Love And Indifference, Part 2

I had just posted Love And Indifference, when two oddly-related things happened. First, my copy of Mike Dandridge’s book, Thinking Outside The Bulb, The Art of Creating an Amazing Customer Experience, arrived in the mail.

In chapter 48 of Thinking Outside The Bulb, Mike stated:

“Satisfaction is the bare minimum, the baseline, for customer retention, but it’s no guarantee of your customer’s business tomorrow. Think about it this way, your customer can be satisfied with your company and your competitors at the same time.

“Customer satisfaction simply isn’t enough to keep your clients from switching to a competitor when they perceive a better offer. Note that “better offer” doesn’t always mean cheaper price. In fact, though price may sometimes drive a customer to make the initial purchase from a business, it has almost no effect on retaining that same customer.

“So what keeps customers coming back? According to Gallup surveys, customer loyalty is the main component that drives repeat purchases. And what’s the biggest factor in building customer loyalty?

“You are.

“Gallup found that customers who felt “strongly positive” about the people they bought from were twelve times more likely to continue to buy.”

Then, a matter of hours later, Jeff Eisenberg, co-author of Persuasive On-Line Copywriting and the just published Call To Action, sent me a copy of a Fredrick Reichheld article titled The One Number You Need To Grow, published by the Harvard Business review.

Reichheld reported the results of a study in which the satisfaction of 4,000 individuals was compared to their purchase history over a six to twelve month period.

First, a definition. 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. For a customer, that can mean sticking with a supplier who treats him well and gives him good value in the long term even if the supplier does not offer the best price in a particular transaction.

“Consequently, customer loyalty is about much more than repeat purchases. Indeed, even someone who buys again and again from the same company may not necessarily be loyal to that company but instead may be trapped by inertia, indifference, or exit barriers erected by the company of circumstance.…Conversely, a loyal customer may not make frequent repeat purchases because of a reduced need for a product or service.”

Reichheld concluded:

Loyal customers talk up a company to their friends, family, and colleagues. In fact, such a recommendation is one of the best indicators of loyalty because of the customer’s sacrifice, if you will, in making the recommendation. When customers act as references, they do more than indicate they’ve received good economic value from the company; they put their own reputations on the line. And they will risk those reputations only if they feel intense loyalty. …

“The tendency of loyal customers to bring in new customers – at no charge to the company – is particularly beneficial as a company grows, especially if it operates in a mature industry. In such a case, the tremendous marketing costs of acquiring each new customer through advertising and other promotions make it hard to grow profitably. In fact, the only path to profitable growth may lie in a company’s ability to get it’s loyal customers to become, in effect, its marketing department.”

Very interesting. How does one go about turning satisfied customers into your company’s marketing department?

You won’t find the answer in a “customer loyalty program.”

Dandridge gave us two clues: “you are the biggest factor in building customer loyalty.” and “customers who felt ‘strongly positive’ about the people they bought from were twelve times more likely to continue to buy.

We’ll be discussing the answer, and it’s implementation, in Part 3 of Love and Indifference.

Click here for Love And Indifference, Part 3

Click here for Love And Indifference, Part 1

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