Leading companies recognize that the key to success is creating superior value for customers. Usually, companies think of value as the way to attract new business. But they often overlook the importance of keeping customers-of preventing them from defecting to competitors. Measuring satisfaction alone is not enough. A recent study showed that 60 percent to 80 percent of customers who defected had declared themselves satisfied or highly satisfied on their last satisfaction survey. Rath & Strong's Customer Loyalty Analysis helps you measure customer loyalty and develop a targeted strategy, based on the findings, to directly improve profits. What Is Customer Loyalty? Customer Loyalty is a bond between a targeted customer and a supplier where the customer consistently spends most or all of its budget on the supplier's goods or services. Loyal customers add value to a supplier's bottom line by: -
Providing a consistent cash flow over time -
Generating new sales by referring other customers -
Paying a price premium -
Buying a broader mix of goods and services -
Co-developing leading edge products that can be sold to other customers -
Reducing the company's selling and servicing costs Enhancing loyalty in target customers can lead to sustainable and profitable sales growth. What Is the Difference Between Customer Loyalty and Customer Satisfaction? Many organizations track and manage customer satisfaction. But most of them do not see any connection between their satisfaction scores and the bottom line. We have discovered that even if a customer is 'satisfied,' it may still shift some or all of its business to a competing supplier. This is because satisfaction measures customer preferences, which are often unrelated to their behavior. For example, while 'price' is frequently cited as a leading cause for dissatisfaction, it is almost never the most significant reason why a customer leaves. Customer loyalty, however, is based on customer buying behavior. Its measurement is directly linked to profits. Benefits Rath & Strong's Customer Loyalty Analysis is the best method for understanding and assessing customer-based product or service performance and failure. By understanding the drivers of customer disloyalty, organizations can efficiently target the right parts of their value chain to get highly leveraged improvements in product or service performance. The analysis is especially useful for addressing: -
Declining market share, sales or profitability -
High levels of customer 'churn' (and the resulting need to replace lost business) -
Unclear benefit of investing in quality improvement projects -
Many projects underway without overriding prioritization or consensus Our approach results in: -
Reduced customer defections and improved profits. Marketing costs are reduced because it costs less to keep customers than it does to find new ones. And loyal customers refer other customers. -
Loyal customers who bring in more money. Loyal customers buy more often and are less likely to skip from supplier to supplier looking for the best price. -
Decreased employee turnover. Studies show that this is especially true in service industries, or departments with high customer-employee interaction. Having more loyal customers thus helps save the expense of recruiting, selecting, and training new employees. -
At least a 10:1 payback on consulting investment. The result of the Customer Loyalty Analysis is a detailed map of improvement opportunities allowing your organization to prioritize and focus its performance improvement efforts. -
Specific actions tied to their impact on the bottom-line. We measure the level of disloyalty and draw the connection between loyalty rate and profitability. The results are then linked to specific actions and prioritized by how they will affect the bottom-line. This allows you to align your products and services with factors that drive customer spending behavior. Customer Loyalty Analysis Overview Implementation involves the following steps: Step 1: Establish a Project Team
The first step is to form a client team who will work with Rath & Strong on the analysis. The role of the team is to assist in tailoring our approach to your company and provide a forum for training in the resulting methodology. Step 2: Complete Background Work
The team groups customers into common segments and determines the relative profitability of each group. Step 3: Define Loyalty Rate Measurement
The team decides how to best define and measure customer loyalty. It considers issues such as sales frequency, percent of available business, defection rates, and frequency of referral. The team determines customer loyalty rates and an estimate of the expected financial gains from improving loyalty. Often, the team works with data collected during Rath & Strong's Customer Value Analysis to develop statistical models that predict customer loyalty. Step 4: Conduct Customer Research
The team develops methods for assessing customer loyalty patterns. Typically, it carries out interviews with lost customers to pinpoint what drives customers to leave. Step 5: Develop Customer Loyalty Driver Database
The team works to understand the root causes of customer dissatisfaction. The team quantifies the lost profit attributable to each customer dissatisfier and identifies the highest-leverage improvement opportunities. The result is a clear set of priorities with which to focus quality and service improvement efforts. Step 6: Create Loyalty and Disloyalty Driver Maps
The team incorporates the customer dissatisfiers into a detailed map that tells you where to focus your improvement efforts and just how much you can save by doing so. The team also compares this to feedback from loyal customers to round-out the picture of customer behavior. 
Step 7: Formulate Customer Loyalty- Building Strategy
In the final step, the team develops strategies to remedy the problems causing customer complaints and defections. The team formulates a customer loyalty-building strategy comprising specific activities and accountabilities. The customer loyalty findings are also incorporated into budgets and financial plans. Rath & Strong's Role Rath & Strong's role is to structure and facilitate the Customer Loyalty Analysis. Working with the client team, we tailor the specific steps and group facilitation methods to the organization's unique circumstances. We will also design a system to monitor customer loyalty to track progress and continue improvements. After completing a Customer Loyalty Analysis, we often assist our clients in implementing opportunities for changes that emerge during the process such as process improvement, change management and leadership counsel. For more information about Rath & Strong's Customer Connection Services, please contact us at 781-861-1700, via email at rathstrong_info@aon.com. |