Tuesday, April 22, 2008

Creating Loyal Growth – Part I

By Pablo J. Perez, Executive and Corporate Team Coach
The formula to achieve profitable organic growth should be as simple as attracting, developing and keeping profitable customers. Companies spend an important part of their budgets in marketing and advertising with the purpose of attracting new customers; however, keeping and developing your customers are the result of having a solid and aligned organizational culture.

If your customers can switch to your competition at any time, you should keep reading this article.

In all businesses we have four types of customers:
• New Customers, who receive our biggest investment of attention and time;
• Current Customers, to who we have been providing services for a period of time, giving us a “safe” feeling;
• Past Customers, people who no longer are doing business with us;
• Future Customers, who will do business with us in the future.

From the list above, who is your most important customer? I know the answers will vary; however, let’s focus on the Past Customers – those that decided to stop doing business with us.

The federal government carried out a research program and to find out why customers stop doing business with a company. The research discovered that:
• 3% move away.
• 5% develop friendships or business alliances with other companies.
• 9% go out of business.
• 14% leave because of quality issues.
• The other 68% don't like the way they are treated.

As you can see from the above, the last two reasons make up 82% of the total lost business and both of these reasons are avoidable. Now you might assume these customers were unsatisfied. However, maybe they were not loyal. Or maybe they were both?

Is customer satisfaction equal to customer loyalty? Definitely not. A satisfied customer may keep doing business with you but will not create profitable organic growth for your company. A loyal customer will bring to your company not only her or his business, but will refer you business from family and friends.

Research prepared by Accenture concludes that customers who are highly satisfied for the most part are willing to switch providers if the incentive is right.

% Indicating Would
Reason to Leave Switch Provider
Any reason 87%
Lower price 79%
More reliable/better service 58%
Better products 47%
Offers suited to my needs 6%
Access to a real person 36%
More product choices 27%
Rewards program 29%
More accurate billing 22%

However, according to the same research, these are the actions loyal customers are likely to take:

Continue purchasing .........81%
Recommend the company to others ...........74%
Respond to specials ........51%
Provide direct positive feedback ...........38%
Provide personal endorsement .........31%
Share information with company for improved products and services ........20%

Most consumers believe good customer service should be a core competency of the companies with which they do business. Today, they need to receive more than good customer service to become loyal to your business.

Customer satisfaction surveys are useless in terms of creating loyal customers. 95% of dissatisfied customers will not participate in any survey. They just leave and never come back. Another thing you have to remember is that 8 out of 10 of those people who go away will bad-mouth you. They will tell somewhere between 25 and 250 people that they had a problem with your company, and they will actually enjoy saying it. It's your job to keep that from happening.

Customer loyalty is based on four elements: price, service, trust, and emotion.

On “Creating Loyal Growth – Part 2” I will describe in more details these four elements.

To discuss how I can help your organization to develop loyal customers for your organization, please call (305) 722-7215, or you may also send me an e-mail at pjperez@activategroupinc.com.

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