- In some industries, the cost of “recruiting” new customers is 700 percent more than retaining current ones. A happy customer will tell two or three friends about a positive experience with your company, but an unhappy customer will tell 10-13 why he’s never buying from you again.So, should you measure your customers’ loyalty — or just their satisfaction?
- The Problem with Satisfaction Surveys Satisfaction is an inherently unstable and temporary mental state brought about at the moment a need is met. But just because a customer is satisfied with your product or service, doesn’t mean that they will come back to you.Ask yourself, “Does the value my customers receive keep them coming back and referring others to us? How do I know my customers will return?”
Satisfaction surveys are a grossly imperfect tool for predicting whether customers will purchase more products and services. Typical satisfaction survey measurement scales are not done from the customer’s point of view; instead, they measure management’s point of view of what the customer wants.
- Measuring Customer Loyalty Companies serious about measuring the value they deliver to customers do not rely solely on satisfaction surveys. In order to measure your customers’ loyalty, observe their behaviors. Find out about their actual repurchases in terms of frequency, amount, retention and longevity. Here are some guidelines:
- Track referrals. Are new customers being referred rather than finding you through a random Yellow Pages search? (This doesn’t mean that you stop advertising in the Yellow Pages; it’s just that you want to drive up the number of referred customers you are getting.)
- Solicit third-party endorsements and testimonials from repeat customers. People respond more readily to “word-of-mouth advertising,” so use testimonials in your newsletters, brochures, Web site and other “spreading of the word.”
- Measure your key customer interactions at the “moments of truth.”These interactions are measured at the time of completion of the service and involve interacting with the customer through online surveys, customer service follow-up calls, or simply asking how they felt about the service they received. During these “moments of truth,” you can forge a genuine relationship with your customers and ensure that they will come back and refer others to you.
When you have contact with a customer, ask them: (1) Based on your experience, do you expect to repurchase from us? (2) When?This information offers the opportunity to touch base with them again around the time they said they would be looking to repurchase.
- Track Customer Turnover and Referrals So, what do you do now? First, determine if you’ve fallen into the “satisfaction survey trap.” Look at implementing other tools to measure loyalty, such as intent to repurchase, and “moments of truth” interviewing. Encourage and solicit feedback from all your customer-contact employees; they’re on the front line and know best what your customers think of your service or product and the company itself.Implement ways to track customer turnover and referrals:
- Make follow-up calls to customers to see if they plan to buy from you again.
- If they choose to defect, tactfully ask why.
- Find out who’s referring new customers and thank them for their loyalty. (A simple “thank you” note will do, and may very well net you more referrals.)
Next, look at your “complaint culture.” Do your employees report complaints, understanding that this is a way to improve customer relations, or do they hide them, afraid of personal reprisals? Are steps taken to rectify complaints in a timely manner, or do they just receive lip service?Remember, six out of seven customers who should complain never do. They silently take their business elsewhere and you don’t know it. The one in seven who do complain are saying: If you correct the situation, I would like to continue doing business with you.To retain these “nuggets of gold,” make it easy for customers and your own employees to report problems. Then put a system in place that ensures that issues are resolved in a timely manner. If you implement a correction that prevents all future occurrences, you’ll also keep the six out of seven who would otherwise leave without a word and that’s a huge addition to the bottom line.
James Shaw is president of Shaw Resources in Cupertino, California, the holder of the only U.S. patent ever granted for improving organizational quality.