• 05:29:00 am on February 25, 2009 | 4
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    Actions Speak Louder Than Words in Customer Loyalty

    Let me ask you a question: would you recommend me to your friends and family?  Yes, that question… the “L” question.  If you say YES, then you are loyal.  If you say NO, then you are not.  That is an abusive oversimplification of a very, very complex topic – but one that we are able to make mostly because we don’t really understand Loyalty and we do think that everything in this world should be measured.  That question (and its twin sister, “would you use the service or product again?”) supposedly measure loyalty.  Why, there is an entire methodology (NPS or Net Promoter Score) devoted to the study of the answer of those questions.

    Alas, if you have my previous entry on loyalty you know that I think that Loyalty is so badly used in organizations that it is useless.  Thus, asking those questions will not yield any insight into the loyalty of your customers, rather yield some insight into your customers’ ability to answer questions one way – and act a different one.  I have not yet seen any proven correlation between answering those questions and being loyal (sorry Fred).

    Now, let me turn the concept a little bit on its side.  Let’s say for the sake of argument you could measure loyalty.  Let’s say that you want to make sure that your customers would indeed recommend you to their friends and family, or even use the product or service again.  Would you really take their word at face value? or would you rather have some proof, some evidence that they will act as they say they will?  Yeah, thought so.

    Here is the simple way to save yourself the money and not buy into the NPS hype and methodology.  Don’t believe your customers’ words, believe their actions.  Implement frequent shopper or user programs, adopt a referral program – and then see the value of your customers’ actions replace the empty words.  Reward your customers for using you frequently (remember, it costs ten times or more to get a new customer as it does to retain an existing one – use those savings for good).  Pay them, and their friends, for referring new people into your service or organizations.  Make it worth their time to be loyal – and they will.

    What do you think? Take their words or their actions? Have you done this? Want to talk more about it? Leave me some comments or email me.

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Comments

  • tboehm30 2:24 pm on February 25, 2009 | # | Reply

    I have to agree. I have been told that my company has one of the best satisfaction ratings in our industry, but that we have the worst extended business. That means that although people seem to love us, they are not using our services beyond what they already have.

    We are working on changing that, but changing the culture is hard. We have plenty of people set in their ways, won’t change, its always worked this way. Our only hope to survive in this economy is to let them go, or change their attitude.

    • Esteban Kolsky 2:58 pm on February 25, 2009 | # | Reply

      Interesting that you mention that people are the catalyst to make loyalty happen, as most people believe that it is not related to anything else in their organization. I do know that change management and culture management are responsible for loyalty, but have heard few people express it that way.

      BTW, in my three tenets to building loyalty, number two is culture change (number one is executive adoption for real, not just for words – in other words, change your MBO and bonuses to reflect your commitment).

      thanks for reading and for your comment… if you need any help convincing your people, just holler!

  • Haim Toeg 12:41 am on February 26, 2009 | # | Reply

    Funny – I lost a consulting engagement once because I told the client they will not be able to forecast their customers’ maintenance contract renewal rate by adding the NPS question to their transactional support survey (which did not go to the decision maker on renewal).

    They were going to do it anyway, I wonder how good it’s worked…

    • Esteban Kolsky 1:59 pm on February 26, 2009 | # | Reply

      Haim,

      Thanks for sharing that… I know lots more stories like that where people actually decided against common sense and went through NPS as if it was the holy grail. Most of them eventually figured out that there is no golden pill for loyalty – and some of them even changed the way they do things. Alas, it is sometimes akin to shouting into the wind to try to convince them otherwise.

      Either asking the wrong person or wrong questions is what dooms just about every feedback implementation. I go back to my past post on best practices for EFM – make sure you have the four W (who, what, when, and why) covered before you start your feedback event.

      Thanks for reading!
      Esteban


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