Customer Satisfaction is Worthless...

…Customer Loyalty is Priceless.

This often quoted title from Jeffrey Gitomer’s book sets the stage for the fourth and final component of the Total Leadership Model. In a previous edition (11/09) of this newsletter, I introduced some general differences between satisfied customers and loyal customers. However, the real question becomes “How is Customer Loyalty a competitive advantage?”

Customers generate revenue, loyal customers generate profit. When I was leading corporate organizations, our customer and sales support teams worked closely alongside our sales teams. It was a relationship not always obvious or easy to manage, but one I always insisted on nonetheless. You see, while I was interested in the initial sale to a new client, I was even more interested in the second, third, fourth, nth sales. Why? Because I knew how important the follow-on sales were to profitability and creating emotional relationships with our customers. In industries where the core products and services are commodities, it was the power of points of connection, or “Moments of Truth” that drove ongoing loyalty within our customer base. Studies show as little as a 5% increase in customer loyalty can drive an increase in profits from 25% to over 80%. To highlight the power of moments of truth, another study showed that if an organization’s employees were 100% engaged, they would see a 70% increase in customer loyalty. Why is this significant? A recent Gallup Poll showed an average employee engagement level of 30%. Said differently, 70% of employees are disengaged creating an untenable gap in the ability to create powerful points of connection with their customer base and causing a direct drain on profits!

But who or what are we loyal to? We know when we engage in the Buying/Selling process, buyers look to buy you first before they look at your company or your products. They are looking to establish the first of the three components necessary to developing customer loyalty – trust. Whether it is you, the entrepreneur, you the corporate leader or you the member of a non-profit team, prospective customers and donors are first and foremost looking to see if they trust you! What is their first impression of you, your brand, your office or your website? What are others saying about you? These moments of truth become the catalyst to creating a consistent experience creating the second component of loyalty – a strong emotional tie with the customer. The third component of customer loyalty is the use of empathy to continuously and consistently meet or exceed an ever-increasing level of expectation in today’s business environment and strengthen the overall customer relationship.

It is the customer’s experience with you that counts. Peter Drucker once said “Quality in a Service or Product is not what you put into it. It is what the Client or Customer gets out of it.” Is what your customers are getting out of your products or services worthless or priceless?

Lead Well!