On the road to loyal customers, wear borrowed shoes
What has happened to plain old customer loyalty? While marketing sings siren songs of technology-enabled collaboration, why are more and more customers in every industry constantly shifting suppliers, moving from one company to the next in a disgruntled game of musical chairs? Even more to the point, how can you get them to stop and stay?
It's an important question, especially in a market downturn where short-term survival as well as longer-term growth may be at stake. "Firms that are able to attract and keep the right customers are significantly more profitable than those whose customers defect after a few transactions," says Patricia Seybold, author (with Ronni Marshak) of Customers.com (New York Times Books, 1998). It doesn't take much mulling over the benefits of a loyal customer - makes more purchases, efficient to work with, willing to pay higher prices, refers others to you - to see her point.
So what do customers really want? What creates loyalty? In their benchmark study, "Why Satisfied Customers Defect" (Harvard Business Review, November-December 1995), authors Thomas Jones and Earl Sasser Jr. found that completely satisfied customers are more loyal than merely satisfied customers, and that satisfaction requires treating customers as individuals and not as a group.
"In markets where competition is intense, we found a tremendous difference between the loyalty of satisfied and completely satisfied customers," Jones and Sasser reported. "In the automobile industry, even a slight drop from complete satisfaction created an enormous drop in loyalty. This dramatic phenomenon is not limited to markets for manufactured products. It also occurs in services."
The Jones and Sasser prescription for creating loyalty is surprisingly as difficult to do as it is easy to state. "A completely satisfied customer typically believes that the company excels in understanding and addressing his or her personal preferences, values, needs or problems. To figure out how to satisfy customers in this fashion, a company has to excel at listening to customers and interpreting what they are saying."
The catch, of course, has always been that "interpreting" part. It's one thing to mail satisfaction surveys, conduct focus groups or hang those motivational "We're Customer Driven!" banners in the cafeteria; it's another matter entirely to translate customer input into insights and then actions. That requires more than listening. It takes paying attention and creative thinking about someone else's business. No wonder it's so hard to do.
"This failure to listen carefully to all customers, to empathize with their needs and desires, results in reduced service levels, streamlined product lines, and uniform product designs. It inadvertently favors cost reduction at the expense of individuality, even when market needs point toward greater customization," note Francis Gouillart and Frederick Sturdivant in their essay, "Spend a Day in the Life of Your Customers" (Harvard Business Review, January-February 1994.) "Top level managers need to spend a day in the life of key customers."
Maybe they're exactly right. And perhaps now is the perfect time. As the market slows its frantic growth pace this fall, we might consider becoming truly serious students again - putting on our walking shoes and heading out into the field to study our customers' and their customers' businesses.
It's worth a try. By walking a mile or two in our customers' shoes, all we have to lose is those lost customer blues.