The importance of customer loyalty and its three element foundation
By Jim Logan • Feb 8th, 2008 • Category: Featured Customer Service Post
Customer loyalty is important to a business because of the predictable and stable revenue associated with it - loyal customers spend money and refer more new sales than non-loyal customers. And repeat revenue is generally higher margin than new customer revenue. An added benefit for many businesses in the fact greater repeat revenue lessens the pressure to acquire new customers.
It's hard to disagree customer loyalty isn't a strategic success factor for most businesses.
So, what makes a customer loyal?
I believe the foundation of customer loyalty is trust, predictability, and dependable quality:
Trust: Trust comes from holding one's interest in the same or higher regard than your own. Honesty is a huge part of trust, but it's not enough. Trust has a proactive quality - bringing ideas, solutions, and even bad news forward when necessary for someone other than yourself to be aware of to be protected or succeed.
Predictability: Showing up on time, reporting on schedule, updating routinely, delivering on time, and consistently relevant - all are critical elements of predictability. Customers want, appreciate, and depend upon timely updates on progress, plans, and efforts related to their interest.
Dependable Quality: Consistent and reliable performance is critical to business relationships because of its enabling power for work produced by disparate teams to integrate well to meet business objectives. In broader terms, predictable quality is related to expectations. We expect quality of goods and services to be consistent. One business supplying another with goods and services of dependable quality is necessary for business relationships to continue.
It's impossible to be loyal without trust, predictability, and dependable quality. And without loyalty, repeat revenue is questionable at best.
That said, I have three questions for you:
- Do you agree with me that trust, predictability, and dependable quality are the foundation of customer loyalty?
- What would you add or subtract as a foundation element?
- Lastly, do you disagree with me that customer loyalty is most valuable to a business as it relates to future revenue generation? Why?
Jim -
I do agree with you that these three elements form a good foundation for customer loyalty. I also agree that customer loyalty is the most valuable asset a business has. If you run your business in a way that generates strong customer loyalty, then you’ll have a healthy and sustainable business. The “asset” is really everything you’ve done to create customer loyalty. It’s the culture you’ve created, the people you’ve hired and coached, the processed you’ve implemented and the brand you’ve developed.
I would also add two more elements:
1. Surprise
2. Extra
If you really want to cement relationships with your customers, find ways to surprise them (in a good way) on a regular basis. This is not easy which is why most companies don’t do it. But if you do, you give your customers more reason to stick with you (and talk about you).
Finally, build extras into your routine. As you get to know your customers, you’ll discover what they want. So, add to that. Do little things for them that go beyond what they contracted for and what they expect.
These two elements will take your customer loyalty over the top. Nice post Jim - thanks for the opportunity to comment.
Kevin Stirtz
Customer Loyalty Improvement Expert
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