The Value of Loyal Customers

We know that loyal customers will refer you to their friends and colleagues and this was the case with the experience I had with a local oil company. We were referred to this company to by a partner company, NFT Consult. As soon as I met the then Head of Human Resources, her comment was clear and re-assuring ‘since you were referred by NFT Consult (the regional Human Resource (HR) company), we believe you can do the job’. And that was it. NFT Consult had made this local oil company a loyal customer and it showed in value placed on the referral.

No lengthy discussions about ‘have you done this before’ or ‘have you worked in our industry before’ or ‘we have two proposals, we need a third one’, etc. We are told by the folks from Franklin Covey Customer loyalty practice, that loyal customers will do four things consistently. First, they purchase more in each visit, second, loyal customers come back and purchase more often, third, they refer you to their friends and lastly loyal customers devote time to give feedback. And all these four things are true from my favourite airline Emirates. I will fly to Dubai from Entebbe for 5 hours and take a 14 hour flight to New York City especially when flying with the family – thanks to Emirates in-flight entertainment, not to mention the awesome reception on the Airbus A380-500.  It is true for airlines as it is true for hotels. Take the following narrative from a blogger who had the pleasure of staying at the Mandarin Oriental Hotel in Shanghai:

‘Before I checked out of the room, I noticed a little card on the desk: an invitation for Mandarin Oriental guests to visit one of the Shanghai Tang stores to collect a mystery gift. I decided to collect mine at their airport store. After checking in for my flight and clearing immigrations, I headed straight for the Shanghai Tang store for my mystery gift. I handed in the card and was given a colorful little box in return. I opened it to find a little perfume bottle. The lady at the counter explained that it was a scent for the home. I sprayed it into the air and my thoughts immediately drifted back to the Mandarin Oriental – it was the same tea scent I’d smelled in the hotel’s corridors. Another amazing touch and a beautiful memento of my stay at this exceptional hotel’

Now creating a loyal customer base is not only good for repeat business, it is also great for the bottom line. According to Bain and Company Cross Industry, Net Promoter Score (NPS) Analysis for 2006, loyalty leaders grow 2.6 times their competitors’ average. So why do so few companies pay little attention to developing a following of loyal customers? It appears that several companies by their action and sometimes inaction fund their own customer disloyalty.

Take my last attempt at opening a business account, the business banker spent almost 10 minutes demanding for every documentation known – and here is a bank where I already had a personal account. ‘Know Your Customer’ (KYC) is the name of the game, not a memorable customer experience. No one told this business banker that the number one rule in customer loyalty, is that you must make it easy for me to do business with you. How about my local coffee shop around the corner, my son asked for cream cheese with his Bagel and he got grated cheese. When we complained, the Chef came out to explain the difference between Kenyan and Ugandan cheese!

But with a little thought and clear sense of the type of experience we want to offer, we can build a culture of loyalty at every touch point. Based on the work done by Franklin Covey with numerous organizations, we have learnt that first, treat your employees like you want them to treat your customers – this we have learnt from the folks at US based Southwest Airlines. For Southwest its ‘employees first and customers second’ and this has paid off in the numerous industry awards including coveted triple crown airline performance for on-time performance, baggage handling, and Customer complaints. Southwest was the first airline to be rated first in all three categories.

Second, make customer loyalty a core value and the experiences at local Cappuccino houses like Cafe Java and Cafe Pap are examples that customer loyalty is an integral part of the way service is delivered. While other places place premium on waitresses’ looks, these guys place a premium on the service that the frontline delivers.

Third, measure it accurately and frequently, establishments can benefit from the work of Fred Reicheld in The Ultimate Question. Simple questions of your patrons to determine: how likely they will refer your service to a friend or a colleague. The response you get to this simple question is a great predictor of business growth.

And finally, hold people accountable like you would financial data. Far too often, we chase monthly revenues and lose sight of the very thing that is predictive of the revenue.