Customer loyalty is a hot topic right now. It is not a new concept, but every company I work with, from Fortune 50 to Fortune 1000, wants to talk about it. It does seem similar to the American ideas of motherhood and apple pie. Who is not for keeping most customers longer and having fewer defections and more opportunity to do cross- and up-selling?
There is some dissention/debate in the world of customer loyalty research. There are numerous qualifiers and distinctions that some researchers acknowledge and some do not. These have to do with, for example, whether you are dealing with a contractual relationship, a monopoly/ oligopoly, emotional loyalty, the relationship to customer satisfaction, or a transactional/consultative sale.
What has been well established is that you probably do not want to keep all your current customers, as some are a drain on your resources and are unprofitable to serve. With that said, I would like to detail how marketing can play a critical role in improving loyalty with the customers your company wants to keep.
There are three areas where marketing can have a significant impact: value delivery, win/loss analysis, and value migration (note: the focus here is more on business-to-business relationships).
Value Delivery
There is an adage or idea that gets to the heart of this area. If a customer cannot differentiate between something that is value creating (good) vs. value destroying (bad), it does not matter what you are or what you do. As a general premise, customers often stay loyal when they perceive a mutual exchange of value between the transacting parties.
Marketers have an obligation not only to help create unique value propositions for each applicable segment but also to make sure their company's customers understand the value that has been delivered to them. In some respects, this idea is similar to the buyer's remorse concept in terms of making sure you follow up with buyers to alleviate any fears that their purchase was not a good deal for them or that you did not deliver incremental value to them.
There are a couple of actions that a marketer can take (in alignment with other functions) in this area:
- As a first step, contact your most important customers and ask them to describe how your company has delivered value for them. Frame the conversation, saying that you want to better understand their needs and how you can create more value for them in the future.
- After better understanding the value your company has delivered, contact all the key stakeholders within that customer (business) so that you can communicate the value that has been delivered to date while detailing how your company is working to deliver additional value in the future.
Win/Loss Analysis
Like customer loyalty, win/loss analysis seems hot right now. Many companies are trying to sort this process out and have more discipline around its deployment. There is nothing secretive or complicated in a win/loss analysis. At the heart of these types of analyses there is what someone expected to happen, what actually happened, the magnitude and direction of the variance, the relevant causes, and the modifications or adaptations one will implement going forward.
Each sales campaign is a mini-experiment in which one learns what works and what does not work in certain situations, while looking for trends or patterns of variance within successes (you win the deal) and failures (you lose the deal).
Marketers are key constituencies in performing these analyses and in understanding how their unique value propositions (pre- and post-sale) are being transmitted and received in the marketplace. Marketers who help to perform these analyses can get the timely and primary feedback they so often need to improve positioning, messaging, and value delivery processes, as well as helping to establish better marketing and sales alignment.
Marketers can take (in alignment with other functions) a couple of actions in this area:
- Determine the current state with regard to win/loss analyses and see how the marketing area can be more involved in the process. Tout the benefits that marketing can bring when it better understands how its messages and approaches are being received in the marketplace.
- Help to create a win/loss analysis for not only net new accounts but also installed-base customers that happen to defect and/or ones that have remained loyal over the years. Sample questions: (1) Why do you remain loyal to us? (2) What can our company do to keep you a loyal customer? (3) What would have to happen for you to take your business elsewhere? (4) What were the main reasons you defected?
Value Migration
Value is often defined differently by individual functions within a company. Finance may define it as a percentage above the company's cost of capital, while operations may define it as a lower error rate or rework percentage.
Depending on the makeup of the customer buying team and the customer's current goals and objectives, a customer is also likely to define value in different ways, with variations among the stakeholders, during a long-term relationship.
This changing definition is not unlike a personal relationship in which we place a different weight on the things we value from a friend, spouse, etc., depending on our life stage, current needs, and short- and long-term goals.
Without a consistent, proactive, and anticipatory process for understanding the attributes your customers value most, your company is likely to be reactive and late to the game in shifting its value proposition as the perception of value migrates.
Marketers can take (in alignment with other functions) a couple of actions in this area:
- Develop a process for keeping in touch with customers or the account managers who manage accounts, and make sure that there is a continuous dialogue for discovering what a customer values most from what your company does for them.
- Given the data gathered from the first action, help to create a tight link between marketing and sales in order to better tailor unique value propositions and value delivery processes in real-time.
Summary
Typical benefits of having loyal customers include the following: higher probability of cross- and up-selling, lower costs to manage, and a better potential referral flow given a more referenceable and satisfied customer base.
Of course, customer loyalty is not a panacea or silver bullet; companies need to carefully separate—via such elements as profitability, potential opportunity, and strategic value—whom they want as loyal customers and whom they do not want.
Once a company understands which customers it wants to keep loyal, marketing should play a critical role in analyzing and reporting on value-delivery perceptions, win/loss drivers, and value-migration velocity and direction.
Marketing professionals should be an integral part of fine-tuning the growth (sales) engine of their company and helping to align all internal stakeholders on creating and delivering greater levels of value over time.
