Thursday, January 05, 2006

The Loyalty Factor and The Customer Experience

I have been somewhat distracted over the past few days by the ideology of Customer Loyalty. The variances in definition depend on who you talk to. One thing that I have come to grips with is that marketers, sales and branding people (Sorry) have no clue on what true customer loyalty is comprised of. The rush to define customer loyalty in their terms has so distorted it that most of the industry is really ineffective when it comes to developing Loyalty programs (which are also ineffective).

So what is customer loyalty? Good question and I'll try to keep my perspective simple. I went outside of the Industry to gain insight from those who would probably have the best understanding in this area. Loyalty isn't just a business concept. Psychological research is what best defines this. Loyalty doesn't belong to anyone process. Sorry again to those in business who think it belongs to them.

Simply put, loyalty is the extension of trust in exchange for an emotional reward based on previous experiences, observations and instinct. Yes, in the context of customer experiences as they apply to acquisition this is a highly emotional and psychologically based process. Most of it is derived in the subconscious. It is also noted that people have an inherent desire to trust. It is part of who we are and this applies to even the greatest of skeptics.

In terms of marketing and branding, the sensual inputs delivered through various media (visual and suggested) are only a fraction of the over all process that extends outside our direct intervention. These experiences provide the reason or desire to extend trust by the customer toward the company, product or service, but beyond that influence the customer relationship stops. Loyalty is derived from experiences and influences outside of this context such as personal relationships.

What if a particular branding or marketing project promises to delivery a certain psychological experience and that experience is less than suggested (promised). The trust is shattered at that point and trust is withdrawn. In almost all cases this is what happens and as a result there is a large abandonment of first time buyers from the ranks of perceived loyal customers. This is also a key reason for abandonment by long time supporters of a given company.

Recently in Singapore (sounds a bit exotic) the National Kidney Foundation experienced a huge abandonment by over 60% of its donors on news of ethics violations in management and that only 10 cents out of every dollar was passed on to potential patients.

The promise was shattered and trust withdrawn. The promise was perceived and the perception was extended by the marketing and branding efforts through various media. When a selection of donors was interviewed they felt that not only did the NKF violate their trust but they also felt that they were deceived by the marketing media. This is a very common response in cross industry analysis of those who abandon both short and long term business/ customer relationships.

If you have an existing customer contingent and they have shown loyalty to the brand, product etc and they perceive or experience negative interaction direct or indirect with a brand, company, product etc the withdrawl of trust will take place removing the loyalty factor. In reality true loyalty exist in less than 5% of company’s clients at any one time.

The importance of in-depth customer experience management cannot be overstated as it applies to generating loyalty in customers. Customer management, sales management, marketing, accounting, customer retention initiatives etc are just extended components of what customer experience management entails.

Small companies or small businesses, if understanding this concept correctly, will have the greatest effect on their customer/clients. The experience transverses all aspects of a business and all interactions whether direct or indirect. It is also in the context of small that identifiable relationships are formed. Simply put you manage those experiences you can and pray the ones you can't are positive. For more on this aspect read my other blogs or visit the Customer Dvelopment Center for more material and articles.

There, I have had my say and I will continual to address related issues in future blogs and articles.

As always I invite your comments and input. Growth comes through the free exchange of ideas.

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