The Five Factors of Customer Loyalty

One of the important trends in the realm of customer relations has been the transition away from focusing on Customer Satisfaction, and instead focusing on Customer Loyalty.  As a performance standard, “customer satisfaction” is a rather low bar.  We should have higher goals in business than to just meet our customers expectations.  Increasingly, businesses that do no more than satisfy their customers are losing their customers’ loyalty to companies that exceed expectations.

Fred Reichheld wrote a terrific book called The Ultimate Question, that introduced the concept of a “Net Promoter Score” or NPS, which measures Customer Loyalty by asking questions based on the idea of how likely customers are to refer a company to their friends.  It is an important idea that can revolutionize how a business looks at its customer, and I recommend it highly.

When you break down the components of customer loyalty, there are five factors that influence and determine its strength:

1. Price.  Customers are more price sensitive now than they have ever been.  In the new, post-recession economy, I think that price will continue to be a primary driving factor that will determine how loyal our clients and customers are to our business.
2. Product.  There is no substitute for delivering a quality product.  With so many options in the marketplace, if your product or service doesn’t live up expectations, or is less than perfect, customers won’t come back.  I know that for me, one bad meal in a restaurant is all it takes for me to not return.
3. Delivery.  The experience of receiving a product or service encompasses the entire corporate promise to the customer.  It includes every aspect of what the customer sees, feels, touches, and experiences.
4. Service.  Customer’s expectations about service are continually increasing.  To some degree, we’ve become spoiled by immediacy of information that technology provides.  When we have questions or problems, we expect to be able to get answers and solutions now – and in the format we want it.
5. Recognition.  We all want to be recognized – for who we are, for what we do.  We love it when people know and remember our names.  We all like to feel important to someone.  A key factor in building customer loyalty is in finding a way to provide that recognition, and provide it consistently.

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