a five year plan with clear goals and accountability.  See Mitigating the Effects of Baseline Budgeting for more information on the Hoshin Planning Matrix.  When conducting your customer loyalty and satisfaction improvement initiative, remember the following.
  • Customer satisfaction is A priority, not the priority
  • Satisfied employees drive satisfied customers
  • Teach employees about customer satisfaction
  • Define customer segments, models, & metrics
  • Employ overt and covert (ubiquitous) satisfaction management methods

The point here is that extreme customer loyalty comes from an understanding of what is of value to clearly defined customer segments and then focusing on the core competencies that drive the effective and efficient delivery of value to the customer.  Customer loyalty must be addressed from the inside out.  It is like personal health.  One can eat healthy, exercise, and sleep well to stay out of the hospital or you can ignore the fundamental drivers of health and medicate problems as they arise.  Eventually, the problems become too many to medicate, the medications begin to interact, and a death spiral begins.  There is a long history of organizations that ignore the drives of customer loyalty and instead waste time and money on customer satisfaction mitigation (symptom) strategies such as warranties, clubs, and price manipulation.  Some of these companies include: Blockbuster, Border’s Books, Circuit City, and the long list of home improvement chains run out of business by Home Depot.  This is not a list on which you want to be.

So while the holiday season is here and everyone is out being a customer, think about what makes you loyal to a brand, a company, or an organization then consider starting the new year with a plan to get better at managing the underlying root drivers of customer loyalty for your organization.

About gmsieber
President and CEO of Management Science & Innovation

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