Jul 30, 2008

Musing On The Concept of Customer Loyalty

The Notion of Customer Loyalty certainly varies from one industry to the next. It becomes evident when customers make specific decisions about the products or services they choose. It’s rarely about what they say in survey’s or feedback sessions – it’s about what they do, what actions they actually take. I don’t consider myself a loyal customer of Coke – I know it’s not particularly healthy and I have lots of other options, but when I’m out to lunch or dinner, I often drink coke. I’m comfortable with the brand and what it represents – but I wouldn’t necessarily chose it over Pepsi. So, I guess, customers can be very satisfied and still not be loyal.

So in essence, loyalty is always action oriented, retaining customers is all about seeking behavioral drivers which can trigger specific actions – on a regular basis.

So, how does an organization build customer loyalty? It starts with the value proposition – what does the product offering or service do for the customer? How does the company outline its value proposition to potential customers, such that the average individual can clearly see the ROI in buying a specific product or using a service.

Once your initial Consumer Marketing Campaigns, promo offers and free giveaways – have turned potential customers into actual ones, how do you turn first timers or occasional customers – into loyal ones? It’s all about building relationships, communicating a consistent value proposition through different channels and finding ways to maintain that dialogue with your customers in different forums. It’s about making the customer feel that your product or service is useful – even integral to some aspect of their well being. One thing that most successful Global Brands have in common – is a strong Customer Base.

In many cases, customer loyalty is the result of well-managed customer retention programs; customers who are targeted by a retention program, generally tend to be more loyal to a brand, product or service. The process and forum through which one communicates with potential or existing customers is key to retaining them and building customer loyalty.

I recently had a conversation with a colleague who asked – how I would define and measure customer loyalty in the Online Business. Web Analytics tools can tell slice and dice user demographics & trends in many different ways. One can always find data on what types of products or services your users are interested in – so various online customer engagement metrics, could be a measure of loyalty. Certainly, Internet users response to specific Online Marketing Campaigns could provide some indication of how a specific brand is perceived. Especially if the campaigns have strong interactive elements and feedback channels which enable potential customers to maintain a dialogue with a company, about its value proposition.

I don’t believe it’s possible to measure and manager customer loyalty using two or 3 specific metrics – especially in the online realm. One needs to review a number of different indicators providing different perspectives on how visitors and customers think about their relationship with your brand. It's not just about how they behave, but also about what they think. The emphasis between the two will depend on the specific products, services or value proposition which the company presents.
Web analytics tools will track online behavioral trends, specific actions which can serve as indicators of customer loyalty. It's also important to take into account what visitors do when they get to the site. Someone who visits a site three times and spends five minutes there each time is considered more loyal than someone who visits once and spends half an hour on the site. A frequency metric is useful, but does not necessarily serve as a strong indicator of Customer engagement or Loyalty.

If a person visits a site often and spends time interacting with features, tools and proprietary content – that person is displaying strong engagement and certainly has the potential to be a loyal customer.

Clearly, there are several factors which may be considered, when measuring customer loyalty, what’s key though is that turning potential customers into loyal ones – is a function of a number of key initiatives, which every company must take note of.
ð Customer Awareness: Knowing the core set of consumers who would most value your products or services and creating awareness amongst the core set - about your products/services
ð Customer Acquisition: Companies need to quickly determine how to engage with and acquire potential customers. start the dialogue and acquire them
ð Customer Service: Continuing the dialogue with customers, delivering a consistent message, creating and maintaining brand awareness, providing value added services
ð Customer Retention: Initiating programs, campaigns and support services to help retain your core group of customers – and turn them into raving fans

Ultimately, Customer Loyalty is primarily driven by the value proposition to the user, as well as the means by which that value prop is communicated to the user. It's made manifest by the types of actions and behavioural tendencies which the customer displays.

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