P6M4 Customer Loyalty

Another title cut short by the needs of the menu structure.

Think of this as:

Customer Loyalty & Satisfaction – How To Create Moments of Magic & Delight In Your Customers Lives

Customer Attrition

  • Rarely measured – number of customers lost, cancelled or stopped buying
  • Churn is a natural element of some businesses but it can be reduced.
  • Create your own definition of lapsed customers
  • E.g. customers who have not bought for six months if normal purchase pattern is every three months
  • Halving a 20% annual attrition rate is the same as attracting 10% more customers

Why Businesses Lose Customers

  • 1% die
  • 3% move away
  • 5% switch on the advice of friends & relatives
  • 9% find a better deal
  • 14% switch because of product dissatisfaction
  • 68% switch because they don’t feel valued and are not happy at the way they are being treated.
  • Key message – loyalty needs to work both ways

Cost Of Losing Customers

  • Lifetime value of this customer has been lost
  • Lifetime value of referrals this customer would have made plus potentially their referrals etc
  • Negative referrals – 10 to 20 people told
  • Potentially big numbers make it worthwhile customers are treated well and feel valued
  • How committed are you to keep customers happy?
  • Talk is cheap but where are the actions?

How Committed Are You

  • Do right – before, during and after purchase
  • To designing products and services based on customers needs?
  • Helping customers to find the right product?
  • Making it a good experience to buy?
  • Making sure the customer gets value after purchase?
  • Checking customers are happy?
  • Resolving any complaints?

Critical Concepts

  • Regular contact
    Customer value
    Offer higher perceived vfm to win first order
    Continue to offer higher perceived value than the next best alternative to keep the business
    Customer experience
    Create delight, avoid the bad
    Emotional experiences are remembered
    Memorable service feeds into customer value

Myths of Customer Satisfaction

  • Satisfaction is meeting customer expectations
  • Satisfied customers will stay loyal
  • Only very satisfied customers are loyal
  • If you don’t meet customers’ expectations, they will not buy again
  • You can fail to meet expectations and still be the best option for repurchase
  • If you meet expectations you will have happy customers
  • Expectations can be so low, customers are not happy even when met eg airlines

Traditional Thinking about customer satisfaction is part of the answer to keeping customers loyal but it’s not the entire answer.

Gold & Platinum Rules

  • Golden Rule – treat others as you would want to be treated
  • Platinum Rule (Tony Alessandra) – treat others as they want to be treated
  • You have to adapt to the other person – your service is not what you give but what the other person receives


  • Gap 1 between what customers want and what managers think they want
  • Gap 2 between what managers think and the performance standards & specifications
  • Gap 3 the gap between the specifications and actual performance
  • Gap 4 the gap between the performance and the marketing promise
  • Gap 5 between the customer’s expectations and their perception of what they receive

Moments of Truth

  • Service can be difficult to define
  • Jan Calzon – SAS – Any contact between a customer and the business / product
  • Service is a sequence of events that combine together to form the customer experience
  • Special, as expected, bad – moments of magic and moments of misery
  • The moment depends on the customer, the staff member, the product/service and the company’s policies and procedures

Moments of Truth In Action

  • First contact – website, telephone, visit
  • You never get a second chance to make a first impression
  • During the buying process
  • After purchase but before delivery
  • At delivery
  • Using the product / receiving the service
  • If there is a problem
  • On subsequent purchases

Implementing Moments of Truth

  • Very little is deliberately designed – it just keeps happening and no standards are not set
  • Identify your moments of truth
  • Define satisfactory performance, a moment of misery and a moment of magic with your front line staff
  • Check your definitions with customers – either individually or in a focus group
  • Train, provide resources, watch, measure, reward

Moment of Magic Example

  • Customer calls with first enquiry
  • The telephone is answered promptly
  • In a polite and friendly way
  • The staff member is able to provide immediate help and the customer goes away happy with the quick and easy experience
  • Simple idea…but how often does it happen

Moment of Misery Example

  • The phone rings 6 times and you are put into a multi-level answering system…Press 1, 2…
  • You wait in the queue – message “your call is very important to us, we will be with you shortly”
  • The answerer sounds irritated by the interruption
  • You explain what you want but the staff member is not interested or doesn’t know.
  • The call is passed on to another, then in transferring to another, the line is disconnected!

Moments of Magic

  • Special kindness & consideration
  • Chocolate on the pillow
  • Jackpot prizes
  • Circus / Disney / safari / cup final
  • Memorable moments you know are special

Above & Beyond The Call Of Duty

  • Customers don’t know or understand what you do so on their own, they can’t recognise an ABCD moment
  • It is your job to educate them so they appreciate what you have done for them
  • They are special – you don’t do for all
  • It took a lot of time, effort, money, sacrifice
  • You are committed to their success
  • Law of reciprocation – where is your payoff?

Moments of Misery

  • Rude staff
  • The dirty hotel room
  • The emergency plumber who never turns up
  • The expensive children’s toy broken when the box is open
  • The slug in the lettuce
  • “I can’t do that. It’s against company policy”

Customer Complaints

  • Make it easy to complain if there is a problem
  • Much better you hear, have a chance to put right and to stop it happening again
  • Negative referrals tell more people and it is estimated that it takes 3 to 10 recommendations to even out a bad comment
  • Let the customer vent, listen & empathise – apologise
  • Put the problem right, reassure about the future
  • Compensate – create a wow, follow up

Customer Vulnerability

  • A bad experience increases the perception that it is more likely to happen again
  • Restaurant great 10 times, then disappointing
  • A bad experience put right shows that the company is trustworthy and its guarantee /customer care policy mean something
  • Two factors of satisfaction
  • Level of satisfaction
  • Strength of the belief in the satisfaction

Expectations & Customer Satisfaction

  • Traditionally customer satisfaction is meeting expectations
  • Like price, expectations influences assessment of satisfaction – marketing, social proof
  • Something is good/bad because we think it will be good/bad
  • Dan Ariely (Predictably Irrational)– the beer and balsamic vinegar experiment

Sneaky Ways to Improve Retention

  • Manage expectations carefully – under promise and over deliver
  • Add surprise gifts, bonuses and coupons from you and other businesses
  • Ask for referrals
  • Be a relevant information source
  • Send “thank you for being a customer” letters

Making The Internal Changes

  • “Systemize the routine, humanize the exception” Michael Basch, Fedex
  • Pillar 7 – Leading your team
  • Pillar 8 – Systemise your business

What Do Do

  • Define a lost customer in your business
  • Calculation your customer attrition in the last year – the number you’ve lost as a proportion of the number of customers you had at the start.
  • Calculate your customer lifetime value
  • Describe moments of magic, your standard service and moments of misery in your business – share with staff.
  • Make it easy to complain – and create your recovery procedure
  • Survey your customers – ask the Ultimate Question (Pillar 1)

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