According to a study in the Harvard Business Review, 80 percent of all customers who leave for a competitor report being satisfied with the previous company. That tells me that customer satisfaction is not enough.
If you want to retain customers and build your business, you must go beyond satisfaction. You must develop a culture that builds customer loyalty.
Loyalty is the willingness of someone - a customer, an employee or a friend - to make an emotional investment or personal sacrifice in order to strengthen a relationship. For a customer, that can mean sticking with a company that treats him/her well and gives him/her good value in the long term, even if the company does not offer the best price in a particular transaction.
Some people mistakenly believe that if they offer the lowest price they will have a satisfied and long-term customer. This might result in initial customer satisfaction, but that will only be temporary. Unless you couple that low price with legendary service, you will not have a loyal customer.
If a potential customer is shopping on price, and your price isn't the lowest, you must proactively provide value. Demonstrate all of the other benefits you have that can be translated to additional savings and peace of mind. For example, if your fleet is the youngest in the market, make sure customers know the equipment will be more reliable.
If a customer is only interested in the lowest price, is that the type of customer that will allow you to develop a long-term relationship? According to Ruby Newell-Legner's "Understanding Customers," long-term customers are usually more profitable:
- A five percent increase in customer retention can boost profit by 25 to 125 percent.
- It costs six times more to attract a new customer than it does to keep an old one.
- A company can improve revenues by 49 percent with a 10 percent increase in customer retention.
That data is pretty compelling and should motivate you to consider what you are doing to make a customer a long-term one. For example, while your equipment is on rental, are you contacting customers to make sure they are happy? Something as simple as a written thank you note may make the right impression to build that loyalty.
Try this exercise. List three companies you are most loyal to either in your business or personal life. With each of those three companies, describe the experience that helped build your feelings of personal loyalty. In other words, what makes you loyal to them? Are those traits of loyalty something that you can build into your business and/or teach other employees at your company?
Next, let's take this little exercise one step further. List your company's top three most loyal customers. What are the reasons you believe they are loyal? Try to think if there was a particular experience that built that loyalty. What would it take for that experience to be replicated?
The last step of this process would be to identify three additional customers that you would like to add to your loyalty list. Now, determine what needs to be done to get them on the list.
How do you know if a customer is loyal? As mentioned, they may be satisfied, but that's not the same as loyal. Many organizations determine loyalty by asking (usually via a survey) two simple but critical questions:
- Would you continue to use us?
- Would you recommend us to others?
Those two questions will give you the loyalty answer. On a scale of 1-10, with 10 being "strongly agree," a response of nine or 10 would indicate a promoter of your business. A seven or eight would indicate the customer is "passively satisfied." Any response below a seven is referred to as a detractor.
How do you build that loyal customer? Usually, there is not an easy or quick way. For many companies, it may require an overhaul of their culture. At a high level, you should examine the complete customer experiences and determine if you are delivering value at every customer touchpoint, such as:
What is the experience your customers are realizing through these interactions? Re-examine every one and consider which touchpoints have the greatest influence on building loyal relationships with your customers. You should also consider which touchpoints have the greatest potential for reducing loyalty when not implemented well.
There is a significant difference between satisfied and loyal customers. A loyal customer will be your most forgiving customer. If there is a misstep along the way, this customer will recognize that it is the exception, not the rule. The loyal customer will not haggle over price. They value the relationship you have with them, and you must design your systems and culture to ensure that trust is not broken.