Earning Customer Loyalty
Last month we discussed word of mouth economics, and how it relates to the Promoters, Passives, and Detractors within your customer base. Promoters are your most valuable customers regardless of their size. They are loyal and recommend you to other potential customers. Detractors reduce your profitability through their high service costs and eventual defection. Even then the damage is not done because they actively seek opportunities to discourage other customers and prospects from doing business with you. The financial reasons for increasing the percentage of Promoters within your business are clear.
Change, however, is hard, and most managers stumble when it comes to implementing the organizational changes that create Promoters and drive improvements in loyalty. That may sound harsh, but consider the situation in most ag dealerships today. Managers are overwhelmingly focused on operations rather than quantifying what customers really value. And typically there are no ongoing measurements in place to monitor how the company is delivering against these customer priorities. Improvements are consequently unfocused and uneven. In an age when my local video store has a program to determine my priorities and measure how well they are meeting my expectations, the general situation in ag retailing is unimpressive.
Many managers, however, would like to make improvements in customer loyalty but lack a framework to drive change. The goal of my next few columns is to discuss ideas to help your company deliver a superior customer experience based on data and facts, not guesses and working harder.
Why is change hard? Front-line staff question the company’s commitment to improve customer loyalty when the program is just a speech from management rather than a fact-based, targeted effort. Talking about customer loyalty once or twice a year at a meeting is not strategic. Consider also employee goals and incentives. When they are not aligned with customer loyalty targets, little progress will be made. Many companies fall victim to the so-called fog of war, which states that no battle plan survives the first contact with the enemy. Others confuse a customer loyalty initiative with slogans, vision statements, or posters in the lunch room. It’s more complicated than that. Without data to update your focus, how can your targeting efforts remain locked on customer needs?
Finally, I want to comment on an ag retailing legend I have heard numerous times. This is the myth that loyalty has declined for everyone, and that today’s customers are different than the ones we started in business with. Like all legends, there is some truth here, but it misses the point that loyalty is earned, not inherited. Customers will reward you with more loyalty if your efforts are guided by quantitative knowledge.
Four management breakdowns. The well-known company Franklin Covey (“Seven Habits of Highly Effective People” by Stephen Covey) has identified four “management breakdowns” that undermine achieving customer loyalty. This is not to overemphasize management’s role in customer loyalty, but it is the place we need to start our examination.
It is difficult to achieve measurable improvements in customer loyalty if we don’t know what loyalty looks like. One metric that tracks closely to loyalty is market share. AgKnowlogy has measured the market share ag retailers have with thousands of growers. With very few exceptions, Promoters give their retailers higher market share vs. Passives or Detractors.
I encourage you to measure the potential value of your customers and then calculate the Share of Business you have with each high-value customer. I guarantee you will find surprises here. There will be some customers who are less loyal than you thought, i.e., they give you a relatively low share of their business. The graph shows an example from AgKnowlogy’s Customer Experience Monitor. Note how market share for all retailers is lower for Detractors vs. Promoters.
If employees aren’t clear about what actions and customer experiences drive loyalty, how can we expect to reliably repeat those actions? This is like traveling blindfolded. You might arrive where you want to be but don’t know how you got there. You can’t provide directions to someone else, and you likely can’t make the same journey yourself again.
From speaking with ag retailers throughout the country, I realize how time-strapped their sales staff are. Because customer loyalty and its corresponding high market share are so valuable, everyone in your company that impacts the customer experience must have a clear and quantifiable understanding of what actions create Promoters and produce loyalty. This is one of the most important initiatives a manager can focus on.
The third breakdown managers allow regarding customer loyalty is not creating self-directing mechanisms that guide the organization toward consistently delivering superior customer experiences. Unless you can readily identify these mechanisms, they likely don’t exist. Also, unless specific coaching is provided to all staff involved in creating the customer experience, progress will be limited.
There is no blame here. If managers need help to create the mechanisms and processes within their company to achieve increased loyalty, they should seek help themselves.
The fourth management breakdown in achieving customer loyalty is lack of accountability. I ask ag managers how frequently they meet with staff to fine-tune sales approaches, identify customer needs, evaluate barriers with customers, or create customer goals that establish accountability. Do your staff meetings include discussions that increase collaboration toward creating a predictable superior customer experience? Are actions created to identify and resolve barriers that create Passives and Detractors within your business?
Lack of accountability for the customer experience brings us back to some of the reasons why change is hard. In any organization big or small, progress is never made until management passionately cares about the outcome. If staff hear management talking about customer loyalty but there are no links to desired behaviors, no creation of self-guiding teams, and no accountability for improvements, what does that signal?
Ag retailing has excellent opportunities for improved customer loyalty. Progress takes more than good intentions, however. An action plan to uncover what is really important to your customers, ongoing measurement of your performance against these priorities, and collaboration among all staff to consistently deliver a superior customer experience is your best competitive advantage.