Measuring and Managing Customer Loyalty

Measuring and Managing Customer Loyalty

The customer experience begins when a customer realizes that he or she has an unfulfilled need. When a need is realized, customers access information through a series of touch points, such as industry experts, articles and white papers, and references from past users. It is through these interactions that a potential customer chooses to continue a relationship with a brand or to seek a relationship with other brands in the competitive set. The decision to move forward with a relationship is based on the value, quality of experience, and potential tradeoffs associated with each of the brands considered.

When a customer realizes a need, the information-seeking process begins almost immediately. Frequently, consumers will first seek information from their inner circles regarding potential solutions to their needs. Because users are frequently the most influential, the brands that they promote will receive serious consideration. Likewise, a potential customer whose cohorts inform them of poor experiences with a brand are not likely to seek a relationship with that brand.

As everyone involved with marketing knows, customer promotion of a brand is the strongest form of marketing. Strong brands are those whose customers trust enough to promote to others.

To measure the likelihood that customers will promote a brand to others, Saurage Research, Inc. utilizes Net Promoter, which is a customer-loyalty metric developed by (and a registered trademark of) Fred Reichheld, Bain & Company, and Satmetrix.

A Net Promoter Score is determined by dividing a company’s customer base into three categories: Promoters, Passives, and Detractors. By asking one simple question — How likely is it that you would recommend [Insert Company] to a friend or colleague? Customers respond on a 0-to-10 point rating scale and are grouped as follows:

Promoters (score 9-10): Brand loyalists who will continue to buy and refer others to the brand.

Passives (score 7-8): Satisfied, but may be swayed to try other offerings.

Detractors (score 0-6): Unsatisfied customers who are likely to talk negatively about the brand

The Net Promoter Score is calculated by subtracting the percentage of Detractors from the percentage of Promoters.

How likely are you to recommend [Company Name] to a friend or colleague?

It is believed by many that this measurement is the best measurement for companies to gauge customer loyalty and ultimate success.

Stay Engaged with Customers

Regardless if a company sells products or services, and regardless of industry, it must stay engaged with its customers. One consistent trend is that as the length of time increases between a customer’s interactions with a brand, the less likely that customer is to promote that brand. In other words, out-of-sight means out-of-mind.

The following chart shows the impact that time-since-last-purchase has on the likelihood that a customer will recommend the products and services. This information was interpreted from a recent oil and gas study of professionals who were asked to rate the likelihood of recommending a drill bit provider.

As indicated in the data above, the likelihood of a company being promoted is negatively affected by the length of time that passes between brand purchases. Therefore, sales and marketing strategies must include plans to engage current customers on a consistent basis.

However, sales literature and tradeshows, though a necessary part of an overall marketing strategy, may not be the most effective tools for informing customers about new product offerings. As discovered in a recent study with oil and gas professionals, company websites and articles posted in print or online are where oil and gas professionals are most likely to first encounter information about new products or technologies.

As indicated in the chart above, published articles and white papers can prove to be effective tools that allow a company to stay engaged with its customers. They can also provide an opportunity to allow a company to establish itself as the “thought leader” or “industry expert” – especially in highly technical areas.

As more customers and industry-specific professionals engage and utilize social media, a company’s presence becomes critical. Currently, there are approximately 800 million Facebook users, 100 million LinkedIn users, and 56 million on Twitter. The potential for customers to be brand promoters or brand detractors has never been greater. Because of this, brands must actively monitor what is being said about its brand online, and engage customers who are disparaging of the brand. This provides not only another very important touchpoint, but the opportunity to triage any negative encounters that a customer may have experienced. Publicly acknowledging and informing or correcting negative experiences may go a long way in improving brand perceptions.

The following example is a conversation cloud for a network marketing company, Viridian. This retailer of energy products (electricity and natural gas) is being discussed in such positive terms as “progressive”, “powerful”, and “affordable”. Hopefully this aligns with the marketing and message strategies that Virdian has deployed.

Tools such as Radian6 or Meltwater News easily allow companies to monitor what is being said about their brands in social media. This type of software also typically includes a customer engagement model that allows the social media team to respond directly to online postings.

Summary

Building a strong brand means building a brand that customers trust and will recommend to others. Frequently engaging customers, either online, in print, or in person, keeps a company “top-of-mind” among its customers. And, if a company delivers on its promise to provide a consistently satisfactory experience, a good value for its customers, and a product and/or service that sets it apart from the competition, it will likely experience brand loyalty and customer growth.

About Saurage Research

We are a full-service marketing research firm that provides the answers that drive successful business strategies. We have worked with corporations and brand strategy firms in gathering accurate, usable data – packaged so that so that it is easily understood and immediately actionable.

Since 1987 we have worked closely with companies in many industries. Our research has been used to create (or redirect) national advertising campaigns, bring faltering businesses into the black, optimize new or existing product configuration, define go-to-market strategies, and turn unconvincing promotional programs into success stories. We know our business and understand your needs.