Do Your Customers Love You?

One of the biggest problems worrying ag retailers is customer loyalty. There is a rural legend that customers are not as loyal, and relationships mean less than they used to. While this may be true on the surface, I think the greater issue is asking why this might be happening. Many ag retailers have convinced themselves the loyalty issue is beyond their control, and there is little they can do to improve profits through greater customer loyalty. This column is the first in a series that will explore customer loyalty. I will review how leading companies in highly competitive markets outside of agriculture are finding innovative ways to improve loyalty and add profits to their bottom line. We will start with some general concepts and move into specifics.

Many studies have shown that satisfaction is a weak predictor of customer loyalty. In the late 1990s, Xerox shattered conventional wisdom by demonstrating that its totally satisfied customers were six times more likely to repurchase Xerox products during the next 18 months than its satisfied customers. The implications were profound: Merely satisfying customers who have alternative sources is not enough to ensure loyalty. Studies by other researchers has confirmed — the more competitive the market, the greater the difference in loyalty between merely satisfied and completely satisfied customers. 

In the ag market, products and services are easily duplicated, and what one retailer innovates, others quickly copy. As we know, the market is very competitive. If achieving complete satisfaction in this type of market is a requirement for loyalty, what is needed to produce complete satisfaction? The only way to understand loyalty is to identify and measure the customer experiences that drive satisfaction and hence, loyalty. In ag, delivering a superior customer experience may be your only sustainable differentiator. Achieving this, however, is more difficult than it seems, and there is typically a significant gap between management’s perceptions of the customer’s experience and the customer’s.

Survey Results

In 2005, Bain & Co. surveyed 362 firms and found that 80% believed they delivered a “superior experience” to their customers. When they asked customers from these companies about their own perceptions, only 8% of companies were rated as delivering a superior experience. This disconnect between customer and company perceptions sets up a perfect storm of potential defections, because management can’t focus on problems they can’t identify and quantify. A key step in our journey is to ask yourself, “why would my business be any different?”  

The objective of this series of articles is to help you manage the key customer experiences that lead to customer loyalty and a sustainable competitive advantage. Positive customer experiences increase your odds of loyalty, category penetration, and revenue growth per customer. Negative customer experiences create dissatisfied clients who look elsewhere to satisfy their needs.

AgKnowlogy‘s customer experience model is shown in the above diagram. To summarize, customers with unique needs give us a share of their business in response to the quality of their experience when they interact with us. Think of these experiences as touch points along a customer corridor. Typically, companies rationalize the results they have with customers (and prospects). Because customers have options in choosing a company to meet their agronomic, grain merchandising, and risk management needs, it is critical to identify which experiences are most important in terms of loyalty, and measure how your company performs on these relative to competitors. 

A problem with customer satisfaction is that measuring it does not tell you how to achieve it. It is essentially the culmination of all the customer’s experiences with your company. Think of it as the net result of the good experiences minus the bad ones. To understand how to achieve total satisfaction, a company must measure customer experiences at the touch points along its customer corridor.

Without measuring key customer experiences and mapping these to loyalty it is difficult to know where you are vulnerable, and where you are aligned with customer needs. If the barriers between yourself, customers, and prospects are not identified and quantified, efforts to achieve improvement are often unfocused and payback is uneven. Finally, without benchmarking your performance to competitors, it is difficult to determine if the improvements that are made are meaningful to customers.

Here are some points to consider in deciding if you should implement customer experience measurements within your business:
   •   Insufficient or no objective measurements on what is important to customers.
   •   No verifiable data on how you are performing on what matters most to customers.
   •   Can you benchmark your performance relative to competitors on the customer experiences that drive loyalty?
   •   Are customer experience measurements being used to redesign service (and potentially product) delivery to customers?
   •   Insufficient collaboration among employees to implement change based on customer experience.

Customer experience management will produce financially rewarding results for companies that implement a disciplined approach to gathering and utilizing “Voice of Customer” input. Ag retailers and grain merchants can increase their share of customer business, improve loyalty, and take their business to a higher level by rethinking their current approaches to customer loyalty. I look forward to presenting my thoughts on this topic, and welcome your questions/observations.

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