The two most important measurements in your business are not revenue and net profit. While these are clearly desired outcomes, to get them one must focus on employee loyalty and customer loyalty, in that order. More employee loyalty drives customer loyalty, resulting in more revenue and profit. It is that simple!
Employee and customer loyalty are the ultimate competitive advantages in any business. Think about it. What would it do for your business if your employees and customers stayed with you, no matter what incentives your competitors offered? The economics are huge. Every 10% improvement in customer loyalty should lead to a 100% increase in your revenue. The reasons are numerous and include:
- Recruiting costs decline as more new employees are found through existing employees, and “outsiders” are knocking your door down to get in.
- Employee turnover costs are minimized.
- Employee sick days are reduced.
- Legal fees decrease.
- It costs 4 times as much to acquire business from a new customer as it does from an existing one.
- Referrals for new business are plentiful.
- Customers are willing to pay more, even if your product is not as good as the competition’s.
The Difference between Loyalty and Satisfaction
In order to embrace this principle one must understand the difference between satisfaction and loyalty. By definition, satisfied means contented or pleased with what has happened. “I am satisfied” can be interpreted as the experience was “not bad.” However, it was not exceptional. As Jeffrey Gitomer has put it “satisfaction is the measure of mediocrity.”
Loyal, on the other hand, means to remain faithful. In other words, no matter what others are offering, the customer will stay with the current company and/or person serving them. Loyal customers always come back to purchase your product or service and go out of their way to find it. Coca-Cola is a classic example. Many people will go out of their way to purchase a Coke instead of a Pepsi.
Manage Points of Connection
Imagine your entire organization as a linked chain. On one end is the vision of what you want your company to accomplish and on the other end are loyal customers. Each link in the chain is an employee, and they are grouped by department. Now imagine tension on that chain, which is the pull generated by your competition on your customers to leave your chain. If you have any weak links, your chain will eventually break, and you will lose customers.
There are many places that a potential customer touches your organization. Most leaders focus their concerns on their sales and customer service departments. However, there are many other points of connection. Here a few points overlooked:
- When your employees are away from work, what do they say about where they work?
- Are invoices and receipts correct, and how easy is it to get copies?
- When customer invoices are past due, how well does your accounts receivable department manage interactions?
- How much care do your warehouse and delivery employees put into preserving the quality and packaging of your product?
- When a guest or customer is lost in your premises, does someone go out of their way to make sure they get to where they are going?
- When someone calls your company and winds up in the wrong department, how is that interaction handled?
- When you need to give negative strokes to an employee, do they walk away inspired or upset?
The key here is that everyone in your company needs to view themselves as the star in customer service and act accordingly.
Emotional Connection
In order to achieve loyalty, everyone in the organization must make a positive emotional connection with each customer. Research conducted by the Gallup Organization (Gallup’s Management Journal 6/17/2001) indicated that the key to winning customers is not price or even product. It’s emotion! We now know that loyalty is tied to consistent and positive points of connection. Because emotions are perceived as soft, messy, and hard to deal with, emotions make many organizations nervous. It takes skill to handle emotions properly. However, this is one skill everyone in your business needs to master.
How to Measure
Measuring customer loyalty is simple. In a recent book, The Ultimate Question: Driving Good Profits and True Growth, Fred Reicheild indicates that organizations need to know how their customers feel and how to create accountability for the customer experience. He believes there is one ultimate question that all organizations should ask their customers:
“How likely is it that you would recommend this organization and our products or services to a friend or colleague?”
We believe that the internal measure of employee loyalty can be just as simple:
“How likely is it that you would recommend this organization as a place to work to a friend, family, or former colleague?”
Using a scale of one to 10, ask all employees and customers the above questions.
In Conclusion
If you want sustainable growth and extraordinary profit you need to build employee and customer loyalty. Review our website to understand how an executive coach or business coach can help you increase the success of your career and business, or contact Howard Shore at (305) 722-7213 or shoreh@activategroupinc.com.
Reference and excerpts taken with permission from Customer Loyalty published by Resource Associates Corporation, Mohnton, PA
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