The Customer Loyalty Challenge Most customers will not tell you how they feel about your products and services to your face. So how do you know what they are thinking, and if they will return? Customer satisfaction is as much of a managerial art as a science, because of the profitability tradeoffs it poses. Customers demand performance, high quality, fast service and a highly trained and knowledgeable staff, all the while insisting on superior value. Despite these dilemmas, the research is in. Superior customer service can be a viable source of sustainable competitive advantage.

View the PDi Customer Loyalty Model

Why So Important?

It is far less expensive to retain existing customers than to attract new ones. Advertising expenses for new customers, and the costs of losing old customers, make customer satisfaction a critical success factor for many businesses. Losing a customer not only forfeits the lifetime value of that customer's business; it also poisons potential business with an estimated 2% of future customers, who hear negative "word-of-mouth" (each dissatisfied customer eventually tells over 10 people about the bad experience).

For this reason, "defensive marketing" and "service recovery and customer retention programs" have become increasingly popular - with good cause. Empirical research in this area finds the costs associated with keeping customers are much less than the costs associated with losing them.
 

The Building Blocks of Customer Loyalty

Beyond the nearly ubiquitous expectation for basic customer satisfaction lies the gold standard - customer loyalty. Just as the importance of having a stable base of repeat customers can hardly be underestimated, so is the difficulty of learning how to retain demanding customers. So how does a business build customer loyalty?

1. Customer Feedback. Before you can understand how your organization is satisfying or frustrating customers, you need to listen to your customers. Unfortunately, holding interviews and focus groups with major customers is quite time consuming, and PDi can help. Beyond major customers lie scores of smaller customers, who can be contacted through the mail, over the internet or by phone. As long as the survey questions are well-written, and do not miss important areas, they can yield valuable insights. PDi can help here, as well, with pre-validated questions on a wide variety of customer topics.

2. Problem Resolution Processes. Market researchers have discovered that properly handled complaints mitigate negative word-of-mouth. Everyone knows that problems with products or services are unavoidable. Consequently, quickly responding to, and satisfactorily resolving, customer complaints can both increase loyalty and minimize the costs of losing customers. So are you handling problems well? As an independent, external firm, PDi can offer employees and customers the guarantees of confidentiality and objectivity they need to be candid and open with their feedback - to tell it like it is.

3. Distinctive Competence through Customers. Is good performance good enough? While customers are often satisfied with good performance, loyalty requires something more. Unfortunately, that something more is relative - something above and beyond what customers would normally expect from the typical offerings in your industry. If they look around and conclude that you are providing superior customer service in some area they value (performance, service, speed, quality, etc.), they tend to stick with you over time. The first question becomes, how are you perceived? What do customers expect from the "average" product / service provider, and how do you rate in comparison? The second question becomes, what do they really care about? Are you being distinctive in areas most of your customers value highly? Successful companies must know how they rate. PDi has the resources to get you there.