Building Customer Loyalty Begins with Customer Experience

Dec 19, 2016
12 Min Read
Building Customer Loyalty Begins with Customer Experience

Building Customer Loyalty Begins with Customer Experience

As companies invest more in the customer experience, there is some concern about whether such a commitment will be enough to retain increasingly fickle customers who are constantly being wooed by competitors.

A study of 2,000 U.S. consumers by Accenture, for example, shows that 40% were willing to change their brand loyalty for at least one reason, such as:

  • The customer could receive discounts or coupons via the retailer’s social media channels. (18%)
  • Google Wallet or other form of mobile payment was accepted in store by the retailer. (9%)
  • The retailer allowed consumers to use bitcoin or other digital currencies. (3%)
  • Security measures such as a finger print or other biometric sensors were offered when consumers shopped mobile. (21%)

Bob Barr, managing director and global B2B commerce leader for Accenture, says because consumers have exposure to brands all over the world and “can explicitly shop for whatever they want,” it’s also easier for them to switch retailer loyalties if they can’t immediately find what they want – or don’t deliver it to them fast enough.

“Consumers are also willing to switch if they feel the customer service is less than ideal, or if they get a strong recommendation from friends or family,” he says.

With customers having access to more brands and information about a product or company than ever before, how businesses choose to respond will be critical. For example, the Accenture study finds that 60% of respondents say they see too much sponsored content and others kinds of advertisements.

Also, customers can be turned off by a company that hits them too often with online messaging, such as emails or texts.  Barr says that companies can’t fall into the trap of believing they have a “relationship” with a consumer simply because the customer buys a product or service. It’s important, he says, that companies look for ways to “preserve” that connection, such as stepping into an advisory role with consumers.

For example, brands can notify customers of expiring warranties or provide solutions to issues that interest the consumer and are customized to his or her needs. “You don’t want to have the consumer saying, ‘Why are you sending me this?’” he says.

“Companies must make sure that they really differentiate the value they bring to the consumer,” Barr says. “Customers will abandon you if you’re always just contacting them to make a sale.”

That’s why Barr advises that companies “take the high road” and focus on providing stellar service, understanding that sales will result from that strategy.

Barr says there are steps that any company can take immediately to establish greater customer loyalty, including offering mobile services, becoming active via social media and “consumerizing” the customer experience.

“By that, I mean you want consumers – especially Generation Y and Z – to feel comfortable with you and your service. So, the ‘buy’ button is the same as on Amazon, or you have an online site that feels like Facebook or Uber.”

Another strategy that companies should adopt that will take a bit longer to come to fruition is a strong set of analytics that can reveal things like how customers are best engaged and how they’re buying, Barr says.

Speed and transparency also are issues that companies must address if they want to attract and retain consumers. Barr says that customers want to be assured that a company is reliable when it comes to protecting their payment information and that it also will be up front with its pricing, fees and delivery.

Further, customers are “almost treating online like a brick-and mortar store,” he says. “They want that product as fast as possible, so you have to keep them informed of when it ships and when it will be delivered.”

Emotional connection

According to Rare Consulting, 86% of consumers say loyalty is mostly driven by likeability, followed by 83% who attribute it to trust.  When asked to identify a brand to which they were loyal and would always buy from if they were given a choice, 6% named Amazon and Heinz, followed by 5% for Apple and Samsung.

Experts say that brands with a high likeability score are seen as having a “personality” and consumers relate to it when it creates a positive emotional reaction within them. Customers are also “more amenable” to companies after they’ve purchased a product from them, Barr says.

“You can say, ‘Hey, we’ve got this new model coming out,’ and people who have already purchased from you tend to be more receptive to hearing about it,” Barr says. “These consumers now consider it more of a service than a selling event.”

As Rare research notes, this idea of an emotional connection being a driver of customer loyalty is very different from the idea of using points and prizes to be the driving force behind customer loyalty. “While these mechanics and offers are still important in providing ‘extra value’, we believe that the fundamentals of brand love, trust and customer satisfaction must be firmly in place and understood for these benefits to obtain any real value to the customer,” researchers say.

Fred Reichheld, a Bain & Co. fellow who has been called the “high priest” of loyalty by The Economist, says  that too many companies are sabotaging their customer loyalty efforts by earning “bad profits.”

“Bad profits are those profits that are earned at the expense of the customer,” he says. “They’re doing things to customers that they wouldn’t want done to a loved one or to themselves.”

For example, car rental companies charging a customer for a half day when the person is only 30 minutes late or airlines charging baggage fees are “outrageous,” he says.

“In so doing, these companies send a message to their employee that treating people ethically has nothing to do with what we care about as a management team,” he says. “More companies need to realize that they can’t innovate and bring in the right kind of good people unless they get more serious about treating customers right and earning their loyalty.”

Reichheld has long argued that typical customer satisfaction surveys haven’t been useful in the past, but focusing on just one question can be a useful predictor of growth – and the question isn’t even focused on customer satisfaction or loyalty. That question: “How likely is it that you would recommend [company X] to a friend or colleague?” works best for most industries, he says.

Further, Reichheld’s research underscores the need to keep customer surveys simple if they want to be able to get results quickly enough that they can be acted upon by employees and managers. “Good luck to the branch manager who tries to help an employee interpret a score resulting from a complex weighting algorithm based on feedback from anonymous customers, many of whom were surveyed before the employee had his current job,” he says.

As Barr pointed out earlier with Accenture’s research, strong recommendations from family and friends can drive customer behavior, and more companies are turning to customers to become part of their marketing and sales efforts. At the same time, companies must react swiftly to appease customers who have received less-than-stellar service so that they do not become detractors of the brand who spread criticism to family and friends – and even to strangers via online reviews.

“You can’t wait to decide how you will respond when the service delivered isn’t your best,” Barr says. “You’ve got to be ready now.”

Reichheld notes that companies that have succeeded in gaining customer loyalty – and are very profitable – all carefully measure “that when they’ve touched a life, they’ve really made that life better.”

“When you earn loyalty from a customer, special things happen. They come back and bring their friends. They want you to succeed. They give you great ideas and they really become your PR department,” Reichheld says. “Loyalty is what drives long-term, sustainable growth.”

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