Call Me Loyal: How To Build Customer Loyalty By Focusing On Employee Loyalty
What does customer loyalty even mean? It’s more than customer satisfaction. Over two-thirds of customers reporting themselves as ‘satisfied’ will take their business elsewhere for a cheaper price or shinier distractions. The past decade has seen a re-focusing by business leaders on customer loyalty. A common and practical perspective is that a loyal customer is one who, when asked how likely it is that they’d recommend your business to friends or family, would reply with a score of 9 out of 10 or better. Anything less is a neutral customer or a detractor. (A useful follow-up question, regardless of their score, would be, “Why?”)
This shouldn’t be confused with the increasingly ubiquitous ‘loyalty programmes’ with varied effectiveness, ranging from cardboard coffee shop cards where a 10th stamp means a free coffee to national points-earning systems plugged into databases like Neo was plugged into the matrix (with much the same intent.) I’ll often ask audiences to raise their hand if they have a coffee shop loyalty card. Then I’ll ask who has more than one. Then I’ll ask what the word loyalty means…
These programmes occur narrowly at the touch points with customers – the phone, the store, the website – but a lot of what drives customer loyalty comes from non-customer facing processes such as billing or delivery. Programmes involve significant expended energy and expense, yet the research indicates a wiser investment might be to generate employee loyalty which drives a much greater and quicker positive impact on customer loyalty. Businesses need customers who will advocate for them on their behalf. Apple has tons of them for example (or had tons of them. Check again tomorrow, they might be back.)
The Harvard Business School’s research in the 90s established the service profit chain showing the flow-on effect to profits from loyal employees. Subsequent studies have further validated this. These committed souls are far more likely to be engaged, applying discretionary effort – doing more than they have to because they want to. They are far more likely to stay and form productive relationships within the business. They are far more likely to create an impression of perceived value in the mind of the customer and perceived value is the primary driver of customer loyalty. If you want to research further yourself, Frederick F. Reichheld is the guru on this topic, with his ‘loyalty effect’.
So if loyal employees drive customer loyalty (or conversely, disloyal or neutral employees suck out the lifeblood of loyalty like a vampire’s bedbug), what can employers do to generate and maintain employee loyalty? Try frequent and genuine recognition, career growth and / or personal development opportunities. Try giving them some autonomy wherever possible. Try paying them more than the least you have to. Try catering to reasonable work-life balance requests. Get to know them. (People don’t leave jobs, they leave bosses.) Keep them informed and involved in developing processes that affect them.
Remember those questions at the start of this article we were asking customers to assess their loyalty? Ask your employees those same questions. Get it done independently. After all, what are they going to say to your face? Would they recommend your products or services to their friends or family? Why? Why not? What would be the first thing they’d do if the business was theirs? And, after all, your name might be on the paperwork but, really, the business is theirs.
[First published in The NZ Herald 9th March 2013]