Customer Loyalty - A Product That Produces Direct Revenue

Kevin J Danaher — Wed, 28 Apr 2010 00:04:00 GMT

In today’s lean business environment, everyone in the organization needs to have the mind-set to be able to gain new customers and to create deeper customer relationships that translate into better retention, sales and referrals.

To win the battle over customer indifference first establish the Customer Loyalty metrics for your organization. In his book, The Ultimate Question, Fred Reichheld suggests a simple measurement to determine customer loyalty. His contention is that you have three types or levels of customers resulting from their experience with your organization.

Determining which category each one of your customers falls into can be measured by asking one question, “How likely is it that you would recommend us to a friend?” If the responses were sorted on a scale of 0-10 with 1 being “not at all likely” to 10 being “extremely likely,” the responses of 9-10 are your loyal customers and provide you with the best word of mouth advertising; 7-8’s are generally not excited about their experience but found their experience to be okay or average; while anyone rating their experience as a 6 or lower is clearly not happy with their experience and may even be angry.

Customers who rated their experience with your organization as 9 or 10 will tell the world about you and encourage others to use your product or service, and the reverse is equally true. Customers who rated their experience as a 6 or lower will also tell the world about you in a negative way, and with today’s communication being so readily available via the internet that negative advertising can spread like wild fire.

Identify the percentage of your customers who fall into each category: Loyal (9-10), Neutralizers (7-8), and Diminishers (0-6) provides you with a metric that will indicate the future strength and direction of your organization. We call this metric the Customer Loyalty Score or CLS.

Now here is the moment of truth. The Customer Loyalty Score is calculated by using the following formula:

Percentage of Loyal Customers (9-10) minus the percentage of customers who fall in the Diminisher (0-6) category equals your Customer Loyalty Score.

This one simple metric, the Customer Loyalty Score, can provide you with an indication of your long-term future because this formula is an absolute predictor of your customers’ future purchasing behavior as opposed to their opinions, which are collected through a traditional satisfaction survey. If your Customer Loyalty metric is going down, your future is not strong and proactive decisions may be needed; if this metric is going up so, too, will your profits and long-term growth. This metric can be to customer relationships what an organization’s net profit is to financial performance. This single metric can for the first time provide a target for management and the entire organization to focus upon as an indicator of your business’ growth. No longer should it be the goal of business to only satisfy a customer, but rather it needs to focus on how to make loyal promoters for your business.

Organizations that have the benefit of a customer database often track customer purchase action and profitability scores. Modeling high-profit customer characteristics, and identifying new customer segments that closely match loyal customer demographics and psychographics, is also an important process to grow your customer base. The research overlay, indicating Customer Loyalty score, is critical. You may find that today’s profitable customers may quickly shift their preference for a competitor should market conditions change.

In an effort to create value and loyal customers, an organization needs to understand what their customers’ value. It is generally accepted that most buying decisions are based on more emotion than logic. For example, an owner of a new Acura does not need an Acura because a new Ford will certainly get them everywhere they want to go. However, there is a specific emotional and personal reason why they selected the Acura over the Ford, and the reasons will vary from individual to individual.

Uncovering the Voice of the Customer provides a formal process for your organization to listen to and respond to what your customers are requesting. At the center of this type of audit is the need for adaptability. This audit works only when organizations have a stable workforce, the organizational structure supports every customer experience, the employees have the right tools and training to meet defined customer issues, and there is a well-defined internal communication infrastructure.

To determine the Voice of the Customer (VOC) process, determine your customer’s voice relative to their Points of Connection with your business. Points of Connection include every interaction with the customer including such activities as your advertising message, packaging, employee interaction and service follow-up. A solid assessment of the Points of Connection allows you to assess where you stand with each Point of Connection that will lead to a high impact, results oriented system. This will gauge factors that influence the efficiency and effectiveness of your ability to develop value and loyalty. You must also have a firm, baseline understanding of what is important to your customers and where you might be underperforming. Baseline surveys will help identify issues that customers care about thus allowing you to prepare for issues that matter most to them.

Preparation for an effective VOC process is directly proportional to the training and development of employees and the success of the business. Specific areas should include:

Customer profile training (who are our customers, how can we respond to their individual needs, etc.)

Mastering the interaction (understand the organization’s goals, empowered with product knowledge, knowledge of how to respond to customer interactions even the most difficult, etc.)

High morale (leads to reduced turnover, personal development, delighted customer, etc.)

Flexibility in response (ability to bend the rules, make them feel unique, assist them in getting what they want, etc.)

One caution, flexibility must be carefully planned to prevent weak policy formation and inconsistent customer experiences. By focusing on key problems that cost the organization money and reduce customer satisfaction, organizations can create adaptable responses for multiple situations and outcomes; thus, empowering the employee to gauge the customer situation and provide resolution according to preset parameters.

The bottom line is when customers are not treated according to their expectations, they take their business elsewhere. What's more, they usually communicate their poor service experience to many other people. This has led to the demise of many good products and services. On the other hand, the rewards for exceeding customer expectations can be plentiful.

So the question therefore becomes not whether to improve your organization's service standard, but how to do so in a way that dramatically influences customer/client/patient attitudes and behaviors. The Customer Loyalty score is a start to a process that needs to be ongoing. The greatest part about doing the right thing by your customers and employees is that it will have a significant, measurable result in increased profits and organizational growth.

Counterfeiting: What To Do When You Get a Nastygram From a Lawyer.

Paul Reidl — Tue, 20 Apr 2010 15:00:00 GMT

This is the first in what I hope to be a series of regular blogs for the CenterPoint Corporate Services community. Today I want to chat about counterfeiting.

The laws in the United States recognize that counterfeiting is wrong in several respects. First, It provides a conduit for terrorists, organized crime, and other unsavory people to generate huge amount of illicit cash. Second, it undermines the legitimacy of genuine goods sold under well-known brands. And third, although consumers may appreciate the lower prices, they may not appreciate the lower quality of the goods.

Federal law give brand owners very powerful weapons to combat counterfeiting. They can get a seizure order, they can sue and get damages and attorneys fees, they can have Customs stop goods at the border, and the like. These laws apply to everyone in the retail chain, not simply the person who makes the counterfeit goods. This means that unwitting retailers, wholesalers and traders can find themselves in legal trouble even though they did not make the goods. As in other areas of intellectual property law, it is not a defense to say “I didn’t know.”

In most cases, brand owners start their anti-counterfeiting enforcement efforts at the retail level where the goods are found, whether in a bricks and mortar store an on-line storefront. The brand owner will typically send a strong letter demanding that the retailer cease selling the goods, that they send any unsold inventory to the law firm who sent the letter, that they provide detailed information about the source of the goods, and that they provide an accounting.

If you receive such a letter, don’t panic. Unless you are a member of the Corleone family, the brand owner is primarily interested in using you as a starting point to trace the distribution chain. You should get your intellectual property lawyer involved immediately and cooperate unless you are quite sure that the goods are genuine. In most cases your lawyer should be able to negotiate a resolution quickly, provided that you cooperate.

How do you prevent yourself from getting in this situation? It is difficult because there is a lot of counterfeit junk out there. Here are two tips. First, know your supplier and make sure that they are reputable. To protect yourself, make sure that you have appropriate warranties and indemnification in your purchase agreement. Second, follow the old maxim: if it looks too good to be true, it is too good to be true. Genuine goods – whether they are auto parts, handbags, athletic shoes, or watches -- all have a fairly constant wholesale price. If you are offered a "deal" make sure that it is a bona fide and reasonable discount.

10 Reasons Why Your Business Needs to be on the Web

Alan Tiras — Mon, 01 Feb 2010 23:20:00 GMT

10 Reasons Why Your Business Needs a Web Presence

Sales - It's a Process, Not an Event

Alan Tiras — Mon, 01 Feb 2010 07:13:00 GMT

Effective selling demands a committed and disciplined approach to a series of actions performed time and time again.

Inverted Business Building - Fulfillment - Sales - Marketing

Alan Tiras — Mon, 21 Dec 2009 02:00:00 GMT

What may seem like a good idea, to get the phone ringing or customers coming in the door as soon as possible, may not be the best way to launch your business.

CenterPoint Blog - Sales

Customer Loyalty - A Product That Produces Direct Revenue

Counterfeiting: What To Do When You Get a Nastygram From a Lawyer.

10 Reasons Why Your Business Needs to be on the Web

Sales - It's a Process, Not an Event

Inverted Business Building - Fulfillment - Sales - Marketing