Doesn’t it feel great when business is booming (or at least appears that way)? You’re not receiving any complaints, customers continue to use your service, and some of them are even growing their accounts. You must be doing everything right, right?
Not necessarily. Many businesses make the mistake of assuming that a customer is loyal, simply because they aren’t complaining and they keep coming back month after month. But that misapprehension that retention equals loyalty can be dangerous, especially with large accounts who may be silently languishing and getting ready to churn.
Loyalty or Something Else?
Repeat business from a customer may seem like loyalty, but there are many reasons for it. Instead of relying on assumptions, proactively see if customers are quietly loving your product/service, or if they think you suck but keep using you for one of the reasons listed below:
- Trapped by Inertia
The relationship may be bound by a contract or prepayment, and your customer is gleefully counting the days that remain. At other times, sticking with your offering may just be the easiest choice. Remember that can change overnight.
- Red tape
How nimble is your company? Perhaps you are one of the fortunate few who are given relative autonomy to make decisions within a certain budget, and with no other constraints. For others, something as simple as changing a vendor may takes months of meetings and getting stakeholders to agree.
This is especially true if your offering is relatively simple and inexpensive, or there aren’t too many competitors in your space.
- Creatures of Habit
Getting used to a particular cadence or rhythm with a piece of software can temporarily prevent us from making a shift. How long does anything in business stand still?
- No Competition…yet
This may be the most dangerous mistake of them all, because it’s simply a matter of when. If your offering is indeed valuable, at least one other company is preparing to emerge with something more intuitive, faster, or prettier.
Nothing illustrates the difference between true customer loyalty and mere repeat business, like someone who can do it cheaper or better than you. Your customer may actually be in the process of finding an alternative supplier as you read this.
- Loyal to Who?
Sometimes, the customer relationship is with a particular employee at your customer’s company, not with the company itself. When that person moves on, you may find yourself moved along with them.
- Embedded is not Indispensable
When your customers use your product or service at their company, they can get comfortable with your unique user experience. Those little details are often why people stick with the same car company – the familiarity of how something feels is an advantage.
Depending on the service, there may even be a cache of data that has built up over time that may be difficult to transfer to a new platform or system. Your customer may be willing to get comfortable with a new UX and deal with some annoying data transferring if you aren’t wowing them in other ways.
- Other Priorities
Guess what? You are not at the center of your customer’s world. But you are reaping the rewards as a result.
They may not have time to evaluate every competitor to see if you’re still the best choice. Even if your customer is savvy or has the time for comparison shopping, the fear of having to learn another interface may keep them at bay…for awhile anyway.
- High switching costs
Your competitor may charge more, or have an onboarding fee, but that may be only temporary. An unloyal customer can be lured away by a temporary discount.
- Pivots and Agility
The business world is in a constant state of flux, and there are many circumstances that can lead to a downgrade or churn. For example if you are a Customer Relationship Management (CRM) platform:
- Your customer may learn that email marketing is not as valuable of a marketing channel as they thought. A more lightweight CRM solution will be sufficient.
- Conversely, they may choose a more aggressive email marketing strategy requiring a more robust CRM than you offer.
- Growth or investment may mean the ability to hire new team-members to handle the implementation of new software, overcoming the inertia that was preventing them from switching until now.
So What Is Customer Loyalty?
Now you have intimate knowledge of what loyalty isn’t, but just what are you looking for from your ideal customers?
According to Fred Reicheld, acclaimed author and creator of the Net Promoter System, “loyalty is the willingness of someone—a customer, an employee, a friend—to make an investment or personal sacrifice in order to strengthen a relationship”. In the case of customers, this loyalty may be an indication of repeat business, but repeat business is not necessarily an indication of loyalty.
The Loyalty Research Center lists these characteristics for loyal customers:
- Willingness to hang in there even when there may be a problem, because the organization has a history of addressing issues with phenomenal customer service.
- Not actively seeking out competitors and, when approached by them, customers are not interested.
- Spending the time and effort to communicate with the organization so as to build on past successes and overcome any weaknesses.
We would add one more exceptionally valuable characteristic of customer success:
- Willingness and even eagerness to promote the company they are loyal to.
True loyalty is far more powerful and valuable than repeat business, and it is based on other factors beyond the quality and value of the product or service being offered. Research shows that customers are willing to pay more for better customer support. So even if a competitor charges a bit less than you, or you don’t have the exact feature set being sought, loyal customers are likely to stay.
Another factor beyond a track-record of excellent customer service, is an alignment of values. A Corporate Executive Board Study of 7,000 consumers found that shared values are what create lasting relationships between customers and brands. Even businesses will rally to a company because of shared ideas and values, because we are often drawn to the purpose that particular business is trying to achieve. Why else do companies, even B2B companies, publicize their values and mission statements on their
Customer satisfaction is not enough. Being truly loved means that the customer will give you the benefit of the doubt, promote you, and give you valuable feedback because they want you to succeed. Some customers are so loyal, that they will even fight with their own leadership to keep using your
What to do about it?
Customer Service is statistically the greatest contributing factor to either churn or retention, but you can’t address concerns when you aren’t aware they exist. The more you know, the more power you have to keep customer loyal and happy. This includes high-level data about customer happiness as well as detailed qualitative information about why they love or hate you.
In the end, the only real way to know why customers come back every month or every year is to ask them one simple question:
On a zero-to-10 scale, how likely are you to recommend this product or service to a friend or colleague?
Why this question? Today, word of mouth is more powerful than ever because we can shout across the planet in an instant. According to Nielsen’s Global Trust in Advertising Report, “recommendations from people I know” blows away every other type of brand promotion. This question is so powerful, because every time a business recommends a product or service, they know their reputation is on the line.
The NPS question provides the data that businesses need to gauge loyalty at a glance. The Why behind the answer gives businesses the power to do more of what’s working and fix what isn’t:
- Improve customer onboarding and service.
- Shift the product roadmap to be more responsive to customer needs.
- Have the CEO intervene directly, demonstrating the customer’s value.
Time is of the essence with all customer interactions. Like any relationship, communication is key. The longer issues go unspoken and unresolved, the more likely customers will be to sever ties. Displeasure aggregates over time, whether it’s communicated or not. When you are able to find out what’s wrong and address it, you interrupt the emotional upheaval. When you resolve things quickly, you prevent people from forming an indelible opinion and instead allow them to see those issues as isolated problems.
Assuming that customers are loyal simply because they are still customers, is the road to ruin. Discovering how customers truly feel is the path to building lasting relationships. All it takes is a CFO audit or a new director to come on board and ask, “why are we paying $1000 per month for this service?” Loyalty means that someone will speak up and make a convincing argument on your behalf.
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